<PAGE>
As filed with the SEC on May 30, 1995
Registration No. 2-42379
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
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FORM N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 X
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Pre-Effective Amendment No.
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Post-Effective Amendment No. 15 X
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and/or
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 X
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Amendment No. 15 X
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STRATTON MONTHLY DIVIDEND SHARES, INC.
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(Exact Name of Registrant as Specified in Charter)
610 W. Germantown Pike, Suite 300, Plymouth Meeting, PA 19462-1050
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(Address of Principal Executive Offices)
(610) 941-0255
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(Registrant's Telephone Number Including Area Code)
Patricia L. Sloan, Secretary/Treasurer
Stratton Monthly Dividend Shares, Inc.
610 West Germantown Pike, Suite 300, Plymouth Meeting, PA 19462-1050
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(Name and Address of Agent for Service)
With copies to:
Vernon Stanton, Jr., Esq.
Drinker Biddle & Reath
1100 Philadelphia National Bank Building
1345 Chestnut Street
Philadelphia, PA 19107-3496
215-988-2700
It is proposed that this filing will become effective (check appropriate
box)
immediately upon filing pursuant to paragraph (b)
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X on (June 1, 1995) pursuant to paragraph (b)
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60 days after filing pursuant to paragraph (a)(1)
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on (date) pursuant to paragraph (a)(1).
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75 days after filing pursuant to paragraph (a)(2) of
----- rule 485.
on (date) pursuant to paragraph (a)(2) of rule 485.
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If appropriate, check the following box:
this post-effective amendment designates a new
----- effective date for a previously filed post-effective
amendment.
(1) Registrant has elected to register an indefinite number and amount of
shares of beneficial interest pursuant to Rule 24-f-2 under the Investment
Company Act of 1940. Registrant's Rule 24-f-2 Notice for Fiscal Year ended
January 31, 1995 was filed with the Commission on March 23, 1995.
Total Pages xx Exhibit Index Page xx
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<PAGE>
CALCULATION OF THE REGISTRATION FEE
UNDER THE SECURITIES ACT OF 1933/(1)/
<TABLE>
<CAPTION>
Proposed Proposed
Title of Amount Maximum Maximum
Securities Being Being Offering Price Aggregate Amount of
Registered Registered /(2)/ Per Unit/(2)/ Offering Price/(3)/ Registration Fee
--------------
<S> <C> <C> <C> <C>
Common Stock,
par value $1.00
per share,
Stratton
Monthly
Dividend
Shares, Inc.
646,589.259 $24.63 $15,925,493.45 $100.00
----------- ------ -------------- -------
</TABLE>
/(1)/ Registrant has elected to register an indefinite number of shares of its
Common Stock under the Securities Act of 1933 pursuant to Rule 24f-2
under the Investment Company Act of 1940. Registrant's Rule 24f-2 Notice
for the fiscal year ended January 31, 1995 was filed with the Commission
on March 23, 1995.
/(2)/ Estimated solely for the purpose of calculating the registration fee
pursuant to Rule 24e-2 under the Investment Company Act of 1940 and Rule
457(c) under the Securities Act of 1933, based on an offering price of
$24.63 on May 23, 1995.
/(3)/ The maximum aggregate offering for Registrant's shares is calculated
pursuant to Rule 24e-2 under the Investment Company Act of 1940. During
Registrant's fiscal year ended January 31, 1995, 2,141,485 shares of the
Registrant's Common Stock were redeemed, of which 1,506,670 were used for
reductions pursuant to paragraph (c) of Rule 24f-2 in Registrant's Rule
24f-2 Notice for the year ended January 31, 1995, and none of the
redeemed shares were used for reductions pursuant to Rule 24e-2 in
previous post-effective amendments filed during the current fiscal year.
As a result, 634,815 shares are being used for reduction of the
registration fee with respect to this Post-Effective Amendment pursuant
to paragraph (a) (1) of Rule 24e-2.
2
<PAGE>
CROSS REFERENCE SHEET
Pursuant to Rule 495(a)
Part A
Item No. Prospectus Caption
- -------- ------------------
1. Cover Page Cover Page
2. Synopsis Fee Table
3. Financial Highlights Financial Highlights;
Performance Calculations
4. General Description of Registrant Introduction, The Fund's Investment
Objective, Policies, Restrictions and
Risk Considerations; Description of
Common Stock
5. Management of the Fund Management of the Fund; Investment
Advisor; Service Providers and
Underwriter
5A. Management's Discussion of
Fund Performance Inapplicable
6. Capital Stock and Other Securities Reinvestment of Income Dividends and
Capital Gains Distributions; Income
Dividends and Capital Gains
Distributions: Tax Treatment;
Description of Common Stock
7. Purchase of Securities Being
Offered Service Providers and Underwriter;
Computation of Net Asset Value; How to
Buy Fund Shares; Exchange Privilege;
Retirement Plans
8. Redemption or Repurchase How to Redeem Fund Shares
9. Pending Legal Proceedings Inapplicable
Part B Statement of Additional
Item No. Information Caption
- -------- -----------------------
10. Cover Page Cover Page
11. Table of Contents Table of Contents
12. General Information and History Inapplicable
3
<PAGE>
CROSS REFERENCE SHEET
Pursuant to Rule 495(a)
Part B Statement of Additional
Item No. Information Caption
- -------- -----------------------
13. Investment Objective and Policies Investment Restrictions
14. Management of the Fund Directors and Officers of the Fund
15. Control Persons and Principal Directors and Officers of the Fund
Holders of Securities
16. Investment Advisory and Other The Investment Advisor and Other
Services Service Providers
17. Brokerage Allocation and Other Portfolio Transactions and Brokerage
Practices Commissions
18. Capital Stock and Other Securities Covered in Part A
19. Purchase, Redemption and Pricing Covered in Part A
of Securities Being Offered
20. Tax Status Additional Information Concerning
Taxes
21. Underwriters Underwriter
22. Calculation of Performance Data Additional Information on
Performance Calculations
23. Financial Statements Financial Statements; Report of
Independent Certified Public
Accountants
Part C
- ------
Information required to be included in Part C is set forth under the appropriate
Item, so numbered, in Part C of this Post-Effective Amendment No. 15 to the
Registration Statement.
4
<PAGE>
PROSPECTUS
JUNE 1, 1995
Stratton Monthly Dividend Shares, Inc. is a no-load mutual fund seeking as its
objective a high rate of return from dividend and interest income on its
investments in common stock and securities convertible into common stock.
This Prospectus sets forth concisely the information about the Fund that
prospective investors ought to know before investing. Investors should read
this Prospectus and retain it for future reference.
Additional information about the Fund has been filed with the Securities and
Exchange Commission and is available upon request and without charge by calling
or writing the Fund at the telephone number or address below. The "Statement of
Additional Information" bears the same date as this Prospectus and is
incorporated by reference into this Prospectus in its entirety.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION, NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS
A CRIMINAL OFFENSE.
STRATTON MONTHLY DIVIDEND SHARES, INC.
A NO-LOAD FUND
PROSPECTUS / JUNE 1, 1995
PLYMOUTH MEETING EXECUTIVE CAMPUS * 610 W. GERMANTOWN PIKE, SUITE 300
PLYMOUTH MEETING, PA 19462-1050 * 610-941-0255
5
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
<S> <C>
Introduction..........................................................
Fee Table.............................................................
Financial Highlights..................................................
The Fund's Investment Objective, Policies, Restrictions & Risk
Considerations.......................................................
Management of the Fund................................................
Investment Advisor....................................................
Computation of Net Asset Value........................................
How to Buy Fund Shares................................................
Investing by Mail...................................................
Investing by Wire...................................................
Automatic Investment Plan...........................................
Direct Deposit Program..............................................
Reinvestment of Income Dividends and Capital Gains Distributions....
Additional Information..............................................
Investment Application................................................
How to Redeem Fund Shares.............................................
By Written Request..................................................
By Automated Clearing House ("ACH").................................
Systematic Cash Withdrawal Plan.....................................
Additional Information..............................................
Exchange Privilege....................................................
Retirement Plans......................................................
Income Dividends and Capital Gains Distributions: Tax Treatment......
Performance Calculations..............................................
Description of Common Stock...........................................
General Information...................................................
Service Providers and Underwriter.....................................
Audits and Reports....................................................
Automatic Investment Plan Application.................................
</TABLE>
- --------------------------------------------------------------------------------
FOR MORE DETAILED INFORMATION ABOUT THE ITEMS DISCUSSED IN THIS PROSPECTUS, A
COPY OF THE STATEMENT OF ADDITIONAL INFORMATION MAY BE OBTAINED WITHOUT CHARGE
BY WRITING TO THE FUND'S "DISTRIBUTOR", FUND/PLAN BROKER SERVICES, INC., 2 W.
ELM STREET, P.O. BOX 874, CONSHOHOCKEN, PA 19428-0874, OR BY TELEPHONING
800-634-5726.
6
<PAGE>
INTRODUCTION
Stratton Monthly Dividend Shares, Inc. (the "Fund") is a no-load open-end
diversified mutual fund seeking as its objective a high rate of return from
dividend and interest income on its investments in common stock and securities
convertible into common stock.
The Fund will seek to achieve this objective through investment of at least 25%
of assets in public utility companies engaged in the production, transmission or
distribution of electric, energy, gas, water or telephone services. Due to the
inherent risk of any type of investment, however, there can be no assurance that
the objective of the Fund will be achieved.
The Fund pays a monthly dividend to shareholders (see pages 16 and 17 for more
detailed information about Income Dividends and Capital Gains Distributions).
FEE TABLE
Below is a summary of the Operating Expenses that the Fund incurred during its
last fiscal year. A hypothetical example based on the summary is also shown.
Annual Fund Operating Expenses
(as a percentage of average net assets)
<TABLE>
<S> <C>
Management Fees................................................ 0.63%
Other Expenses................................................. 0.45%
--------
Total Fund Operating Expenses.................................. 1.08%
========
</TABLE>
<TABLE>
<CAPTION>
Example 1 year 3 years 5 years 10 years
<S> <C> <C> <C> <C>
You would pay the
following expenses on
a $1,000 investment,
assuming: (1) a 5%
annual return; and (2)
redemption at the end
of each time period: $ 11 $ 34 $ 59 $ 131
</TABLE>
WHILE THE FOREGOING EXAMPLE ASSUMES A 5% ANNUAL RETURN, THE FUND'S ACTUAL
PERFORMANCE WILL VARY AND MAY RESULT IN AN ACTUAL RETURN MORE OR LESS THAN 5%.
THE EXAMPLE SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR FUTURE
EXPENSES. ACTUAL EXPENSES MAY BE MORE OR LESS THAN THOSE SHOWN.
The purpose of this Fee Table is to assist the investor in understanding the
various costs and expenses that an investor in the Fund will bear directly or
indirectly. The Fund does not impose any sales load or redemption or exchange
fees, nor does it bear any fees pursuant to a Rule 12b-1 Plan; however, the
Transfer Agent currently charges investors who request redemptions by wire
transfer a fee of $9 for each such payment. For more complete descriptions of
the various costs and expenses, see Investment Advisor, How to Buy Fund Shares,
How to Redeem Fund Shares, Retirement Plans and Custodian, Transfer Agent,
Administrator and Fund Accounting/Pricing Agent in this Prospectus and the
financial statements and related notes contained in the Statement of Additional
Information.
7
<PAGE>
FINANCIAL HIGHLIGHTS
The following information provides financial highlights for a share of the Fund
outstanding throughout each year. The information for each of the five years in
the period ended January 31, 1995 has been examined by Tait, Weller & Baker,
certified public accountants, whose report thereon appears in the Fund's
Statement of Additional Information dated June 1, 1995. This data should be read
in conjunction with the other financial statements and notes thereto, also
included in the Fund's Statement of Additional Information. Additional
information is contained in the Fund's annual report, which can be obtained
without charge by calling 800-634-5726.
<TABLE>
<CAPTION>
Years Ended January 31,
-------------------------------------------------------------------------------------
1995 1994 1993 1992 1991 1990/1/ 1989/1/ 1988/1/,/2/
-------- -------- -------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Year......... $28.69 $29.91 $27.83 $23.02 $24.50 $24.43 $25.11 $31.09
-------- -------- -------- -------- -------- -------- -------- --------
Income from Investment Operations
- ---------------------------------
Net Investment Income.................... 1.94 1.87 1.94 1.97 2.05 2.09 2.10 2.06
Net gains (loss) on securities
(both realized and unrealized).......... (3.87) (1.14) 2.08 4.79 (1.33) 0.03 (0.70) (5.33)
-------- -------- -------- -------- -------- -------- -------- --------
Total from investment operations....... (1.93) 0.73 4.02 6.76 0.72 2.12 1.40 (3.27)
-------- -------- -------- -------- -------- -------- -------- --------
Less Distributions
- ------------------
Dividends (from net investment income)... (1.92) (1.94) (1.94) (1.95) (2.20) (2.05) (2.08) (2.06)
Distributions in excess
of net Investment Income................ 0.00 (0.01) 0.00 0.00 0.00 0.00 0.00 0.00
Distributions from net realized gains
from security transactions.............. 0.00 0.00 0.00 0.00 0.00 0.00 0.00 (0.27)
Distributions from paid-in capital/3/.... 0.00 0.00 0.00 0.00 0.00 0.00 0.00 (0.38)
-------- -------- -------- -------- -------- -------- -------- --------
Total distributions.................... (1.92) (1.95) (1.94) (1.95) (2.20) (2.05) (2.08) (2.71)
-------- -------- -------- -------- -------- -------- -------- --------
Net Asset Value, End of Year............... $24.84 $28.69 $29.91 $27.83 $23.02 $24.50 $24.43 $25.11
======== ======== ======== ======== ======== ======== ======== ========
Total Return............................... -6.57% 2.22% 15.18% 30.55% 3.30% 8.69% 5.93% -10.80%
Ratios/Supplemental Data
- ------------------------
Net assets, end of year (in 000's)......... $134,066 $165,798 $98,227 $45,566 $31,178 $33,200 $33,845 $36,305
Ratio of expenses to average net assets.... 1.08% 0.99% 1.10% 1.23% 1.27% 1.25% 1.21% 1.21%
Ratio of net income to average net assets.. 7.71% 6.12% 6.74% 7.63% 8.79% 8.19% 8.54% 7.52%
Portfolio turnover rate.................... 39.50% 19.15% 35.94% 43.55% 14.00% 39.10% 15.00% 24.44%
<CAPTION>
Years Ended January 31,
----------------------
1987/1/,/2/ 1986/1/
-------- --------
<S> <C> <C>
Net Asset Value, Beginning of Year.......... $27.82 $22.47
-------- --------
Income from Investment Operations
- ---------------------------------
Net Investment Income..................... 2.09 1.83
Net gains (loss) on securities
(both realized and unrealized)........... 3.96 5.69
-------- --------
Total from investment operations........ 6.05 7.52
-------- --------
Less Distributions
- ------------------
Dividends (from net investment income).... (2.28) (2.17)
Distributions in excess
of net Investment Income................. 0.00 0.00
Distributions from net realized gains
from security transactions............... (0.10) 0.00
Distributions from paid-in capital/3/..... (0.40) 0.00
-------- --------
Total distributions..................... (2.78) (2.17)
-------- --------
Net Asset Value, End of Year................ $31.09 $27.82
======== ========
Total Return................................ 22.60% 35.33%
Ratios/Supplemental Data
- ------------------------
Net assets, end of year (in 000's).......... $53,545 $21,277
Ratio of expenses to average net assets..... 1.24% 1.49%
Ratio of net income to average net assets... 6.90% 8.36%
Portfolio turnover rate..................... 14.87% 13.62%
</TABLE>
/1/ Not covered by independent accountants' report.
/2/ Per share income and expenses and net realized and unrealized gain (loss) on
investments have been computed using the average number of shares
outstanding during the period. These computations had no effect on net asset
value per share.
/3/ Distributions from paid-in capital result from the excess of taxable capital
gains over gains available from book sources.
The Fund's portfolio turnover is calculated by dividing the lesser of the Fund's
annual aggregate purchases or sales of its portfolio securities by the average
monthly value of the Fund's portfolio securities during the year.
8
<PAGE>
THE FUND'S INVESTMENT OBJECTIVE, POLICIES, RESTRICTIONS AND
RISK CONSIDERATIONS
The Fund's objective is to seek a high rate of return from dividend and interest
income on its investments in common stock and securities convertible into common
stock. Of course, there is no assurance that this objective will be achieved.
Investment decisions will be made on the basis of an analysis of fundamentals of
individual companies and on relevant economic and social conditions.
The Fund will invest at least 80% of its assets in common stock and securities
convertible into, or exchangeable for, common stock. The foregoing objective and
policies may be changed by the Board of Directors without shareholder approval.
The Fund may invest in real estate investment trusts ("REITs"). Equity REITs
invest directly in real property while mortgage REITs invest in mortgages on
real property. REITs may be subject to certain risks associated with the direct
ownership of real estate including declines in the value of real estate, risks
related to general and local economic conditions, overbuilding and increased
competition, increases in property taxes and operating expenses, and variations
in rental income. Generally, increases in interest rates will decrease the value
of high yielding securities and increase the costs of obtaining financing, which
could decrease the value of the portfolio's investments. In addition, equity
REITs may be affected by changes in the value of the underlying property owned
by the trusts, while mortgage REITs may be affected by the quality of credit
extended. Equity and mortgage REITs are dependent upon management skill, are not
diversified and are subject to the risks of financing projects. REITs are also
subject to heavy cash flow dependency, defaults by borrowers, self liquidation
and the possibility of failing to qualify for tax-free pass-through of income
under the Internal Revenue Code and to maintain exemption from the Investment
Company Act of 1940, as amended (the "1940 Act").
The Fund intends to invest at least 25% of its assets at the time of purchase in
securities of public utility companies engaged in the production, transmission
or distribution of electric, energy, gas, water or telephone service. This
policy of concentration may not be changed without the approval of the holders
of a "majority" of the Fund's outstanding shares as defined under "General
Information."
Notwithstanding these general requirements with respect to concentration of its
assets, the Fund reserves the right also to hold up to 100% of its assets in
cash and cash equivalents for temporary defensive purposes. The Fund may invest
its cash reserves in short-term debt securities, securities of the U.S.
Government, its agencies and instrumentalities, bankers' acceptances and
certificates of deposit.
The following investment restrictions are deemed fundamental policies and may be
changed only by the approval of the holders of a "majority" of the Fund's shares
(as defined under "General Information"):
9
<PAGE>
1. The Fund will not borrow money, except from banks for temporary or
emergency purposes in an amount not exceeding 5% of the value of its total
assets; or mortgage, pledge or hypothecate its assets to secure any
borrowing except to secure temporary or emergency borrowing and then only
in an amount not exceeding 15% of the value of its total assets. See the
Statement of Additional Information for a further restriction undertaken in
connection with registration in a certain state.
2. The Fund will not invest more than 5% of the value of its total assets in
securities of issuers which, with their predecessors, have not had at least
three years of continuous operation.
A list of other restrictions on the Fund's investment activities which cannot be
changed without the approval of the holders of a majority of the Fund's shares
as defined in the 1940 Act appears in the Statement of Additional Information.
MANAGEMENT OF THE FUND
Overall responsibility for management and supervision of the Fund rests with the
Fund's Directors. There are currently eight Directors, six of whom are not
"interested persons" of the Fund within the meaning of that term under the 1940
Act. The Board meets regularly five times each year, and at other times as
necessary.
By virtue of the functions performed by Stratton Management Company as
Investment Advisor, the Fund requires no employees other than its executive
officers, all of whom are employed by the Advisor. Three of the employees devote
full-time to the affairs and administration of the Fund, Stratton Growth Fund,
Inc., and The Stratton Funds, Inc. (collectively, the "Stratton Group"). Three
other employees of the Advisor also devote a significant amount of time to the
affairs of the Stratton Group.
The Statement of Additional Information contains the names of and general
background information regarding each Director and Principal Officer of the
Fund.
INVESTMENT ADVISOR
The Investment Advisor to the Fund is Stratton Management Company (the
"Advisor"), Plymouth Meeting Executive Campus, 610 W. Germantown Pike, Suite
300, Plymouth Meeting, PA 19462-1050.
The Advisor provides investment advisory services, consisting of portfolio
management, for a variety of individuals and institutions and had approximately
$ 977 million in assets under management as of March 31, 1995 . The principal
executive officer of the Advisor is James W. Stratton, who owns all of the
Advisor's issued and outstanding voting securities. Since 1980, Mr. Stratton has
been primarily responsible for the day-to-day investment management of the
10
<PAGE>
Fund's portfolio. Mr. Stratton also serves as Chairman of the Board of the Fund,
Stratton Growth Fund, Inc. and The Stratton Funds, Inc. As of April 30, 1995,
the Profit Sharing Plan of the Advisor owned 30,292 shares or 0.6% of the
Fund's outstanding shares.
The Advisor also provides investment advice to the Stratton Growth Fund, Inc.
("SGF"), a no-load fund whose primary objective is growth of capital with
current income from interest and dividends as a secondary objective. SGF's
investments will normally consist of common stock and securities convertible
into or exchangeable for common stock. The Advisor also provides investment
advice to Stratton Small-Cap Yield Fund ("SSCY"), a no-load series of The
Stratton Funds, Inc., whose objective is to achieve both dividend income and
capital appreciation through investment in the equity securities of companies
with total market capitalizations at the time of investment of less than $500
million and which are outside the Standard & Poor's 500 Index. As of April 30,
1995, SGF and SSCY had net assets of $29.9 million and $14.5 million,
respectively.
The Fund entered into its current Investment Advisory Agreement (the
"Agreement") with the Advisor as of July 1, 1989. The Agreement which was
approved by the Fund's shareholders on June 22, 1989 and last approved by the
Fund's Board of Directors on June 21, 1994. Subject to the supervision and
direction of the Fund's Board of Directors, the Advisor manages the Fund's
investment portfolio in accordance with the Fund's stated investment objective
and policies, makes investment decisions for the Fund and places orders to
purchase and sell securities on behalf of the Fund.
The Advisor performs these services for an investment advisory fee payable
monthly at an annual rate of 5/8 of 1% of the Fund's daily net asset value.
The Advisor may also charge the Fund a portion of the costs of: (1) any
equipment used solely in Fund operations; and (2) certain administrative and
accounting services for the Fund; provided, however, that such reimbursement
shall be limited to the amount which would cause the ratio of net operating
expenses to average net assets for the remaining fiscal year not to exceed 2%.
This reimbursement is in addition to the fee to the Advisor for investment
advisory services.
For a more complete description of the terms of the Investment Advisory
Agreement, as well as for the guidelines followed by the Advisor in seeking to
obtain the best price and execution of the purchase and sale of securities for
the Fund, refer to the Statement of Additional Information.
Commencing in 1988, Fund/Plan Services, Inc. ("Fund/Plan") became the Fund's
accounting services agent and responsibility for certain accounting services
(e.g., computation of the net asset value of the Fund's shares and maintenance
of the Fund's books and financial records) were transferred from the Advisor to
Fund/Plan. At that time, the Advisor stopped receiving a monthly expense
reimbursement from the Fund, and the Fund started to pay a monthly fee to
Fund/Plan for these services. For this reason, the Advisor is not expected to
receive expense
11
<PAGE>
reimbursements from the Fund in the foreseeable future. Fund/Plan currently
receives a fee at the annual rate of $26,000 for these services.
The Fund has also entered into an Administration Agreement with Fund/Plan dated
March 1, 1990. As a result of the Administration Agreement, certain
administrative responsibilities previously performed by the Advisor were
transferred to Fund/Plan including responsibility for all federal and state
compliance matters. Fund/Plan receives a fee payable monthly at the annual rate
of $30,000 per year for providing these services. Although the Advisor was
entitled to receive reimbursement from the Fund for the expenses incurred in the
performance of these services, such reimbursement was never sought. Accordingly,
the Advisor has voluntarily agreed to waive $15,000 annually of the advisory
fees due it under the Investment Advisory Agreement to offset a significant
portion of the fee that the Fund will incur under the Administration Agreement.
This fee waiver can be terminated or reduced by the Advisor upon 60 days prior
written notice to the Fund.
For the fiscal years ended January 31, 1993, 1994 and 1995, the operating
expenses (including taxes) were 1.10%, 0.99% and 1.08%, respectively, of the
Fund's average net assets.
COMPUTATION OF NET ASSET VALUE
The net asset value per share of the Fund is determined once each business day
as of the close of regular trading hours (currently 4:00 p.m. Eastern time) on
the New York Stock Exchange. Such determination will be made by dividing the
value of all securities and other assets (including dividends accrued but not
collected) less any liabilities (including accrued expenses), by the total
number of shares outstanding.
Portfolio securities are valued as follows:
1. Securities listed or admitted to trading on any national securities
exchange are valued at their last sale price on the exchange where the
securities are principally traded or, if there has been no sale on that
date, at the mean between the last reported bid and asked prices.
2. Securities traded in the over-the-counter market are valued at the last
sale price, if carried in the National Market Issues section by NASDAQ;
other over-the-counter securities are valued at the mean between the
closing bid and asked prices obtained from a principal market maker.
3. All other securities and assets are valued at their fair value as
determined in good faith by the Board of Directors of the Fund, which may
include the amortized cost method for securities maturing in sixty days or
less and other cash equivalent investments.
12
<PAGE>
Determination of the net asset value may be suspended when the right of
redemption is suspended as provided under "How to Redeem Fund Shares" on pages
12 through 14.
HOW TO BUY FUND SHARES
Shares of the Fund are offered on a continuous basis at the net asset value. The
net asset value per share of the Fund, and hence the purchase price of the
shares, will vary with the value of securities held in the Fund's portfolio.
Purchasers of the Fund's shares pay no "sales load"; the full amount of the
purchase price goes toward the purchase of shares of the Fund. Purchases are
made at the net asset value next determined following receipt of a purchase
order by the Fund's Transfer Agent, Fund/Plan, at the address set forth below,
accompanied by payment for the purchase. The Fund may also from time to time
accept wire purchase orders from broker/dealers and institutions who have been
approved previously by the Fund.
Orders for shares of the Fund received prior to the close of regular trading
hours on the New York Stock Exchange (currently 4:00 p.m. Eastern time) are
confirmed at the net asset value determined at the close of regular trading
hours on the Exchange on that day.
Orders received at the address set forth below subsequent to the close of
regular trading hours on the New York Stock Exchange will be confirmed at the
net asset value determined at the close of regular trading hours on the next day
the Exchange is open.
Investing by Mail
- -----------------
An account may be opened and shares of the Fund purchased by completing the
Investment Application enclosed within this Prospectus and sending the
Application, together with a check for the desired amount, payable to "Stratton
Monthly Dividend Shares, Inc." to the Fund c/o Fund/Plan Services, Inc., 2 W.
Elm Street, P.O. Box 874, Conshohocken, PA 19428. The minimum amount for the
initial purchase of shares of the Fund is $2,000. Subsequent purchases may be
made in amounts of $100 or more. (Note: There are no minimum investment amounts
applied to retirement plans.) After each purchase you will receive an account
statement for the shares purchased. Once a shareholder's account has been
established, additional purchases may be made by sending a check made payable to
"Stratton Monthly Dividend Shares, Inc." to the Fund c/o Fund/Plan Services,
Inc., P.O. Box 412797, Kansas City, MO 64141-2797. Please enclose the stub of
your account statement and include your Fund account number on your check (as
well as the attributable year for retirement plan investments, if applicable).
PLEASE NOTE: A $20 FEE WILL BE CHARGED TO YOUR ACCOUNT FOR ANY PAYMENT CHECK
RETURNED TO THE CUSTODIAN.
Investing by Wire
- -----------------
You may also pay for shares by instructing your bank to wire Federal funds to
the Fund's Transfer Agent. Federal funds are monies of member banks within the
Federal Reserve System. Your bank must include the full name(s) in which your
account is registered and your Fund
13
<PAGE>
account number, and should address its wire as follows:
UNITED MISSOURI BANK KC NA
ABA # 10-10-00695
For: Fund/Plan Services, Inc.
Account # 98-7037-071-9
FBO: "STRATTON MONTHLY DIVIDEND SHARES, INC."
Account of (exact name(s) of account registration)
---------------------------------------
Shareholder Account #____________________________________
If you are opening a new account by wire transfer, you must first telephone the
Fund's Transfer Agent at 800-441-6580 to request an account number and furnish
the Fund with your social security or other tax identification number. A
completed application with signature(s) of registrant(s) must be filed with the
Fund immediately subsequent to the initial wire. Your bank will generally charge
a fee for this wire. The Fund will not be responsible for the consequences of
delays, including delays in the banking or Federal Reserve wire systems.
PLEASE NOTE: Your initial Fund account must satisfy the $2,000 minimum balance
requirement in order to participate in the following programs or plans.
Automatic Investment Plan
- -------------------------
Shares of the Fund may be purchased through our "AUTOMATIC INVESTMENT PLAN"
(tear-out application in back of this Prospectus). The Plan provides a
convenient method by which investors may have monies deducted directly from
their checking, savings or bank money market accounts for investment in the
Fund. The minimum investment pursuant to this Plan is $100 per month. The
account designated will be debited in the specified amount, on the date
indicated, and Fund shares will be purchased. Only an account maintained at a
domestic financial institution which is an Automated Clearing House ("ACH")
member may be so designated. The Fund may alter, modify or terminate this Plan
at any time.
Direct Deposit Program
- ----------------------
This program enables a shareholder to purchase additional shares by having
certain payments from the Federal government ONLY (i.e. Federal salary, Social
Security and certain veterans, military or other payments) automatically
deposited into the shareholder's account in the Fund. The minimum investment is
$100.
To elect this privilege, a shareholder must complete a Direct Deposit Enrollment
Form for each type of payment desired. The form may be obtained by contacting
the Fund's Transfer Agent, Fund/Plan Services, Inc., at the address or telephone
number shown below. Death or legal incapacity will terminate a shareholder's
participation in this program. A shareholder may terminate their participation
by notifying, in writing, the appropriate Federal agency. In addition, the Fund
may terminate participation upon 30 days' notice to the shareholder.
14
<PAGE>
Reinvestment of Income Dividends and Capital Gains Distributions
- ----------------------------------------------------------------
Any shareholder may at any time request and receive automatic reinvestment of
any Fund income dividends and capital gains distributions, or income dividends
only, or capital gains distributions only, in additional shares of the Fund
unless the Fund's Board of Directors determines otherwise. Under this
arrangement, the Fund sells to the shareholder full and fractional shares at the
net asset value per share, adds these shares to the shareholder's unissued share
balance, and sends the shareholder an account statement reflecting the
reinvestment. The $100 minimum requirement for subsequent investments does not
apply to such reinvestments.
The election to reinvest may be made on the Investment Application enclosed
within this Prospectus or by writing to Stratton Monthly Dividend Shares, Inc.,
c/o Fund/Plan Services, Inc., 2 W Elm Street, P.O. Box 874, Conshohocken, PA
19428-0874. Any such election will automatically continue for subsequent
dividends, and/or distributions until written revocation is received by the
Fund. If no election is chosen the Fund will automatically reinvest your
dividends and capital gains.
Additional Information
- ----------------------
Shares of the Fund may be purchased or redeemed through certain broker/dealers
who may charge a transaction fee, which would not otherwise be charged if the
shares were purchased directly from the Fund.
The Fund reserves the right to reject purchases under circumstances or in
amounts considered disadvantageous to the Fund. CERTIFICATES WILL NOT BE ISSUED
UNLESS REQUESTED IN WRITING BY THE REGISTERED SHAREHOLDER(S).
The Fund is required by Federal tax law to withhold 31% of reportable payments
(which may include dividends, capital gains distributions, and redemptions) paid
to shareholders who have not complied with IRS regulations regarding Tax ID
Certification. In order to avoid this withholding requirement, you must certify
via signature on your Application, or on a separate W-9 Form supplied by the
Transfer Agent, that your Social Security or Taxpayer Identification Number is
correct (or you are waiting for a number to be issued to you), and that you are
currently not subject to backup withholding, or you are exempt from backup
withholding.
While the Fund provides most shareholder services, certain special services,
such as a request for a historical transcript of an account, may involve an
ADDITIONAL FEE. To avoid having to pay such a fee for these special services, it
is important that you SAVE your last Year-to-Date Confirmation Statement
received each year.
PLEASE REFER ALL QUESTIONS AND CORRESPONDENCE ON NEW AND EXISTING ACCOUNTS (SUCH
AS PURCHASES OR REDEMPTIONS, OR STATEMENTS NOT RECEIVED), DIRECTLY TO THE FUND'S
TRANSFER AGENT, BY WRITING TO FUND/PLAN SERVICES, INC., 2 W. ELM STREET, P.O.
BOX 874, CONSHOHOCKEN, PA 19428-0874, OR BY CALLING FUND/PLAN'S CUSTOMER SERVICE
DEPARTMENT AT 800-441-6580. PLEASE REFERENCE
15
<PAGE>
YOUR FUND NAME AND ACCOUNT NUMBER.
HOW TO REDEEM FUND SHARES
By Written Request
- ------------------
Shareholders may redeem shares of the Fund by mail, by writing directly to the
Fund's Transfer Agent, Fund/Plan Services, Inc., 2 W. Elm Street, P.O. Box 874,
Conshohocken, PA 19428-0874, and requesting liquidation of all or any part of
their shares. The redemption request must be signed exactly as the shareholder's
name appears on the form of registration and must include the Fund name and
account number. If shares are owned by more than one person, the redemption
request must be signed by all owners exactly as their names appear in the
registration. Shareholders holding stock certificates must deliver them along
with their signed redemption requests. To protect your account, the Transfer
Agent and the Fund from fraud, signature guarantees are required for certain
redemptions. Signature guarantees are required for: (1) all redemptions of
$5,000 or more; (2) any redemptions if the proceeds are to be paid to someone
other than the person(s) or organization in whose name the account is
registered; (3) any redemptions which request that the proceeds be wired to a
bank; and (4) requests to transfer the registration of shares to another owner.
The Transfer Agent requires that signatures be guaranteed by an "eligible
guarantor institution" as defined in Rule 17Ad-15 under the Securities Exchange
Act of 1934. Eligible guarantor institutions include banks, brokers, dealers,
credit unions, national securities exchanges, registered securities
associations, clearing agencies and savings associations. Broker-dealers
guaranteeing signatures must be a member of a clearing corporation or maintain
net capital of at least $100,000. Credit unions must be authorized to issue
signature guarantees. Signature guarantees will be accepted from any eligible
guarantor institution which participates in a signature guarantee program. The
Transfer Agent cannot accept guarantees from notaries public. In certain
instances, the Fund may require additional documents, such as certified death
certificates or proof of fiduciary or corporate authority. (NOTE: PLEASE CALL
OUR TRANSFER AGENT TO VERIFY REQUIRED LANGUAGE FOR ALL RETIREMENT PLAN
REDEMPTION REQUESTS.) No redemption shall be made unless a shareholder's
investment application is first on file. In addition, the Fund will not accept
redemption requests until checks (including certified checks or cashier's
checks) received for the shares purchased have cleared, which can be as long as
15 days.
Redemption requests mailed to the Fund's "Investment Advisor" located in
Plymouth Meeting, PA must be forwarded to the Transfer Agent and will not be
effected until they are received in good order by the Transfer Agent. The
Transfer Agent cannot accept redemption requests which specify a particular
forward date for redemption.
By Automated Clearing House ("ACH")
- -----------------------------------
A shareholder may elect to have redemption proceeds, cash distributions or
systematic cash withdrawal payments transferred to his or her bank, savings and
loan association or credit union that is an on-line member of the ACH system.
There are no fees associated with the use of the ACH service.
16
<PAGE>
Written ACH redemption requests must be received by the Fund's Transfer Agent
before 4 p.m. Eastern time to receive that day's closing net asset value. ACH
redemptions will be sent on the day following the shareholder's request; funds
will be available two days later.
Redemption proceeds (including systematic cash withdrawals), as well as dividend
and capital gains distributions, may be sent to a shareholder via Federal Funds
wire. However, the Fund's Transfer Agent will charge a $9 fee for each Federal
Funds wire transmittal, which will be deducted from the amount of the payment.
Systematic Cash Withdrawal Plan
- -------------------------------
The Fund offers a Systematic Cash Withdrawal Plan as another option which may be
utilized by an investor who wishes to withdraw funds from his or her account on
a regular basis. To participate in this option, an investor must either own or
purchase shares having a value of $10,000 or more. Automatic payments by check
will be mailed to the investor on either a monthly, quarterly, semi-annual or
annual basis in amounts of $50 or more. All withdrawals are processed on the
25th of the month or, if such day is not a business day, on the next business
day and paid promptly thereafter. Please complete the appropriate section on the
Investment Application enclosed within this Prospectus, indicating the amount of
the distribution and the desired frequency.
An investor should realize that if withdrawals exceed income dividends and
capital gains distributions, the invested principal will be depleted. Thus,
depending on the size of the withdrawal payments and fluctuations in the value
of the shares, the original investment could be exhausted entirely. An investor
may change or stop the Plan at any time by written notice to the Fund. DIVIDENDS
AND CAPITAL GAINS DISTRIBUTIONS MUST BE AUTOMATICALLY REINVESTED TO PARTICIPATE
IN THIS PLAN. Stock certificates cannot be issued under the Systematic Cash
Withdrawal program.
Additional Information
- ----------------------
Due to the relatively high cost of maintaining smaller accounts, the Fund
reserves the right to involuntarily redeem shares in any account for its then
current net asset value (which will be paid to the shareholder within three
business days) if at any time the total investment does not have a value of at
least $500. The shareholder will be notified that the value of his or her
account is less than the required minimum and will be allowed at least 45 days
to bring the value of the account up to at least $500 before the redemption is
processed.
The redemption price will be the net asset value of the shares to be redeemed as
determined at the close of regular trading hours on the New York Stock Exchange
after receipt at the address set forth above of a request for redemption in the
form described above and the certificates (if any) evidencing the shares to be
redeemed. No redemption charge will be made. Payment for shares redeemed is made
within three business days after receipt of the certificates (or of the
redemption request where no certificates have been issued) by mailing a check to
the shareholder's address of record. Please note, a $9 fee will be charged to
your account at the time of redemption if instructions to wire proceeds are
given; there is no fee to mail proceeds.
17
<PAGE>
THE FUND MAY ALSO FROM TIME TO TIME ACCEPT TELEPHONE REDEMPTION REQUESTS, FROM
BROKER/DEALERS AND INSTITUTIONS WHO HAVE BEEN APPROVED PREVIOUSLY BY THE FUND.
Neither the Fund nor any of its service contractors will be liable for any loss
or expense or cost in acting upon any telephone instructions that are reasonably
believed to be genuine. In attempting to confirm that telephone instructions are
genuine, the Fund will use such procedures as are considered reasonable,
including requesting a shareholder to correctly state his or her Fund account
number, the name in which his or her account is registered, his or her banking
institution, bank account number and the name in which his or her bank account
is registered. To the extent that the Fund fails to use reasonable procedures to
verify the genuineness of telephone instructions, it and/or its service
contractors may be liable for any such instructions that prove to be fraudulent
or unauthorized. During times of unusual market conditions it may be difficult
to reach the Fund by telephone. If the Fund cannot be reached by telephone,
shareholders should follow the procedures for redeeming by mail as set forth
above.
The right of redemption may not be suspended or payment upon redemption deferred
for more than three business days except: (1) when trading on the New York Stock
Exchange is restricted as determined by the Securities and Exchange Commission
or such Exchange is closed for other than weekends and holidays; (2) when the
Securities and Exchange Commission has by order permitted such suspension; or
(3) when an emergency, as defined by the Rules of the Securities and Exchange
Commission, exists, making disposal of portfolio securities or valuation of net
assets of the Fund not reasonably practicable. In case of a suspension of the
determination of the net asset value, the right of redemption is also suspended
and unless a shareholder withdraws his request for redemption, he or she will
receive payment at the net asset value next determined after termination of the
suspension.
As provided in the Fund's Articles of Incorporation, payment for shares redeemed
may be made either in cash or in-kind, or partly in cash and partly in-kind.
However, the Fund has elected, pursuant to Rule 18f-1 under the 1940 Act to
redeem its shares solely in cash up to the lesser of $250,000 or one percent of
the net asset value of the Fund, during any 90 day period for any one
shareholder. Payments in excess of this limit will also be made wholly in cash
unless the Board of Directors believes that economic conditions exist which
would make such a practice detrimental to the best interests of the Fund. Any
portfolio securities paid or distributed in-kind would be valued as described
under "Computation of Net Asset Value" on pages 8 and 9. Subsequent sale of such
securities would require payment of brokerage commissions by the investor.
The value of a shareholder's shares on redemption may be more or less than the
cost of such shares to the shareholder, depending upon the net asset value of
the Fund's shares at the time of redemption.
18
<PAGE>
EXCHANGE PRIVILEGE
------------------
Shares of the Fund may be exchanged for shares of the other Funds managed by
Stratton Management Company, Stratton Growth Fund, Inc. ("SGF") or The Stratton
Funds, Inc. --- Stratton Small-Cap Yield Fund ("SSCY"), provided such other
shares may legally be sold in the state of the investor's residence. SGF has a
primary investment objective of possible growth of capital with current income
from interest and dividends as a secondary objective. SGF's investments will
normally consist of common stocks and securities convertible into or
exchangeable for common stock. SSCY has an investment objective of achieving
both dividend income and capital appreciation by investing in equity securities,
primarily common stock and securities convertible or exchangeable for common
stock of companies with total market capitalizations at the time of investment
of less than $500 million and which are outside the Standard & Poor's 500 Index.
For more complete information about SGF and SSCY, including charges and
expenses, a current Prospectus of SGF or SSCY should be obtained and read prior
to seeking any such exchange. Shares may be exchanged by: (1) written request;
or (2) telephone if a special authorization form has been completed and is on
file with the Transfer Agent in advance. See "How to Redeem Fund Shares -
Additional Information" for a description of the Fund's policy regarding
telephone instructions.
PLEASE NOTE: Shareholders who have certificated shares in their possession MUST
surrender these shares to the Fund's Transfer Agent to be held on account in
unissued form PRIOR to taking advantage of either exchange privilege. When
returning certificates for this purpose only, signature(s) need NOT be
guaranteed. There are no sales charges involved. Shareholders who engage in
frequent exchange transactions may be prohibited from further exchanges or
otherwise restricted in placing future orders. The Fund reserves the right to
suspend the telephone exchange privilege at any time. An exchange for tax
purposes constitutes the sale of one fund and the purchase of another.
Consequently, the sale may involve either a capital gain or loss to the
shareholder for Federal income tax purposes.
RETIREMENT PLANS
The Fund has available three types of tax-deferred retirement plans for its
shareholders: Defined Contribution Plans, for use by both self-employed
individuals and corporations; an Individual Retirement Account, for use by
certain eligible individuals with compensation (including earned income from
self-employment); and a 403(b)(7) Retirement Plan, for use by employees of
schools, hospitals, and certain other tax-exempt organizations or associations.
More detailed information about how to participate in these plans, the FEES
charged by the custodian, and the limits on contributions can be found in the
Statement of Additional Information. TO INVEST IN ANY OF THE TAX-DEFERRED
RETIREMENT PLANS, PLEASE CALL THE FUND FOR INFORMATION AND THE REQUIRED SEPARATE
APPLICATION.
19
<PAGE>
INCOME DIVIDENDS AND CAPITAL GAINS DISTRIBUTIONS:
TAX TREATMENT
The Fund expects to distribute monthly substantially all of its net investment
income, if any, and annually all of its net realized capital gains, if any. Any
distribution paid necessarily reduces the Fund's net asset value per share by
the amount of the distribution. Distributions may be reinvested in additional
shares of the Fund (See "Reinvestment of Income Dividends and Capital Gains
Distributions" on page 11).
For the fiscal year ended January 31, 1995, the Fund distributed dividends of
$1.92 per share from ordinary income, all of which was taxable.
For the fiscal year ended January 31, 1995 the Fund met the requirements for
the special tax treatment afforded certain investment companies and their
shareholders under Subchapter M of the Internal Revenue Code, and the Fund
expects that the requirements for special tax treatment under the Code will
continue to be met. Under such circumstances, the Fund is not subject to Federal
income tax on such part of its ordinary taxable income or net realized long-term
capital gains that it distributes to shareholders. Distributions paid by the
Fund from net investment income and short-term capital gains (but not
distributions paid from long-term capital gains) will be taxable as ordinary
income to shareholders, whether received in cash or reinvested in additional
shares of the Fund. Such ordinary income distributions will qualify for the
dividends received deduction for corporations to the extent of the total
qualifying dividends from domestic corporations received by the Fund for the
year. Shareholders who are citizens or residents of the United States will be
subject to Federal taxes with respect to long-term realized capital gains which
are distributed to them, whether or not reinvested in the Fund and regardless of
the period of time such shares have been owned by the shareholders. These
distributions do not qualify for the dividends received deduction. Shareholders
will be advised after the end of each calendar year as to the Federal income tax
consequences of dividends and distributions of the Fund made each year.
Dividends declared in October, November or December of any year payable to
shareholders of record on a specified date in such months, will be deemed for
Federal tax purposes to have been received by the shareholders and paid by the
Fund on December 31 of such year in the event such dividends are paid during
January of the following year.
Prior to purchasing shares of the Fund, the impact of dividends or capital gains
distributions which are expected to be announced or have been announced, but not
paid, should be carefully considered. Any such dividends or capital gains
distributions paid shortly after a purchase of shares by an investor prior to
the record date will have the effect of reducing the per share net asset value
of his or her shares by the per share amount of the dividends or distributions.
All or a portion of such dividends or distributions, although in effect a return
of capital to the shareholder, is subject to taxes, which may be at ordinary
income tax rates.
20
<PAGE>
A taxable gain or loss may be realized by an investor upon his or her
redemption, transfer or exchange of shares of the Fund, depending upon the cost
of such shares when purchased and their price at the time of redemption,
transfer or exchange. If a shareholder has held Fund shares for six months or
less and received a distribution taxable as capital gains attributable to those
shares, any loss he realizes on a disposition of those shares will be treated as
a capital loss to the extent of the earlier capital gain distribution.
The information above is only a short summary of some of the important Federal
tax considerations generally affecting the Fund and its shareholders. Income and
capital gains distributions may also be subject to state and local taxes.
Investors should consult their tax advisor with respect to their own tax
situation.
PERFORMANCE CALCULATIONS
From time to time, performance information such as total return and yield data
for the Fund may be quoted in advertisements or in communications to
shareholders. The Fund's total return may be calculated on an average annual
total return basis, and may also be calculated on an aggregate total return
basis, for various periods. Average annual total return reflects the average
annual percentage change in value of an investment in the Fund over the
measuring period. Aggregate total return reflects the total percentage change in
value over the measuring period. Both methods of calculating total return assume
that dividends and capital gains distributions made by the Fund during the
period are reinvested in Fund shares.
The yield of the Fund may be computed based on the net income of the Fund during
a 30-day (or one month) period (which period will be identified in connection
with the particular yield quotation). More specifically, the Fund's yield may be
computed by dividing the Fund's net income per share during a 30-day (or one
month) period by the net asset value per share on the last day of the period and
annualizing the result on a semi-annual basis.
The total return and yield of the Fund may be compared to that of other mutual
funds with similar investment objectives and to bond and other relevant indices
or to rankings prepared by independent services or other financial or industry
publications that monitor the performance of mutual funds. For example, the
total return of the Fund's shares may be compared to data prepared by Lipper
Analytical Services, Inc. and to indices prepared by Dow Jones & Co., Inc. and
Standard & Poor's Corporation.
Performance quotations of the Fund represent the Fund's past performance, and
should not be considered as representative of future results. The investment
return and principal value of an investment in the Fund will fluctuate so that
an investor's shares, when redeemed, may be worth more or less than their
original cost. Any fees charged by banks or other institutional investors
directly to their customer accounts in connection with investments in shares of
the Fund will not be included in the Fund's calculations of yield and total
return. Further information about the performance of the Fund is included in the
Fund's most recent Annual
21
<PAGE>
Report which may be obtained without charge by contacting the Fund at (800) 634-
5726.
DESCRIPTION OF COMMON STOCK
The Fund is a Maryland corporation organized on March 4, 1985, as successor to a
Delaware corporation organized on November 10, 1971. The Fund's authorized
capital is 10,000,000 shares of Common Stock, par value $1.00 per share. Each
share has equal voting, dividend, distribution and liquidation rights. The
outstanding shares are, and when issued for a consideration in excess of the par
value shares offered by this Prospectus will be, fully-paid and non-assessable.
Shares have no preemptive or conversion rights and are freely transferable.
Shares may be issued as full or fractional shares and each fractional share has
proportionately the same rights as provided for full shares.
Voting
The Fund's shares have non-cumulative voting rights, which means that the
holders of more than 50% of the shares voting for the election of directors can
elect 100% of the directors if they choose to do so and, in such event, the
holders of the remaining shares voting for the election of directors will not be
able to elect any directors.
The Fund does not presently intend to hold annual meetings of shareholders
except as required by the 1940 Act or other applicable law. The law under
certain circumstances provides shareholders with the right to call for a meeting
of shareholders to consider the removal of one or more directors. To the extent
required by law, the Fund will assist in shareholder communication in such
matters.
GENERAL INFORMATION
As used in this Prospectus the term "majority" means the holders of the lesser
of: (1) 67% of the Fund's shares present at a meeting if the holders of more
than 50% of the outstanding shares are present in person or by proxy; or (2)
more than 50% of the Fund's outstanding shares.
SERVICE PROVIDERS AND UNDERWRITER
Pursuant to an arrangement between the Fund, The Bank of New York and Fund/Plan
Services, Inc. ("Fund/Plan"), The Bank of New York, serves as Custodian of all
securities and cash owned by the Fund. The Custodian performs no managerial or
policy-making functions for the Fund.
Pursuant to an agreement between the Custodian and Fund/Plan, Fund/Plan performs
certain administrative and recordkeeping services for the Custodian. The
Custodian reallows a portion of its custody fee to Fund/Plan for providing such
services.
22
<PAGE>
Fund/Plan, Conshohocken, PA, serves as the Fund's Transfer Agent, Administrator
and Fund Accounting/Pricing Agent. Fund/Plan was acquired by FinDaTex, Inc. on
January 1, 1986. Stratton Management Company, the Advisor to the Fund, and
certain directors and officers of the Fund are controlling shareholders of
FinDaTex, Inc. During the Fund's last fiscal year, Fund/Plan received fees of
$268,804 for providing shareholder services, $30,000 for certain administrative
services and $26,000 for accounting/pricing services. Fund/Plan Broker Services,
Inc. was paid $3,000 for underwriting services in connection with the
registration of the Fund's shares under state securities laws.
Fund/Plan Broker Services, Inc. ("FPBS"), 2 W. Elm Street, Conshohocken, PA
19428-0874, acts as underwriter to the Fund pursuant to an agreement dated
June 22, 1993. Also, Fund/Plan and FPBS are affiliates of the Advisor inasmuch
as FPBS, Fund/Plan and the Advisor are under common control.
AUDITS AND REPORTS
Investors in the Fund will be kept informed of its progress through quarterly
reports showing diversification of portfolio, principal security changes,
statistical data and other significant data and annual reports containing
audited financial statements. The Fund's independent certified public
accountants for the fiscal year ended January 31, 1995 were Tait, Weller &
Baker.
23
<PAGE>
PROSPECTUS
JUNE 1, 1995
<TABLE>
<CAPTION>
Directors Investment Advisor
<S> <C>
LYNNE M. CANNON STRATTON MANAGEMENT COMPANY
Plymouth Meeting Executive Campus
JOHN J. LOMBARD, JR. 610 W. Germantown Pike, Suite 300
Plymouth Meeting, PA 19462-1050
ROSE J. RANDALL Telephone: 610-941-0255
HENRY A. RENTSCHLER Transfer Agent and Dividend Paying Agent
FUND/PLAN SERVICES, INC.
MERRITT N. RHOAD, JR. 2 W. ELM STREET, P.O. Box 874
Conshohocken, PA 19428-0874
ALEXANDER F. SMITH Telephones: 610-834-3500 . 800-441-6580
RICHARD W. STEVENS Custodian Bank
THE BANK OF NEW YORK
JAMES W. STRATTON 48 Wall Street
New York, NY 10286
Officers
Independent Accountants
JAMES W. STRATTON TAIT, WELLER & BAKER
Chairman 2 Penn Center Plaza, Suite 700
Philadelphia, PA 19102-1707
GERARD E. HEFFERNAN
President Legal Counsel
DRINKER BIDDLE & REATH
JOHN A. AFFLECK 1100 Philadelphia National Bank Building
Vice President 1345 Chestnut Street
Philadelphia, PA 19107-3496
FRANK H. REICHEL, III
Vice President
PATRICIA L. SLOAN
Secretary and Treasurer
CAROL L. ROYCE
Assistant Secretary
Assistant Treasurer
</TABLE>
STRATTON MONTHLY DIVIDEND SHARES, INC.
A NO-LOAD FUND
24
<PAGE>
STATEMENT OF ADDITIONAL INFORMATION
JUNE 1, 1995
This Statement of Additional Information is not a Prospectus but should be read
in conjunction with the current Prospectus for Stratton Monthly Dividend Shares,
Inc. (the "Fund"), dated June 1, 1995. A copy of the Prospectus for the Fund
may be obtained by contacting the Fund's "Distributor", Fund/Plan Broker
Services, Inc., 2 W. Elm Street, P.O. Box 874, Conshohocken, PA 19428-0874, or
by telephoning (800) 634-5726.
25
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
<S> <C>
Statement of Additional Information......................................
Investment Restrictions..................................................
Directors and Officers of the Fund.......................................
The Investment Advisor and Other Service Providers.......................
The Investment Advisor..............................................
Accounting Agent....................................................
The Administrator & Transfer Agent..................................
Auditor & Custodian.................................................
Portfolio Transactions and Brokerage Commissions.........................
Retirement Plans.........................................................
Underwriter..............................................................
Additional Information Concerning Taxes..................................
Additional Information on Performance Calculations.......................
Miscellaneous............................................................
Financial Statements.....................................................
</TABLE>
STATEMENT OF ADDITIONAL INFORMATION
This Statement of Additional Information should be read in conjunction with the
Prospectus of the Fund having the same date as this Statement of Additional
Information. Much of the information contained in this Statement of Additional
Information expands upon subjects discussed in the Prospectus. No investment in
shares of the Fund should be made without first reading the Prospectus of the
Fund.
INVESTMENT RESTRICTIONS
A list of the Fund's investment policies and restrictions, including those
policies and restrictions that can be changed by the Board of Directors without
shareholder approval, can be found on page 5 & 6 of the Fund's Prospectus dated
June 1, 1995.
The following investment restrictions are deemed fundamental policies and may be
changed only by the approval of the holders of a "majority" of the Fund's shares
(as defined under "General Information"):
THE FUND WILL NOT:
1. Issue any senior securities (as defined in the Investment Company Act of
1940, as amended (the "1940 Act"), except in so far as investment
restriction 1 on page 6 of the Prospectus may be deemed to be an issuance
of a senior security.
2. Act as an underwriter or purchase securities which the Fund may not be free
to sell to the public without registration of the securities under the
Securities Act of 1933.
3. Purchase or sell real estate, commodities, or commodity contracts.
26
<PAGE>
4. Invest less than 75% of the value of its total assets in securities limited
in respect to any one issuer to an amount not exceeding 5% of the value of
its total assets, Government securities (as defined in the Investment
Company Act of 1940, as amended (the "1940 Act"), cash and cash items.
(There is no similar restriction as to the investment of the balance of the
Fund's total assets). See page 3 for a further restriction undertaken in
-
connection with registration in certain states.
5. Purchase or own 5% or more of the outstanding voting securities of any
electric or gas utility company (as defined in the Public Utility Holding
Company Act of 1935), or purchase or own 10% or more of the outstanding
voting securities of any other issuer.
6. Purchase the securities of an issuer, if, to the Fund's knowledge, one or
more Officers or Directors of the Fund or of its Investment Advisor
individually own beneficially more than 0.5%, and those owning more than
0.5% together own beneficially more than 5%, of the outstanding securities
of such issuer.
7. Make loans to other persons, except that the purchase of a portion of an
issue of publicly distributed debt securities (whether or not upon original
issuance) shall not be considered the making of a loan.
8. Purchase securities on margin, except that it may obtain such short-term
credits as may be necessary for the clearance of purchases or sales of
securities.
9. Participate on a joint or a joint-and-several basis in any securities
trading account.
10. Invest in puts, calls or combinations thereof or make short sales.
11. Purchase the securities of other investment companies
12. Purchase securities which do not have readily available market quotations.
Real estate investment trusts ("REITs") are not considered investment companies,
and therefore are not subject to the restriction in limitation 11 above. The
restriction in limitation 3 on the purchase or sale of real estate does not
include investments by the Fund in securities secured by real estate or
interests therein or issued by companies or investment trusts which invest in
real estate or interests therein.
The following investment restrictions may be changed by the Board of Directors
of the Fund:
THE FUND WILL NOT:
1. Invest for the purpose of exercising control or management.
2. Invest in warrants, except when acquired as a unit with other securities.
The Fund has agreed, for purposes of compliance with certain state securities
regulations, that so long as its shares are registered and are being offered in
such states, that the Fund will: (1) not purchase a security, including
commercial paper or variable amount master notes, of any one issuer if
immediately after such purchase more than five percent of the value of its total
assets would be invested in such issuer; (2) not mortgage, pledge or
hypothecate its assets to secure any borrowing except to secure temporary
borrowing or emergency borrowing and then only in an amount not exceeding 10% of
the value
27
<PAGE>
of its total assets; and (3) not invest in interests in oil, gas or other
mineral exploration or development programs. These policies are subject to
change without the affirmative vote of a majority of the Fund's outstanding
shares.
The percentage limitations on investments are applied at the time an investment
is made. An actual percentage in excess of a stated percentage limitation does
not violate the limitation unless such excess exists immediately after an
investment is made and results from the investment. In other words, appreciation
or depreciation of the Fund's investments will not cause a violation of the
limitations. In addition, the limitations will not be violated if the Fund
receives securities by reason of a merger or other form of reorganization.
DIRECTORS AND OFFICERS OF THE FUND
The directors and executive officers of the Fund, their position with the Fund,
their addresses, affiliations, if any, with the Investment Advisor, and
principal occupations during the past five years are set forth below. Each of
the directors named below is also a director of Stratton Growth Fund, Inc. and
The Stratton Funds, Inc. and each of the officers named below also holds the
same position, unless otherwise noted, with Stratton Growth Fund, Inc. and The
Stratton Funds, Inc.
James W. Stratton* Mr. Stratton is the Chairman of the
Director/Chairman Board of Directors and President of the
610 W. Germantown Pike Investment Advisor, Stratton Management
Suite 300 Company. He is a Director of ALCO
Plymouth Meeting, PA 19462 Standard (diversified distribution and
manufacturing company), FinDaTex, Inc.
(financial services), Gilbert
Associates, Inc. (engineering/consulting
services), Petrolane, Inc. and AmeriGas
(energy), Teleflex, Inc. (aerospace
controls and medical products) and UGI
Corp., Inc. (utility-natural gas).
Lynne M. Cannon* Ms. Cannon is a Senior Vice President of
Director Relationship Management of Fund/Plan
2 W. Elm Street Services, Inc. She was formerly employed
Conshohocken, PA 19428 as Vice President of Mutual Funds of
Independence Capital Management,
Inc.(investment advisor). Prior to
Independendence Capital, she was Vice
President of AmA Investment Advisors,
Inc. (investment advisor & broker
dealer).
John J. Lombard, Jr. Mr. Lombard is a partner in the law firm
Director of Morgan, Lewis & Bockius.
2000 One Logan Square
Philadelphia, PA 19103
Rose J. Randall Ms. Randall is a private investor.
Director
20 Laughlin Lane
Philadelphia, PA 19118
28
<PAGE>
Henry A. Rentschler Mr. Rentschler is a private investor. He
Director was formerly the President of Baldwin-
P.O. Box 962 Hamilton Company, a division of Joy
Paoli, PA 19301 Environmental Equipment Co.
(manufacturer of renewal parts for
Baldwin locomotives and diesel engines)
and was also formerly a Director of the
Society for Industrial Archeology (which
promotes the study and preservation of
the physical survivals of our
technological and industrial past).
Merritt N. Rhoad, Jr. Mr. Rhoad is a private investor. He was
Director formerly a senior systems engineer with
640 Bridle Road International Business Machines
Custis Woods Corporation.
Glenside, PA 19038
Alexander F. Smith Mr. Smith is a private investor. He was
Director formerly the Chairman and Director of
Cricket Springs Gilbert Associates, Inc. (engineering
Geigertown, PA 19523 services to the electric utility
industry).
Richard W. Stevens Mr. Stevens is an attorney in private
Director practice. He was formerly a partner in
One Jenkintown Station the law firm of Clark, Ladner,
115 W. Avenue, Suite 108 Fortenbaugh and Young.
Jenkintown, PA 19046
Gerard E. Heffernan* Mr. Heffernan is a Senior Vice President
President and Director of the Investment Advisor,
610 W. Germantown Pike Stratton Management Company. He is Vice
Suite 300 President of Stratton Growth Fund, Inc.
Plymouth Meeting, PA 19462 and The Stratton Funds, Inc. He is
secretary of FinDaTex, Inc.
John A. Affleck* Mr. Affleck is a Senior Vice President
Vice President and Director of the Investment Advisor,
610 W. Germantown Pike Stratton Management Company. He is
Suite 300 President of Stratton Growth Fund, Inc.
Plymouth Meeting, PA 19462 and Vice President of The Stratton
Funds, Inc.
Frank H. Reichel, III* Mr. Reichel is a Vice President, a
Vice President Director and the Director of Research of
610 W. Germantown Pike the Investment Advisor, Stratton
Suite 300 Management Company. He is President of
Plymouth Meeting, PA 19462 The Stratton Funds, Inc. and Vice
President of Stratton Growth Fund, Inc.
29
<PAGE>
Patricia L. Sloan* Ms. Sloan is an employee of the
Secretary/Treasurer Investment Advisor, Stratton Management
610 W. Germantown Pike Company.
Suite 300
Plymouth Meeting, PA 19462
Carol L. Royce* Mrs. Royce is an employee of the
Assistant Secretary/Treasurer Investment Advisor, Stratton Management
610 W. Germantown Pike Company.
Suite 300
Plymouth Meeting PA 19462
- ------
* As defined in the 1940 Act, Messrs. Stratton, Heffernan, Affleck, Reichel,
Ms. Sloan and Mrs. Royce are "interested persons" of the Fund, by reason of
their positions with the Fund's Investment Advisor. Ms. Cannon is an
"interested person" of the Fund by reason of her employment with Fund/Plan
Services, Inc. Several of the Directors and Officers of the Fund are
controlling shareholders of FinDaTex, Inc., which acquired Fund/Plan on
January 1, 1986.
The officers and directors of the Fund who are also officers or employees of the
Advisor receive no direct compensation from the Fund for services to it. The
Directors who are not "interested persons" of the Fund receive fees and expenses
for each meeting of the Board of Directors they attend. Such Directors currently
receive $750 for each Board Meeting attended, and an annual retainer of $4,000.
The Directors serve in the same capacity for the other two Funds in the Stratton
Family of Funds complex. There are no separate audit, compensation or
nominating committees of the Board of Directors.
Set forth below are the total fees which were paid to each of the trustees who
are not "interested persons" during the fiscal period ended January 31, 1995:
<TABLE>
<CAPTION>
Aggregate Fees Paid Total Fees Paid
Director by the Company by Fund Complex
- -------- ------------------- ---------------
<S> <C> <C>
John J. Lombard, Jr. $6,187.94 $7,750
Rose J. Randall $6,187.94 $7,750
Henry A. Rentschler $6,187.94 $7,750
Merritt N. Rhoad, Jr. $6,187.94 $7,750
Alexander F. Smith $6,187.94 $7,750
Richard W. Stevens $6,187.94 $7,750
Gordon L. Wahls $3,182.46 $3,900
</TABLE>
Shares of the Fund over which the officers and directors as a group exercise
voting control or are owners of record aggregated 66,980 shares, or 1.2% of the
outstanding shares at April 30, 1995.
As of April 30, 1995, James W. Stratton owned of record and beneficially or
exercised voting control over 44,419 shares, or 0.8% of the outstanding shares
of the Fund; as of that same date, the Profit Sharing Plan of the Investment
Advisor owned 30,292 shares, or 0.6% of the Fund.
30
<PAGE>
THE INVESTMENT ADVISOR AND OTHER SERVICE PROVIDERS
The Investment Advisor
The Investment Advisory Agreement (the "Agreement") requires the Advisor to
furnish research, statistical and administrative services and advice, reports
and recommendations with respect to the Fund's portfolio, and to compute the net
asset value of the Fund's shares and maintain the books and records of the Fund.
The Agreement provides that the Advisor is not required to give the Fund
preferential treatment as compared with the treatment given to any other
customer or investment company. In addition, the Advisor furnishes to the Fund
office space and facilities necessary in connection with the operation of the
Fund. The Fund pays, or arranges for others to pay, all other expenses in
connection with its operations.
The investment advisory fee payable under the Agreement is payable monthly, at
an annual rate of 5/8 of 1% of the Fund's daily net assets. During the fiscal
years ended January 31, 1993, 1994 and 1995, the fees paid to the Advisor
were $407,642, $971,241 and $829,796 respectively.
The Advisor may charge the Fund monthly for its cost in providing (1) any
equipment used in the Fund's operations, and (2) any administrative and
accounting services for the Fund including, without limitation, maintaining
financial records and bookkeeping, daily computation of net asset value per
share, registration of the Fund and its securities with the SEC and under
various state laws, and holding shareholders' meetings. The Advisor will in no
event seek reimbursement of costs which would result in the net operating
expenses of the Fund being in excess of two percent (2%) of the average net
asset value of the Fund for any fiscal year. The Advisor's costs which are to be
reimbursed are not intended to include any profit to the Advisor.
Accounting Agent
Commencing in 1988, Fund/Plan Services, Inc. ("Fund/Plan") became the Fund's
accounting services agent and responsibility for certain accounting services
(e.g., computation of the net asset value of the Fund's shares and maintenance
of the Fund's books and financial records) were transferred from the Advisor to
Fund/Plan. At that time the Advisor stopped receiving a monthly expense
reimbursement from the Fund, and the Fund started to pay a monthly fee to
Fund/Plan for these services. For this reason, the Advisor is not expected to
receive expense reimbursements from the Fund in the foreseeable future.
During the fiscal years ended January 31, 1993, 1994 and 1995, there were no
reimbursements paid to the Advisor. For the fiscal year ended January 31, 1995,
the Fund paid Fund/Plan $26,000 in fees pursuant to the accounting services
agreement.
The Administrator & Transfer Agent
The Fund has also entered into an Administration Agreement with Fund/Plan dated
March 1, 1990. As a result of this Administration Agreement, certain
administrative responsibilities previously performed by the Advisor were
transferred to Fund/Plan, including responsibility for all federal and state
compliance matters. Fund/Plan receives a fee payable monthly at the annual rate
of $30,000 per year. Although the Advisor was entitled to receive reimbursement
from the Fund for the expenses incurred in the performance of these services,
such reimbursement was never sought. Accordingly, the Advisor has voluntarily
agreed to waive $15,000 annually of the compensation due it under the Investment
Advisory Agreement, to offset a significant portion of the fee that the Fund
will incur under the Administration Agreement. This fee waiver can be terminated
or reduced by the Advisor upon 60 days prior written notice to the Fund.
31
<PAGE>
The Advisor has agreed to reimburse the Fund in an amount equal to the expenses
of the Fund in any fiscal year which exceed the permissible limits applicable to
the Fund in any state in which its shares are qualified for sale. At the present
time, the most restrictive state limitation limits the Fund's annual expenses
(excluding interest, taxes, brokerage commissions, extraordinary expenses and
other expenses) subject to approval by state securities administrators to 2 1/2%
of the first $30 million, 2% of the next $70 million, and 1 1/2% of the
remaining average net assets. The operating expenses of the Fund will be accrued
daily and any excess over the above described limitations will be reimbursed
monthly. For the fiscal years ended January 31, 1993, 1994 and 1995, no
such reimbursement of expenses was necessary.
The Fund's transfer agent and dividend-paying agent is Fund/Plan Services, Inc.,
2 W. Elm Street, Conshohocken PA 19428. Fund/Plan was acquired by FinDaTex, Inc.
on January 1, 1986. Stratton Management Company, the Advisor to the Fund, and
certain directors and officers of the Fund are controlling shareholders of
FinDaTex, Inc. During the last Fiscal Year Fund/Plan received $13.00 per account
for providing this service.
Auditor and Custodian
The Fund's independent auditor is Tait, Weller & Baker. Their offices are
located at 2 Penn Center Plaza, Suite 700, Philadelphia PA 19102-1707. The
auditor's responsibilities are (1) to ensure that all relevant accounting
principles are being followed by the Fund; and (2) to report to the Fund's Board
of Directors concerning the Fund's operations.
The Bank of New York, 48 Wall Street, New York, New York 10286 serves as the
custodian of the Fund's assets pursuant to a custodian agreement. Under such
agreement, The Bank of New York (1) maintains a separate account or accounts in
the name of the Fund; (2) holds and transfers portfolio securities on account of
the Fund; (3) accepts receipts and makes disbursements on money on behalf of the
Fund; (4) collects and receives all income and other payments and distributions
on account of the Fund's securities; and (5) makes periodic reports to the Board
of Directors concerning the Fund's operations.
PORTFOLIO TRANSACTIONS AND BROKERAGE COMMISSIONS
The Fund seeks to obtain the best price and execution in all purchases and sales
of securities, except when the authorization to pay higher commissions for
research and services, as provided for in the Investment Advisory Agreement, is
exercised. Purchases and sales of over-the-counter securities are ordinarily
placed with primary market makers acting as principals. Consistent with its
obligation to seek the best price and execution, the Fund may place some
purchases and sales of portfolio securities with dealers or brokers who provide
statistical and research information to the Advisor. Statistical and research
services furnished by brokers through whom the Fund effects securities
transactions in accordance with these procedures are ordinarily of general
application and may be used by the Advisor in servicing other accounts as well
as that of the Fund. In addition, not all such services may be used in
connection with the Advisor's activities on behalf of the Fund. Portfolio
transactions are assigned to brokers, and commission rates negotiated, based on
an assessment of the reliability and quality of a broker's services, which may
include research and statistical information such as reports on specific
companies or groups of companies, pricing information, or broad overviews of the
stock market and the economy.
Although investment decisions will be made independently from investment
decisions made with respect to other clients advised by the Advisor,
simultaneous transactions may occur on occasion when the same security is
suitable for the investment objectives of more than one client. When two or more
such clients are simultaneously engaged in the purchase or sale of the same
security, to the extent possible the
32
<PAGE>
transactions will be averaged as to price and allocated among the clients in
accordance with an equitable formula. In some cases this system could have a
detrimental effect on the price or quantity of a security available to the Fund.
In other cases, however, the ability of the Fund to participate with other
clients of the Advisor in volume transactions may produce better executions for
the Fund.
The Investment Advisory Agreement contains provisions which authorize the
Advisor to recommend and cause the Fund to pay brokerage commissions in excess
of commissions which might be charged by other brokers, where a determination is
made that the amount of commission paid is reasonable in relation to the
brokerage and research services provided by the broker to the Fund, viewed in
terms of the particular transaction or the overall responsibilities of the
Advisor with respect to the Fund. In addition, the Investment Advisory Agreement
recognizes that the Advisor may, at its expense, acquire statistical and factual
information, advice about economic factors and trends and other appropriate
information from others in carrying out its obligations. During the fiscal year
ended January 31, 1995, no brokerage commissions were paid by the Fund
pursuant to the provision in the Investment Advisory Agreement permitting the
Fund to pay commissions for brokerage and research services in excess of
commissions that might have been charged by other brokers.
During the fiscal years ended January 31, 1993, 1994 and 1995, the Fund
paid $162,605, $224,528 and $274,673, respectively, in brokerage commissions,
substantially all of which were paid to brokers which had provided research,
statistical data or pricing information to the Advisor. The variation in these
commissions from year to year reflects primarily the amount of total net assets
in the Fund and to a lesser extent the annual turnover rate. For the fiscal
years ended January 31, 1993, 1994 and 1995, the Fund's portfolio turnover
rate was 35.94%, 19.15% and 39.50% respectively.
RETIREMENT PLANS
Defined Contribution Plans
The Fund offers a profit sharing and a money purchase plan (the "Defined
Contribution Plans") for use by both self-employed individuals (sole
proprietorships and partnerships) and corporations who wish to use shares of the
Fund as a funding medium for a retirement plan qualified under the Internal
Revenue Code.
Annual deductible contributions to the Defined Contribution Plans may generally
be made on behalf of each participant in a total amount of up to the lesser of
20% of a self-employed participant's pre-contribution earned income (after
reducing the earned income by the self-employed's deduction for 1/2 of his or
her self-employment tax) (25% of a non-self-employed participant's wages) or
$30,000. Unless the employer chooses to take Social Security contributions into
account, the same percentage of earned income (or wages) must be contributed on
behalf of each participant in the Defined Contribution Plans. Earned income and
wages are generally limited for this purpose to $150,000 (for 1995 -- indexed
for cost-of-living).
The Internal Revenue Code provides certain tax benefits for participants in a
Defined Contribution Plan. For example, amounts contributed to a Defined
Contribution Plan and earnings on such amounts are not taxed until distributed.
However, distributions to a participant from a Defined Contribution Plan before
the participant attains age 59 1/2 will (with certain exceptions) result in an
additional 10% tax on the amount included in the participant's gross income.
33
<PAGE>
Individual Retirement Account
The Fund offers a retirement account (the "IRA") for use by individuals with
compensation for services rendered (including earned income from self-
employment) who wish to use shares of the Fund as a funding medium for
individual retirement saving. However, except for rollover contributions, an
individual who has attained, or will attain, age 70 1/2 before the end of the
taxable year may only contribute to an IRA for his or her nonworking spouse
under age 70 1/2.
The general deductible limit for contributions to an IRA is the lesser of 100%
of compensation or $2,000 ($2,250 total for the individual and the individual's
nonworking spouse with two separate accounts). However, this limit is phased out
for certain individuals who are active participants in an employer-maintained
retirement plan. If such an individual is a married person with adjusted gross
income ("AGI") on his or her joint return in excess of $40,000 but less than
$50,000, or a single person with AGI in excess of $25,000 but less than $35,000,
the individual's $2,000 deduction will be decreased proportionately. A married
individual with AGI on his or her joint return of $50,000 or more, or a single
individual with AGI of $35,000 or more, may not make any deductible contribution
if he or she is an active participant in a retirement plan.
Even if the individual is not an active participant in a retirement plan, if his
or her spouse is a participant in such a plan and if their AGI, filed jointly,
is more than $40,000, the individual and his or her spouse will both be subject
to the phase-out discussed above. If neither the individual nor his or her
spouse is a participant in an employer-sponsored retirement plan, or if their
AGI is less than the $40,000 or $25,000 amounts discussed above, the individual
may continue to make deductible contributions of up to the lesser of $2,000
($2,250), or 100% of compensation.
Nondeductible contributions to the IRA may be made to the extent an individual
is unable to make a deductible contribution under the phase-out rules discussed
above. In addition, an individual may roll over to the IRA funds (in any amount)
that he or she has received in a qualifying distribution from an employer's
retirement plan.
The individual's IRA assets (and earnings thereon) may generally not be
withdrawn (without the individual's incurring an additional 10% tax on the
amount included in the individual's gross income) until age 59 1/2. Earnings on
amounts contributed to the IRA are not taxed until distributed.
403(b)(7) Retirement Plan
The Fund offers a plan (the "403(b)(7) Plan") for use by schools, hospitals, and
certain other tax-exempt organizations or associations who wish to use shares of
the Fund as a funding medium for a retirement plan for their employees.
Contributions are made to the 403(b)(7) Plan based on a reduction of the
employee's regular compensation. Such contributions, to the extent they do not
exceed applicable limitations (including a generally applicable limitation of
$9,500 per year), are excludable from the gross income of the employee for
Federal income tax purposes. Assets withdrawn from the 403(b)(7) Plan are
subject to Federal income tax and to the additional 10% tax on early withdrawals
discussed above under "Defined Contribution Plans."
General Information
In all these Plans, distributions of net investment income and capital gains
will be automatically reinvested in the Fund.
34
<PAGE>
The Custodian of the plans is Semper Trust Company ("Semper"), Plymouth Meeting,
Pennsylvania. Fund/Plan Services, Inc. serves as the fiduciary agent for Semper
and in such capacity is responsible for all recordkeeping, applicable tax
reporting and fee collection in connection with the plan accounts. Fund/Plan
Services, Inc. is also the transfer agent for the Funds. The Custodian is
entitled to deduct its fees and administrative expenses by liquidating shares
annually in September, unless the annual maintenance fee is paid separately to
Fund/Plan Services, Inc. The annual maintenance fee is currently $12.00 per plan
account. This fee may be amended without notice by Stratton Management Company,
the Custodian, or Fund/Plan Services, Inc. in the future.
The foregoing brief descriptions are not complete or definitive explanations of
the Defined Contribution, IRA, or 403(b)(7) Plans available for investment in
the Fund. Any person who wishes to establish a retirement plan account may do so
by contacting the Fund directly. The complete Plan documents and applications
will be provided to existing or prospective shareholders upon request, without
obligation. Since all these Plans involve setting aside assets for future years,
it is important that investors consider their needs and whether the investment
objective of the Fund as described in this Statement of Additional Information
and in the Prospectus is most likely to fulfill them. The Fund recommends that
investors consult their attorneys or tax advisors to determine if the retirement
programs described herein are appropriate for their needs.
UNDERWRITER
The Fund has entered into an Underwriting Agreement with Fund/Plan Broker
Services, Inc. ("FPBS"). FPBS acts as an underwriter of the Fund's shares for
the purpose of facilitating the registration of shares. In this regard, FPBS has
agreed at its own expense to qualify as a broker/dealer under all applicable
federal or state laws in those states which the Fund shall from time to time
identify to FPBS as states in which it wishes to offer its shares for sale, in
order that state registrations may be maintained for the Fund.
FPBS is a broker/dealer registered with the Securities and Exchange Commission
and a member in good standing of the National Association of Securities Dealers,
Inc. FPBS is an affiliate of the Advisor in as much as both the Underwriter and
the Advisor are under common control.
For the services to be provided under the Underwriting Agreement in facilitating
the registration of Fund shares under state securities laws, FPBS has receive d
an annual fee of $3,000 for providing these services in each of the last three
fiscal years . This fee is included in the net expenses of the Fund. The Fund
shall continue to bear the expense of all filing or registration fees incurred
in connection with the registration of shares of the Fund under state securities
laws. The Fund pays no compensation to FPBS for its assistance in sales of Fund
shares. The Advisor pays certain out-of-pocket expenses, plus the cost for each
employee to be licensed as a Registered Representative by FPBS.
The Underwriting Agreement may be terminated by either party upon 60 days prior
written notice to the other party, and if so terminated, the pro-rata portion of
the unearned fee will be returned to the Fund.
ADDITIONAL INFORMATION CONCERNING TAXES
The following summarizes certain additional tax considerations generally
affecting the Fund and its shareholders that are not described in the
Prospectus. No attempt is made to present a detailed explanation of the tax
treatment of the Fund or its shareholders, and the discussion here and in the
Prospectus is not intended as a substitute for careful tax planning. Potential
investors should consult their tax advisors with specific reference to their own
tax situation.
35
<PAGE>
As stated in the Prospectus, the Fund intends to qualify as a regulated
investment company under the Internal Revenue Code for each taxable year. The
Fund will not be treated as a regulated investment company for a taxable year
if, among other things, the Fund derives 30% or more of its gross income from
the sale or other disposition of securities and certain other investments held
for less than three months.
Ordinary income of individuals is taxable at a maximum nominal rate of 39.6%;
although because of limitations on itemized deductions otherwise allowable and
the phase-out of personal exemptions, the maximum effective marginal rate of tax
for certain taxpayers may be more than 39.6% in certain circumstances. Net long-
term capital gains are taxed at a maximum normal rate of 28%. For corporations,
long-term capital gains and ordinary income are both taxable at a maximum
nominal rate of 35%.
A 4% nondeductible excise tax is imposed on regulated investment companies that
fail to currently distribute an amount equal to specified percentages of their
ordinary taxable income and capital gain net income (excess of capital gains
over capital losses). The Fund intends to make sufficient distributions or
deemed distributions of its ordinary taxable income and any capital gain net
income prior to the end of each calendar year to avoid liability for this excise
tax.
If for any fiscal year the Fund does not qualify for the special tax treatment
afforded regulated investment companies, all of its taxable income will be
subject to Federal income tax at regular corporate rates (without any deduction
for distributions to its shareholders). In such event, dividend distributions
would be taxable as ordinary income to shareholders to the extent of the Fund's
current and accumulated earnings and profits, and would be eligible for the
dividends received deduction for corporations.
The foregoing discussion is based on Federal tax laws and regulations which are
in effect on the date of this Statement of Additional Information; such laws and
regulations may be changed by legislative or administrative action.
ADDITIONAL INFORMATION ON PERFORMANCE CALCULATIONS
From time to time, the Fund's yield and the total return may be quoted in
advertisements, shareholder reports or other communications to shareholders.
YIELD CALCULATIONS
The Fund's yield may be calculated by dividing the net investment income per
share (as described below) earned by the Fund during a 30-day (or one month)
period by the net asset value per share on the last day of the period and
annualizing the result on a semi-annual basis by adding one to the quotient,
raising the sum to the power of six, subtracting one from the result and then
doubling the difference. The Fund's net investment income per share earned
during the period is based on the average daily number of shares outstanding
during the period entitled to receive dividends and includes dividends and
interest earned during the period minus expenses accrued for the period, net of
reimbursements.
This calculation can be expressed as follows:
36
<PAGE>
a-b
Yield = 2[(--- + 1)(to the sixth power) - 1]
cd
Where: a = dividends and interest earned during the period.
b = expenses accrued for the period (net of reimbursements).
c = the average daily number of shares outstanding during the
period that were entitled to receive dividends.
d = net asset value per share on the last day of the period.
For the purpose of determining net investment income earned during the period
(variable "a" in the formula), interest earned on debt obligations held by the
Fund is calculated by computing the yield to maturity of each obligation held by
the Fund based on the market value of the obligation (including actual accrued
interest) at the close of business on the last business day of each month, or,
with respect to obligations purchased during the month, the purchase price (plus
actual accrued interest) and dividing the result by 360 and multiplying the
quotient by the market value of the obligation (including actual accrued
interest) in order to determine the interest income on the obligation for each
day of the subsequent month that the obligation is held by the Fund. For
purposes of this calculation, it is assumed that each month contains 30 days.
The maturity of an obligation with a call provision is the next call date on
which the obligation reasonably may be expected to be called or, if none, the
maturity date. With respect to debt obligations purchased at a discount or
premium, the formula generally calls for amortization of the discount or
premium. The amortization schedule will be adjusted monthly to reflect changes
in the market values of such debt obligations.
Undeclared earned income will be subtracted from the net asset value per share
(variable "d" in the formula). Undeclared earned income is the net investment
income which, at the end of the base period, has not been declared as a
dividend, but is reasonably expected to be and is declared as a dividend shortly
thereafter. Based on the foregoing calculations, the Fund's yield for the month
of January, 1995 was 7.07%.
TOTAL RETURN CALCULATIONS
The Fund computes its average annual total return by determining the average
annual compounded rate of return during specified periods that equate the
initial amount invested to the ending redeemable value of such investment. This
is done by dividing the ending redeemable value of a hypothetical $1,000 initial
investment by $1,000 and raising the quotient to a power equal to one divided by
the number of years (or fractional portion thereof) covered by the computation
and subtracting one from the result.
This calculation can be expressed as follows:
ERV
T = [(---)1/n - 1]
P
37
<PAGE>
Where: T = average annual total return.
ERV = ending redeemable value at the end of the period
covered by the computation of a hypothetical $1,000
investment made at the beginning of the period.
P = hypothetical initial investment of $1,000.
n = period covered by the computation, expressed in
terms of years.
The Fund computes its aggregate total return by determining the aggregate
compounded rate of return during specified periods that likewise equate the
initial amount invested to the ending redeemable value of such investment.
The formula for calculating aggregate total return is as follows:
(ERV - P)
A = ---------
P
Where: A = aggregate total return.
ERV = ending redeemable value at end of the period
covered by the computation of a hypothetical $1,000
investment made at the beginning of the period.
P = hypothetical initial investment of $1,000.
The calculations of average annual total return and aggregate total return
assume the reinvestment of all dividends and capital gain distributions on the
reinvestment dates during the period. The ending redeemable value (variable
"ERV" in each formula) is determined by assuming complete redemption of the
hypothetical investment and the deduction of all nonrecurring charges at the end
of the period covered by the computations.
Since performance will fluctuate, performance data for the Fund cannot
necessarily be used to compare an investment in the Fund's shares with bank
deposits, savings accounts and similar investment alternatives which often
provide an agreed or guaranteed fixed yield for a stated period of time.
Shareholders should remember that performance is generally a function of the
kind and quality of the instruments held in a portfolio, portfolio maturity,
operating expenses and market conditions.
Based on the foregoing calculations, the average annual total returns for the
Fund for the one year, five year and ten year periods ended January 31, 1995
were -6.57%, 8.21% and 9.72%, respectively. The aggregate total returns for
the same five year and ten year periods were 48.35% and 152.79%, respectively.
MISCELLANEOUS
As of April 30, 1995, Charles Schwab Co. was the record owner of 20.9% of the
outstanding shares of the Fund. However, at such date, no other single
shareholder owned of record or beneficially more than 5%
38
<PAGE>
of the outstanding shares of the Fund.
FINANCIAL STATEMENTS
The financial statements of the Fund which appear in this Statement of
Additional Information and the Financial Highlights which appears in the Fund's
Prospectus were examined by Tait, Weller & Baker, independent certified public
accountants, whose report thereon appears elsewhere herein, and have been
included herein and in the Fund's Prospectus in reliance upon the report of said
firm of accountants given upon their authority as experts in accounting and
auditing.
39
<PAGE>
SCHEDULE OF INVESTMENTS JANUARY 31, 1995
<TABLE>
<CAPTION>
Market
Number of Value
Shares Security (Note 1)
- ---------- -------- ---------------
<S> <C> <C>
COMMON STOCKS - 81.5%
Real Estate Commercial - 6.8%
255,000 Crown American Realty Trust ................................... $ 3,474,375
140,000 Excel Realty Trust, Inc. ...................................... 2,345,000
100,000 IRT Property Co. .............................................. 1,012,500
309,000 Mid-America Realty Investments, Inc. .......................... 2,240,250
---------------
9,072,125
---------------
Real Estate Diversified - 3.4%
165,500 Colonial Properties Trust ..................................... 3,703,062
50,000 EastGroup Properties, SBI ..................................... 875,000
---------------
4,578,062
---------------
Real Estate Health Care - 13.7%
224,500 American Health Properties, Inc. .............................. 4,602,250
309,800 Health Care REIT, Inc. ........................................ 6,621,975
102,000 Meditrust, SBI ................................................ 3,123,750
160,000 National Health Investors, Inc. ............................... 4,020,000
---------------
18,367,975
---------------
Telecommunications - 2.3%
100,000 Pacific Telesis Group ......................................... 3,062,500
---------------
Utilities - 55.3%
150,000 Allegheny Power System, Inc. .................................. 3,581,250
200,000 Boston Edison Co. ............................................. 5,000,000
105,400 Central Hudson Gas & Electric Corp. ........................... 2,806,275
170,000 CINergy Corp. ................................................. 4,186,250
300,000 Delmarva Power & Light Co. .................................... 5,775,000
100,000 General Public Utilities Corp. ................................ 2,825,000
110,000 IES Industries, Inc. .......................................... 2,983,750
200,000 Nevada Power Co. .............................................. 4,200,000
32,000 New York State Electric & Gas Corp. ........................... 668,000
230,000 Ohio Edison Co. ............................................... 4,858,750
180,000 Oklahoma Gas & Electric Co. ................................... 6,345,000
212,800 Pennsylvania Power & Light Co. ................................ 4,362,400
100,000 Public Service Co. of Colorado ................................ 3,025,000
245,000 Public Service Enterprise Group, Inc. ......................... 7,074,375
200,000 Puget Sound Power & Light Co. ................................. 4,175,000
220,000 Rochester Gas & Electric Corp. ................................ 4,867,500
236,800 SCEcorp. ...................................................... 3,877,600
100,000 Texas Utilities Co. ........................................... 3,475,000
---------------
74,086,150
---------------
Total Common Stocks (cost $113,338,639) ....................... 109,166,812
---------------
</TABLE>
See accompanying notes to financial statements.
40
<PAGE>
SCHEDULE OF INVESTMENTS JANUARY 31, 1995
<TABLE>
<CAPTION>
Market
Number of Value
Shares Security (Note 1)
- ---------- -------- ---------------
<S> <C> <C>
PREFERRED STOCKS - 0.7%
20,000 Delta Airlines, Inc., Series C cm. Cv. Dep. Pfd. .............. $ 960,000
---------------
Total Preferred Stocks (cost $970,600) ........................ 960,000
---------------
Principal
Amount
- ----------
CONVERTIBLE DEBENTURES - 3.7%
$ 500,000 Dorchester Gas Corp. 8.50% Cv. Sub. Debs. 12/01/05*............ 418,125
$1,794,000 Interstate/Johnson Lane, Inc. 7.75% Cv. Sub. Debs. 03/31/11 ... 1,493,505
$1,000,000 Liberty Property Ltd. 8.00% Cv. Sub. Debs. 07/01/01 ........... 995,000
$2,500,000 Mid-Atlantic Realty Trust 7.625% Cv. Sub. Debs. 09/15/03 ...... 2,050,000
---------------
Total Convertible Debentures (cost $5,558,556) ................ 4,956,630
---------------
U.S. GOVERNMENT OBLIGATIONS - 8.8%
$5,000,000 U.S. Treasury Notes 4.625% due 08/15/95 ....................... 4,950,950
$2,000,000 U.S. Treasury Notes 5.125% due 11/15/95 ....................... 1,976,120
$5,000,000 U.S. Treasury Notes 5.875% due 05/31/96 ....................... 4,925,250
---------------
Total U.S. Government Obligations
(amortized cost $11,922,711)............................... 11,852,320
---------------
SHORT-TERM NOTES - 4.3%
$ 1,280,000 General Motors Acceptance Corp. Note 5.55% due 02/01/95 ....... 1,280,000
$ 1,375,000 Prudential Funding Corp. Note 5.30% due 02/02/95 .............. 1,375,000
$ 1,545,000 General Motors Acceptance Corp. Note 5.80% due 02/03/95 ....... 1,545,000
$ 1,545,000 General Motors Acceptance Corp. Note 5.80% due 02/06/95 ....... 1,545,000
---------------
Total Short-Term Notes (cost $5,745,000) ...................... 5,745,000
---------------
Total Investments - 99.0% (cost $137,535,506)**................ 132,680,762
Cash and other assets, less liabilities - 1.0% ................ 1,385,557
---------------
NET ASSETS - 100.0% ........................................... $ 134,066,319
===============
</TABLE>
* Fair value as determined by the Board of Directors.
** Aggregate cost for federal income tax purposes is $137,535,506; and net
unrealized depreciation is as follows:
<TABLE>
<S> <C>
Gross unrealized appreciation................................. $ 3,130,994
Gross unrealized depreciation................................. (7,985,738)
---------------
Net unrealized depreciation................................. $ (4,854,744)
===============
</TABLE>
See accompanying notes to financial statements.
41
<PAGE>
STATEMENT OF ASSETS AND LIABILITIES
January 31, 1995
<TABLE>
<S> <C>
ASSETS
Investments in securities at market value (identified cost $137,535,506) (Note 1)... $ 132,680,762
Cash................................................................................ 176,015
Dividends receivable................................................................ 957,053
Interest receivable................................................................. 317,100
Receivable for capital stock sold................................................... 19,836
---------------
Total Assets.................................................................... 134,150,766
---------------
LIABILITIES
Accrued expenses.................................................................... 56,656
Payable for capital stock redeemed.................................................. 27,791
---------------
Total Liabilities............................................................... 84,447
---------------
NET ASSETS
Applicable to 5,397,491 shares; $1.00 par value; 10,000,000 shares authorized ...... $ 134,066,319
===============
Net asset value, offering and redemption price per share
($134,066,319/5,397,491 shares).................................................. $ 24.84
===============
SOURCE OF NET ASSETS
Paid-in capital..................................................................... $ 159,382,505
Undistributed net investment income ................................................ 90,187
Accumulated net realized loss on investments........................................ (20,551,629)
Net unrealized depreciation of investments.......................................... (4,854,744)
---------------
Net Assets...................................................................... $ 134,066,319
===============
</TABLE>
================================================================================
STATEMENT OF OPERATIONS
Year Ended January 31, 1995
<TABLE>
<S> <C>
INCOME
Dividends............................................................................ $ 11,029,922
Interest............................................................................. 852,650
---------------
Total Income...................................................................... 11,882,572
---------------
EXPENSES
Advisory fees (Note 2)............................................................... 829,796
Shareholder services fees (Note 2)................................................... 268,804
Registration fees (Note 2)........................................................... 68,691
Printing and postage................................................................. 66,541
Custodian fees (Note 2).............................................................. 44,782
Directors' fees...................................................................... 40,310
Administrative services fees (Note 2)................................................ 30,000
Miscellaneous........................................................................ 27,198
Accounting/Pricing services fees (Note 2)............................................ 26,000
Legal fees........................................................................... 20,908
Audit................................................................................ 18,809
Taxes other than income taxes........................................................ 14,144
---------------
Total Expenses.................................................................... 1,455,983
---------------
Net Investment Income.......................................................... 10,426,589
---------------
REALIZED AND UNREALIZED LOSS ON INVESTMENTS
Net realized loss on investments..................................................... (17,833,712)
Net decrease in unrealized depreciation of investments............................... (3,842,840)
---------------
Net loss on investments........................................................... (21,676,552)
---------------
Net decrease in net assets resulting from operations........................... $ (11,249,963)
===============
</TABLE>
See accompanying notes to financial statements.
42
<PAGE>
STATEMENT OF CHANGES IN NET ASSETS
For the years ended January 31,
<TABLE>
<CAPTION>
1995 1994
------------- -------------
<S> <C> <C>
OPERATIONS
Net investment income............................................ $ 10,426,589 $ 9,658,290
Net realized loss on investments................................. (17,833,712) (1,557,801)
Net decrease in unrealized appreciation (depreciation)
of investments................................................ (3,842,840) (9,338,255)
------------- -------------
Net decrease in net assets resulting from operations...... (11,249,963) (1,237,766)
DISTRIBUTIONS TO SHAREHOLDERS
Distributions from net investment income
($1.92 and $1.94 per share, respectively)..................... (10,336,402) (9,863,604)
Distributions in excess of net investment income
($.00 and $.01 per share, respectively)....................... -- (34,338)
CAPITAL SHARE TRANSACTIONS
Net increase (decrease) in net assets derived from the net change
in the number of outstanding shares (a)....................... (10,145,399) 78,707,263
------------- -------------
Total Increase (Decrease) in Net Assets................... (31,731,764) 67,571,555
NET ASSETS AT THE BEGINNING OF THE YEAR ........................... 165,798,083 98,226,528
------------- -------------
NET ASSETS AT THE END OF THE YEAR
(including undistributed net investment
income of $90,187 and $0, respectively)....................... $ 134,066,319 $ 165,798,083
============= =============
</TABLE>
(a) A summary of capital share transactions follows:
<TABLE>
<CAPTION>
Years Ended January 31,
----------------------------------------------------------------
1995 1994
----------------------------- -----------------------------
Shares Value Shares Value
----------- ------------- ----------- -------------
<S> <C> <C> <C> <C>
Shares issued................. 1,506,670 $ 37,662,221 4,249,380 $ 130,781,613
Shares reinvested from
net investment income..... 252,999 6,370,235 214,821 6,565,682
----------- ------------- ----------- -------------
1,759,669 44,032,456 4,464,201 137,347,295
Shares redeemed............... (2,141,485) (54,177,855) (1,969,191) (58,640,032)
----------- ------------- ----------- -------------
Net increase (decrease)... (381,816) $ (10,145,399) 2,495,010 $ 78,707,263
=========== ============= =========== =============
</TABLE>
See accompanying notes to financial statements.
43
<PAGE>
NOTES TO FINANCIAL STATEMENTS
January 31, 1995
Note 1. - Significant Accounting Policies. Stratton Monthly Dividend Shares,
Inc. ("Fund") is registered under the Investment Company Act of 1940, as
amended, as a diversified, open-end management company. The following is a
summary of significant accounting policies consistently followed by the Fund in
the preparation of its financial statements. The policies are in conformity with
generally accepted accounting principles.
A. Security valuation - Investments in securities traded on a national
securities exchange are valued at the last reported sales price on the
primary exchange on which they are traded on the valuation date.
Securities not listed or not traded are valued at the mean of the bid and
ask price. Illiquid securities and other securities for which market
valuations are not available are valued by or at the direction of the
Board of Directors. Short-term money market instruments which have a
maturity of 60 days or less are valued at amortized cost which
approximates market value.
B. Determination of gains or losses on sales of securities - Gains or losses
on the sale of securities are calculated for accounting and tax purposes
on the identified cost basis.
C. Federal Income Taxes - It is the Fund's policy to comply with the
requirements of the Internal Revenue Code applicable to regulated
investment companies and to distribute all of its taxable income to its
shareholders. Therefore, no federal income tax provision is required. The
Fund has a capital loss carryover available to offset future capital
gains, if any, of approximately $13,525,000 of which $341,000 expires in
1999 and $13,184,000 expires in 2003.
D. Other - Security transactions are accounted for on the date the securities
are purchased or sold. Interest income is recorded on the accrual basis
and dividend income on the ex-dividend date. Dividends and distributions
to shareholders are recorded on the ex-dividend date.
Note 2. - During the year ended January 31, 1995, the Fund paid advisory fees
aggregating $829,796 to Stratton Management Company, (the "Advisor"). Management
services are provided by the Advisor under an agreement whereby the Advisor
furnishes all investment advice, office space and facilities to the Fund and
pays the salaries of the Fund's officers and employees, except to the extent
that those employees are engaged in administrative and accounting services
activities. In return for these services, the Fund pays a monthly fee to the
Advisor at an annual rate of 5/8 of 1% of the average daily net asset value of
the Fund for such month. The Advisor has voluntarily agreed to waive $15,000
annually of the compensation due it under the agreement to offset a significant
portion of the cost of certain administrative responsibilities delegated to
Fund/Plan Services, Inc. Because of certain undertakings to comply with various
state securities laws, if in any fiscal year the expenses of the Fund (excluding
taxes, brokerage commissions and interest) exceed 2 1/2% of the first $30
million of the Fund's average net assets, 2% of the next $70 million and 1 1/2%
of the remaining, the Advisor shall reimburse the Fund for such excess. Certain
officers and directors of the Fund are also officers and directors of the
Advisor. None of the Fund's officers receives compensation from the Fund.
The Fund's Transfer Agent, Fund/Plan Services, Inc. ("Fund/Plan"), is a wholly-
owned subsidiary of FinDaTex, Inc. Certain directors and officers of the Fund
are shareholders of FinDaTex, Inc. Fund/Plan received fees of $268,804 for
providing shareholder services, $30,000 for certain administrative services and
$26,000 for accounting/pricing services during the year ended January 31, 1995.
Pursuant to an agreement between The Bank of New York, (the "Custodian"), and
Fund/Plan, the Custodian reallows a portion of its custody fee to Fund/Plan for
certain services delegated to Fund/Plan. The amount is not readily determinable.
Fund/Plan Broker Services, Inc. serves as the Fund's principal underwriter and
receives no fees for services in assisting in sales of the Fund's shares but
does receive an annual fee of $3,000 for its services in connection with the
registration of the Fund's shares under state securities laws.
Note 3. - Purchases and sales of securities, excluding short-term notes,
aggregated $51,652,315 and $73,756,883, respectively, for the year ended January
31, 1995.
44
<PAGE>
FINANCIAL HIGHLIGHTS
The table below sets forth financial data for a share of capital stock
outstanding throughout each year presented.
<TABLE>
<CAPTION>
Years Ended January 31,
----------------------------------------------------
1995 1994 1993 1992 1991
-------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Year......... $28.69 $29.91 $27.83 $23.02 $24.50
-------- -------- -------- -------- --------
Income from Investment Operations
---------------------------------
Net Investment Income.................... 1.94 1.87 1.94 1.97 2.05
Net gains (loss) on securities
(both realized and unrealized).......... (3.87) (1.14) 2.08 4.79 (1.33)
-------- -------- -------- -------- --------
Total from investment operations....... (1.93) 0.73 4.02 6.76 0.72
-------- -------- -------- -------- --------
Less Distributions
------------------
Dividends (from net investment income)... (1.92) (1.94) (1.94) (1.95) (2.20)
Distributions (in excess
of net Investment Income)............... 0.00 (0.01) 0.00 0.00 0.00
-------- -------- -------- -------- --------
Total distributions.................... (1.92) (1.95) (1.94) (1.95) (2.20)
-------- -------- -------- -------- --------
Net Asset Value, End of Year............... $24.84 $28.69 $29.91 $27.83 $23.02
======== ======== ======== ======== ========
Total Return............................... -6.57% 2.22% 15.18% 30.55% 3.30%
Ratios/Supplemental Data
- ------------------------
Net assets, end of year (in 000's)......... $134,066 $165,798 $98,227 $45,566 $31,178
Ratio of expenses to average net assets.... 1.08% 0.99% 1.10% 1.23% 1.27%
Ratio of net investment income to average
net assets............................... 7.71% 6.12% 6.74% 7.63% 8.79%
Portfolio turnover rate.................... 39.50% 19.15% 35.94% 43.55% 14.00%
</TABLE>
See accompanying notes to financial statements
================================================================================
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
To the Shareholders and Board of Directors of Stratton Monthly Dividend Shares,
Inc.
We have audited the accompanying statement of assets and liabilities of
Stratton Monthly Dividend Shares, Inc., including the schedule of investments,
as of January 31, 1995, and the related statement of operations for the year
then ended, the statement of changes in net assets for each of the two years in
the period then ended, and the financial highlights for each of the five years
in the period then ended. These financial statements and financial highlights
are the responsibility of the Fund's management. Our responsibility is to
express an opinion on these financial statements and financial highlights based
on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned as of
January 31, 1995, by correspondence with the custodian. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred
to above present fairly, in all material respects, the financial position of
Stratton Monthly Dividend Shares, Inc. as of January 31, 1995, the results of
its operations for the year then ended, the changes in its net assets for each
of the two years in the period then ended, and the financial highlights for each
of the five years in the period then ended, in conformity with generally
accepted accounting principles.
Philadelphia, PA
February 10, 1995 TAIT, WELLER & BAKER
45
<PAGE>
POST-EFFECTIVE AMENDMENT NO. 15
TO REGISTRATION STATEMENT NO 2-42379
on
FORM N-1A
PART C. OTHER INFORMATION
Item 24. Financial Statements and Exhibits
- -------------------------------------------
(a) Financial Statements:
(1) The Financial Highlights are included in Part A of this
Registration Statement on Form N-1A. The following Financial
Statements which are included in Part B of this Registration
Statement on Form N-1A are for the fiscal year ended January
31, 1995:
Schedule of Investments at January 31, 1995.
Statement of Assets and Liabilities at January 31,
1995.
Statement of Operations for the year ended January 31,
1995.
Statement of Changes in Net Assets for the years ended
January 31, 1995 and January 31, 1994.
Notes to Financial Statements
Financial Highlights
Report of Independent Accountants
(2) All required financial statements are included or incorporated
in Parts A and B hereof. All other financial statements and
schedules are inapplicable.
(b) Exhibits:
(1) Articles of Incorporation of Registrant dated March 1, 1985,
are incorporated herein by reference to Exhibit No. (1) of
Post-Effective Amendment No. 5 to Registrant's Registration
Statement on Form N-1A, filed on March 29, 1985.
(2) By-laws of Registrant, as amended, dated February 28, 1989 are
incorporated herein by reference to Exhibit No. (2) of
Post-Effective Amendment No. 9 to Registrant's Registration
Statement on Form N-1A, filed on May 31, 1989.
(3) None.
(4) Specimen certificate for shares of common stock of Registrant
is incorporated herein by reference to Exhibit No. (4) of
Post-Effective Amendment No. 11 to Registrant's Registration
Statement on Form N-1A, filed on May 31, 1991.
(5) Investment Advisory Agreement dated July 1, 1989, between
Registrant and Stratton Management Company is incorporated
herein by reference to Exhibit No. (5) of
46
<PAGE>
Post-Effective Amendment No. 10 to Registrant's Registration Statement
on Form N-1A filed on March 30, 1990.
(6) Underwriting Agreement dated June 22, 1993 between Registrant and
Fund/Plan Broker Services, Inc is incorporated herein by reference
to Exhibit No., (6) of Post-Effective No. 14 to Registrant's
Registration Statement on Form N1-A filed on June 1, 1994.
(7) None.
(8) (a) Custodian Agreement between Registrant and The Bank of New York
dated November 1, 1994 is incorporated herein.
(b) Custody Administration and Agency Agreement between Registrant
and Fund/Plan Services, Inc. dated November 1, 1994 is
incorporated herein.
(9) (a) Administration Agreement dated March 1, 1990 between Registrant
and Fund/Plan Services, Inc. is incorporated herein by reference
to Exhibit No. (9)(a) of Post-Effective Amendment No. 10 to
Registrant's Registration Statement on Form N-1A filed on March
30, 1990.
(b) Shareholder Services Agreement (formerly known as Administration
Agreement) dated May 31, 1985 between Registrant and Fund/Plan
Services, Inc. is incorporated herein by reference to Exhibit
No.(9)(a) of Post-Effective Amendment No. 9 to Registrant's
Registration Statement on Form N-1A filed on May 31, 1989.
(c) Amendment No. 1 to Shareholder Services Agreement (formerly known
as Administration Agreement) dated May 29, 1987 is incorporated
herein by reference to Exhibit No. (9)(b) of Post-Effective
Amendment No. 8 to Registrant's Registration Statement on Form N-
1A filed on May 31, 1988.
(d) Amendment No. 2 to Shareholder Services Agreement (formerly known
as Administration Agreement) dated May 29, 1987 is incorporated
herein by reference to Exhibit No. (9)(c) of Post-Effective
Amendment No. 8 to Registrant's Registration Statement on Form N-
1A filed on May 31, 1988.
(e) Amendment to Shareholder Services Agreement (formerly known as
Administration Agreement) dated February 27, 1990 changing title
of May 31, 1985 Administration Agreement to Shareholder Services
Agreement is incorporated herein by reference to Exhibit No.
(9)(e) of Post-Effective Amendment No. 10 to Registrant's
Registration Statement on Form N-1A filed on March 30, 1990.
(f) Accounting Services Agreement dated May 1, 1988 between
Registrant and Fund/Plan Services, Inc. with notice of February
22, 1989 is incorporated herein by reference to Exhibit No.
(9)(d) of Post-Effective Amendment No. 9 to Registrant's
Registration Statement on Form N-1A filed on May 31, 1989.
(10)
(a) Opinion and Consent of Counsel filed under Rule 24f-2 of the 1940
Act as part of Registrant's Rule 24f-2 Notice on March 23,
1995.
47
<PAGE>
(b) Opinion and Consent of Counsel under Rule 24e-2 of the 1940
Act is filed herein.
(11) (a) Consent of Tait, Weller & Baker filed herein.
(b) Consent of Drinker Biddle & Reath filed herein.
(12) None.
(13) None.
(14) (a) Form of 403(b)(7) Retirement Plan is incorporated herein by
reference to Exhibit No. (14)(a) of Post-Effective Amendment No.
11 to Registrant's Registration Statement on Form N-1A filed on
May 31, 1991.
(b) Form of Individual Retirement Account (I.R.A.) is incorporated
herein by reference to Exhibit No. (14)(b) of Post-Effective
Amendment No. 11 to Registrant's Registration Statement on Form
N-1A filed on May 31, 1991.
(c) Form of Self-Employed Retirement Plan (Defined Contribution
Plans) as amended June 30, 1994 is filed herein.
(15) None.
(16) Schedule of computations of performance quotations is incorporated
herein by reference to Exhibit No. (16) of Post-Effective Amendment
No. 14 to Registrant's Registration Statement on Form N-1A filed on
June 1, 1994.
(17) Powers of Attorney filed herein.
Item 25. Persons Controlled by or under Common Control with Registrant.
- ------------------------------------------------------------------------
Registrant is controlled by its Board of Directors.
Item 26. Number of Holders of Securities.
- ------------------------------------------
<TABLE>
<CAPTION>
Number of
Record Holders
Title of Class (as of April 30, 1995)
-------------- ----------------------
<S> <C>
Common Stock 8,647
par value $1.00
per share
</TABLE>
Item 27. Indemnification.
- --------------------------
Section 2-418 of the Corporation and Associations Article of the
Annotated Code of Maryland gives Registrant the power to indemnify its
directors and officers under certain situations. Article VII, Section 3
of Registrant's Articles of Incorporation, incorporated by reference as
Exhibit (1) hereto, and Section 2.12 of Registrant's By-Laws,
incorporated by reference as Exhibit (2) hereto, provide for the
indemnification of Registrant's directors and officers. Each
indemnification must be authorized by the Board of Directors of
Registrant by a majority of a quorum consisting of directors who were not
parties to the action, suit or proceeding, or by independent legal
counsel in a written
48
<PAGE>
opinion, or by the shareholders. Notwithstanding the foregoing, Section
2.12(e) of Registrant's By-Laws provides that no director or officer of
Registrant shall be indemnified against any liability to Registrant or its
shareholders by reason of willful misfeasance, bad faith, gross negligence
or reckless disregard of the duties involved in the conduct of his office.
In addition, the aforesaid section of the Corporations and Associations
Article of the Annotated Code of Maryland gives Registrant the power (a) to
purchase and maintain insurance for its directors and officers against any
liability asserted against them and incurred by them in that capacity or
arising out of their status as such, whether or not Registrant would have
the power to indemnify such directors and officers under such statute, and
(b) under certain circumstances to pay the reasonable expenses incurred by
a director or officer in defending an action, suit or proceeding in advance
of the final disposition of the action, suit or proceeding.
Insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be permitted to directors, officers, and controlling persons of
the Registrant, pursuant to the foregoing provisions or otherwise, the
Registrant has been advised that, in the opinion of the Securities and
Exchange Commission, such indemnification is against public policy as
expressed in the Act and is, therefore, unenforceable. In the event that a
claim for indemnification against such liabilities (other than the payment
by the Registrant of expenses incurred or paid by a director, officer or
controlling person of the Registrant in the successful defense of any
action, suit or proceeding) is asserted by such director, officer or
controlling person in connection with the securities being registered the
Registrant will, unless in the opinion of its counsel the matter has been
settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against
public policy as expressed in the Act and will be governed by the final
adjudication of such issue.
Indemnification of the Registrant's Custodian, Transfer Agent,
Accounting/Pricing Agent and Administrator against certain stated
liabilities is provided for by the following documents:
(a) Article XVII (14) of the Custodian Agreement between the
Registrant and The Bank of New York, incorporated herein by
reference to Exhibit 8(a) of the Registrant's Registration Statement
on Form N-1A.
(b) Section 26 of the Shareholder Services Agreement, incorporated herein
by reference as Exhibit 9(b) through 9(e) of the Registrant's
Registration Statement on Form N-1A;
(c) Section 10 of the Accounting Services Agreement, incorporated herein
by reference as Exhibit 9 (f) of the Registrant's Registration
Statement on Form N-1A; and
(d) Section 8 of the Administration Agreement, incorporated herein by
reference as Exhibit No. 9 (a) of the Registrant's Registration
Statement on Form N-1A.
Item 28. Business and Other Connections of Investment Advisor.
- ---------------------------------------------------------------
Stratton Management Company provides investment advisory services
consisting of portfolio management for a variety of individuals and
institutions, and as of March 31, 1995 had approximately $977
million in assets under management. It presently also acts as investment
advisor to two other registered investment companies, Stratton Growth Fund,
Inc. and The Stratton Funds, Inc.
For information as to any other business, vocation or employment of a
substantial nature in which each director or officer of the Registrant's
investment advisor has been engaged for his own
49
<PAGE>
account or in the capacity of director, officer, employee, partner or
trustee, reference is made to Form ADV (File #801-8681) filed by it under
the Investment Advisors Act of 1940, as amended.
<TABLE>
<CAPTION>
Position with
Stratton Management Other Business Type of
Name Company Connections Business
- ------------------- ------------------- -------------- --------
<S> <C> <C> <C>
James W. Stratton Chairman, President Director Utility-
and Director UGI Corp. Natural
P.O.Box 858 Gas
Valley Forge,
PA 19482
Director Energy
Petrolane, Inc.
P.O. Box 858
Valley Forge,
PA 19482
Director Energy
AmeriGas
P.O. Box 858
Valley Forge,
Pa 19482
Director Engine-
Gilbert Assoc. ering/
Inc. Consult-
Box 1498 ing
Reading, PA 19603 Systems
Director Diversified
ALCO Standard Distribution
P.O. Box 834 and
Valley Forge, Manufac-
PA 19482-0834 turing
Chairman and Financial
Chief Executive Services
Officer and Company
Director
FinDaTex, Inc.
Plymouth Meeting
Executive Campus
610 W. Germantown
Pike, Suite 300
Plymouth Meeting,
PA 19462
</TABLE>
50
<PAGE>
<TABLE>
<CAPTION>
Position with
Stratton Management Other Business Type of
Name Company Connections Business
- -------------- ---------------------- -------------- --------
<S> <C> <C> <C>
James W. Stratton cont. Chairman and Mutual Funds
Director,
Stratton Growth
Fund, Inc.
Stratton Monthly
Dividend Shares,
Inc. and The Stratton
Funds, Inc.
Plymouth Meeting
Executive Campus
610 W. Germantown
Pike, Suite 300
Plymouth Meeting,
PA 19462
Director, Teleflex, Inc. (Aerospace
630 W. Germantown Pike controls and
Plymouth Meeting, PA medical
19462 products)
James V. D. Quereau Managing Partner, None.
Director
and Portfolio Manager
Gerard E. Heffernan Senior Vice President Secretary Financial
and Director FinDaTex, Inc. Services
Plymouth Meeting Company
Executive Campus
610 W. Germantown
Pike, Suite 300
Plymouth Meeting,
PA 19462
President, Stratton Mutual
Monthly Dividend Funds
Shares, Inc;
Vice President
Stratton Growth
Fund, Inc. and The
Stratton Funds, Inc.
Plymouth Meeting
Executive Campus
610 W. Germantown
Pike, Suite 300
Plymouth Meeting,
PA 19462
</TABLE>
51
<PAGE>
<TABLE>
<CAPTION>
Position with
Stratton Management Other Business Type of
Name Company Connections Business
- ----------------- ------------------- --------------- ------------
<S> <C> <C> <C>
John A. Affleck Senior Vice Pres- President Mutual Funds
ident and Director Stratton Growth
Fund, Inc.;
Vice President
Stratton Monthly
Dividend Shares,
Inc. and The
Stratton Funds, Inc.
Plymouth Meeting
Executive Campus
610 W. Germantown
Pike, Suite 300
Plymouth Meeting,
PA 19462
Frank H. Reichel, III Vice President, President, Mutual
Director and The Stratton Funds
Director of Funds, Inc;
Research Vice President,
Stratton Growth
Fund, Inc. and
Stratton Monthly
Dividend Shares, Inc.
Plymouth Meeting
Executive Campus
610 W. Germantown
Pike, Suite 300
Plymouth Meeting,
PA 19462
Arlene E. Stratton Secretary/ None
Treasurer and
Director
</TABLE>
Item 29. Principal Underwriter.
- -------------------------------
(a) Fund/Plan Broker Services, Inc. ("FPBS"), the principal underwriter for the
Registrant's securities, currently acts as principal underwriter for the
following entities:
The Brinson Funds
CT&T Funds
Dreman Mutual Fund Group
First Mutual Fund, Inc.
Focus Trust, Inc.
The HomeState PA Growth Fund
IAA Trust Mutual Funds
Matthews International Funds
McM Funds
Smith Breeden Series Fund
52
<PAGE>
Smith Breeden Short Duration U.S. Government Fund
Smith Breeden Trust
The Stratton Funds, Inc.
Stratton Growth Fund, Inc.
Stratton Monthly Dividend Shares, Inc.
The Timothy Plan, Inc.
(b) The table below sets forth certain information as to the Underwriter's
Directors, Officers and Control Persons:
<TABLE>
<CAPTION>
Name and Principal Position and Offices Position and Offices
Business Address with Underwriter with Registrant
- ------------------ -------------------- --------------------
<S> <C> <C>
Kenneth J. Kempf Director and None
2 West Elm Street President
Conshohocken, PA 19428-0874
Rocco J. Cavalieri Director and None
2 West Elm Street Vice President
Conshohocken, PA
19428-0874
Gerald J. Holland Director, None
2 W. Elm Street Vice President
Conshohocken PA 19428-0874 Principal
Joseph M. O'Donnell, Esq. Director and None
2 West Elm Street Vice President
Conshohocken, PA 19428-0874
Kristen L. Hummel Director, None
2 W. Elm Street Assistant Vice President
Conshohocken PA 19428-0874 and Principal
Sandra L. Adams Assistant Vice President, None
2 West Elm Street and Principal
Conshohocken, PA 19428-0874
Mary P. Efstration Secretary None
2 West Elm Street
Conshohocken, PA
19428-0874
John H. Leven Treasurer None
2 West Elm Street
Conshohocken, PA 19428-0874
(c) Not applicable.
</TABLE>
James W. Stratton may be considered a control person of the Underwriter due to
his direct or indirect ownership of Fund/Plan Services, Inc., the parent of the
Underwriter.
53
<PAGE>
Item 30. Location of Accounts and Records.
- -------------------------------------------
All records described in Section 31(a) of the 1940 Act and Rules 17 CFR
270.31a-1 to 31a-3 promulgated thereunder, are maintained by Stratton
Management Company, the Fund's Investment Advisor, Plymouth Meeting
Executive Campus, 610 W. Germantown Pike, Suite 300, Plymouth Meeting,
Pennsylvania 19462-1050, except for those maintained by the Fund's
Custodian, The Bank of New York, 48 Wall Street, New York, New York
10286, and Fund/Plan Services, Inc. the Fund's Administrator,
Transfer, Redemption and Dividend Disbursing Agent, Administrator of its
Retirement Plans and Accounting Services Agent, 2 W. Elm Street, P.O. Box
874, Conshohocken, Pennsylvania 19428-0874.
Item 31. Management Services.
- ------------------------------
Not applicable.
Item 32. Undertakings.
- -----------------------
Not applicable.
54
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the Investment
Company Act of 1940, as amended, the Registrant hereby certifies that it meets
all of the requirements for effectiveness of this Post-Effective Amendment No.
15 to its Registration Statement pursuant to Rule 485(b) under the
Securities Act of 1933 and has duly caused this Post-Effective Amendment No. 15
to its Registration Statement to be signed on its behalf by the undersigned,
thereto duly authorized, in Plymouth Meeting, Pennsylvania, on the ___ day of
May, 1995.
STRATTON MONTHLY DIVIDEND SHARES, INC.
- ----------------------------------
James W. Stratton
Director and Chairman of the Board
(Chief Executive Officer)
Pursuant to the requirements of the Securities Act of 1933, this Post-Effective
Amendment No. 15 to the Registrant's Registration Statement has been
signed below by the following persons in the capacities and on the date(s)
indicated.
Signature Title Date
- --------- ----- ---------
___________________ Director and May ___, 1995
James W. Stratton Chairman of the Board
(Chief Executive Officer)
___________________ Secretary/Treasurer May ___, 1995
Patricia L. Sloan (Chief Financial and
Accounting Officer)
* Lynne M. Cannon Director May , 1995
* John J. Lombard, Jr. Director May , 1995
* Rose J. Randall Director May , 1995
* Henry A. Rentschler Director May , 1995
* Merritt N. Rhoad, Jr. Director May , 1995
* Alexander F. Smith Director May , 1995
* Richard W. Stevens Director May , 1995
*By:
____________________________________
William J. Baltrus
as Attorney-in-Fact and Agent, pursuant to Power of Attorney
55
<PAGE>
INDEX TO EXHIBITS ON FORM N-1A
Sequentially
Exhibit No. Description of Exhibit Numbered Page
- ----------- ---------------------- -------------
8(a) Custodial Agreement between Registrant
and The Bank of New York dated November 1, 1994
8(b) Custody Administration and Agency Agreement between
Registrant and Fund/Plan Services, Inc. dated
November 1, 1994
10(b) Opinion and Consent of Counsel Under Rule 24e-2
of the 1940 Act
11(a). Consent of Tait, Weller
& Baker
11(b). Consent of Drinker Biddle
& Reath
14(c) Form of Self Employed Retirement Plan (Defined
Contribution Plans) as amended June 30, 1994
17. Powers of Attorney
56
<PAGE>
Exhibit 8(a)
CUSTODY AGREEMENT
-----------------
Agreement made as of this 1st day of November, 1994, between
Stratton Monthly Dividend Shares, Inc., a corporation organized and
existing under the laws of the state of Maryland, having its
principal office and place of business at
(hereinafter called the "Fund"), and THE BANK OF NEW YORK, a New York
corporation authorized to do a banking business, having its principal
office and place of business at 48 Wall Street, New York, New York
10286 (hereinafter called the "Custodian").
W I T N E S S E T H :
WHEREAS, the Fund represents that pursuant to the Custody
Administration and Agency Agreement between Fund/Plan Services, Inc.
("Fund/Plan") and the Fund, Fund/Plan (a) has agreed to perform
certain administrative functions which may include the functions of
administrator, transfer agent and accounting services agent and (b)
has been appointed by the Fund to act as its agent in respect of
certain transactions contemplated in this Agreement; and
WHEREAS, the Fund represents that (a) Fund/Plan has agreed to
act as Fund's agent in respect of certain transactions contemplated
in this Agreement and (b) the Bank is authorized and directed to rely
upon and follow Certificates and instructions given by Fund/Plan, the
Fund's agent, in respect of transactions contemplated in this
Agreement.
NOW, THEREFORE, in consideration of the mutual promises
hereinafter set forth, the Fund and the Custodian agree as follows:
ARTICLE I
DEFINITIONS
Whenever used in this Agreement, the following words and
phrases, unless the context otherwise requires, shall have the
following meanings:
<PAGE>
1. "Administrator" shall mean Fund/Plan Services, Inc. and
such successors or permitted assigns as may succeed and perform its
duties under the Administration Agreement.
2. "Administration Agreement" shall mean that certain
separate agreement entitled "Custody Administration and Agency
Agreement" dated as of November 1, 1994 between the Fund and the
Fund/Plan Services, Inc.
3. "Book-Entry System" shall mean the Federal
Reserve/Treasury book-entry system for United States and federal
agency securities, its successor or successors and its nominee or
nominees.
4. "Call Option" shall mean an exchange traded option with
respect to Securities other than Stock Index Options, Futures
Contracts, and Futures Contract Options entitling the holder, upon
timely exercise and payment of the exercise price, as specified
therein, to purchase from the writer thereof the specified underlying
Securities.
5. "Certificate" shall mean any notice, instruction, or other
instrument in writing, authorized or required by this Agreement to be
given to the Custodian which is actually received by the Custodian
and signed on behalf of the Fund by any two Officers, and the term
Certificate shall also include instructions communicated to the
Custodian by the Administrator by Terminal Link.
6. "Clearing Member" shall mean a registered broker-dealer
which is a clearing member under the rules of O.C.C. and a member of
a national securities exchange qualified to act as a custodian for
an investment company, or any broker-dealer reasonably believed by
the Custodian to be such a clearing member.
7. "Collateral Account" shall mean a segregated account so
denominated which is specifically allocated to a Series and pledged
to the Custodian as security for, and in consideration of, the
Custodian's issuance of (a) any Put Option guarantee letter or
similar document described in paragraph 8 of Article V herein, or (b)
any receipt described in Article V or VIII herein.
8. "Covered Call Option" shall mean an exchange traded option
entitling the holder, upon timely exercise and payment of the
exercise price, as specified therein, to purchase from the writer
thereof the specified underlying Securities (excluding Futures
Contracts) which are owned by the writer thereof and subject to
appropriate restrictions.
9. "Depository" shall mean The Depository Trust Company
("DTC"), a clearing agency registered with the Securities and
-2-
<PAGE>
Exchange Commission, its successor or successors and its nominee or
nominees. The term "Depository" shall further mean and include any
other person authorized to act as a depository under the Investment
Company Act of 1940, its successor or successors and its nominee or
nominees, specifically identified in a certified copy of a
resolution of the Fund's Board of Directors specifically approving
deposits therein by the Custodian.
10. "Financial Futures Contract" shall mean the firm
commitment to buy or sell fixed income securities including, without
limitation, U.S. Treasury Bills, U.S. Treasury Notes, U.S. Treasury
Bonds, domestic bank certificates of deposit, and Eurodollar
certificates of deposit, during a specified month at an agreed upon
price.
11. "Futures Contract" shall mean a Financial Futures Contract
and/or Stock Index Futures Contracts.
12. "Futures Contract Option" shall mean an option with
respect to a Futures Contract.
13. "Margin Account" shall mean a segregated account in the
name of a broker, dealer, futures commission merchant, or a Clearing
Member, or in the name of the Fund for the benefit of a broker,
dealer, futures commission merchant, or Clearing Member, or
otherwise, in accordance with an agreement between the Fund, the
Custodian and a broker, dealer, futures commission merchant or a
Clearing Member (a "Margin Account Agreement"), separate and
distinct from the custody account, in which certain Securities and/or
money of the Fund shall be deposited and withdrawn from time to time
in connection with such transactions as the Fund may from time to
time determine. Securities held in the Book-Entry System or the
Depository shall be deemed to have been deposited in, or withdrawn
from, a Margin Account upon the Custodian's effecting an appropriate
entry in its books and records.
14. "Money Market Security" shall be deemed to include,
without limitation, certain Reverse Repurchase Agreements, debt
obligations issued or guaranteed as to interest and principal by the
government of the United States or agencies or instrumentalities
thereof, any tax, bond or revenue anticipation note issued by any
state or municipal government or public authority, commercial paper,
certificates of deposit and bankers' acceptances, repurchase
agreements with respect to the same and bank time deposits, where the
purchase and sale of such securities normally requires settlement in
federal funds on the same day as such purchase or sale.
15. "O.C.C." shall mean the Options Clearing Corporation, a
clearing agency registered under Section 17A of the Securities
Exchange Act of 1934, its successor or successors, and its nominee or
nominees.
-3-
<PAGE>
16. "Officers" shall be deemed to include the President, any
Vice President, the Secretary, the Clerk, the Treasurer, the
Controller, any Assistant Secretary, any Assistant Clerk, any
Assistant Treasurer, and any other person or persons, including
officers or employees of the Administrator, whether or not any such
other person is an officer of the Fund, duly authorized by the Board
of Directors of the Fund to execute any Certificate, instruction,
notice or other instrument on behalf of the Fund and listed in the
Certificate annexed hereto as Appendix A or such other Certificate as
may be received by the Custodian from time to time.
17. "Option" shall mean a Call Option, Covered Call Option,
Stock Index Option and/or a Put Option.
18. "Oral Instructions" shall mean verbal instructions
actually received by the Custodian from an Officer or from a person
reasonably believed by the Custodian to be an Officer.
19. "Put Option" shall mean an exchange traded option with
respect to Securities other than Stock Index Options, Futures
Contracts, and Futures Contract Options entitling the holder, upon
timely exercise and tender of the specified underlying Securities,
to sell such Securities to the writer thereof for the exercise price.
20. "Reverse Repurchase Agreement" shall mean an agreement
pursuant to which the Fund sells Securities and agrees to repurchase
such Securities at a described or specified date and price.
21. "Security" shall be deemed to include, without limitation,
Money Market Securities, Call Options, Put Options, Stock Index
Options, Stock Index Futures Contracts, Stock Index Futures Contract
Options, Financial Futures Contracts, Financial Futures Contract
Options, Reverse Repurchase Agreements, common stocks and other
securities having characteristics similar to common stocks,
preferred stocks, debt obligations issued by state or municipal
governments and by public authorities, (including, without
limitation, general obligation bonds, revenue bonds, industrial
bonds and industrial development bonds), bonds, debentures, notes,
mortgages or other obligations, and any certificates, receipts,
warrants or other instruments representing rights to receive,
purchase, sell or subscribe for the same, or evidencing or
representing any other rights or interest therein, or any property or
assets.
22. "Senior Security Account" shall mean an account maintained
and specifically allocated to a Series under the terms of this
Agreement as a segregated account, by recordation or otherwise,
within the custody account in which certain
-4-
<PAGE>
Securities and/or other assets of the Fund specifically allocated to
such Series shall be deposited and withdrawn from time to time in
accordance with Certificates received by the Custodian in connection
with such transactions as the Fund may from time to time determine.
23. "Series" shall mean the various portfolios, if any, of the
Fund as described from time to time in the current and effective
prospectus for the Fund and listed on Appendix B hereto as amended
from time to time.
24. "Shares" shall mean the shares of beneficial interest of
the Fund, each of which is, in the case of a Fund having Series,
allocated to a particular Series.
25. "Stock Index Futures Contract" shall mean a bilateral
agreement pursuant to which the parties agree to take or make
delivery of an amount of cash equal to a specified dollar amount
times the difference between the value of a particular stock index at
the close of the last business day of the contract and the price at
which the futures contract is originally struck.
26. "Stock Index Option" shall mean an exchange traded option
entitling the holder, upon timely exercise, to receive an amount of
cash determined by reference to the difference between the exercise
price and the value of the index on the date of exercise.
26. "Terminal Link" shall mean an electronic data trans-
mission link between the Administrator on behalf of the Fund and the
Custodian requiring in connection with each use of the Terminal Link
by or on behalf of the Administrator on behalf of the Fund use of an
authorization code provided by the Custodian and at least two access
codes established by the Administrator on behalf of the Fund.
ARTICLE II
APPOINTMENT OF CUSTODIAN
1. The Fund hereby constitutes and appoints the Custodian as
custodian of the Securities and moneys at any time owned by the Fund
during the period of this Agreement.
2. The Custodian hereby accepts appointment as such custodian
and agrees to perform the duties thereof as herein-after set forth.
-5-
<PAGE>
ARTICLE III
CUSTODY OF CASH AND SECURITIES
1. Except as otherwise provided in paragraph 7 of this Article
and in Article VIII, the Fund will deliver or cause to be delivered
to the Custodian all Securities and all moneys owned by it, at any
time during the period of this Agreement, and shall specify with
respect to such Securities and money the Series to which the same are
specifically allocated. The Custodian shall segregate, keep and
maintain the assets of the Series separate and apart. The Custodian
will not be responsible for any Securities and moneys not actually
received by it. The Custodian will be entitled to reverse any credits
made on the Fund's behalf where such credits have been previously
made and moneys are not finally collected. The Fund shall deliver to
the Custodian a certified resolution of the Board of Directors of the
Fund, substantially in the form of Exhibit A hereto, approving,
authorizing and instructing the Custodian on a continuous and
on/going basis to deposit in the Book-Entry System all Securities
eligible for deposit therein, regardless of the Series to which the
same are specifically allocated and to utilize the Book-Entry System
to the extent possible in connection with its performance hereunder,
including, without limitation, in connection with settlements of
purchases and sales of Securities, loans of Securities and deliveries
and returns of Securities collateral. Prior to a deposit of
Securities specifically allocated to a Series in the Depository, the
Fund shall deliver to the Custodian a certified resolution of the
Board of Directors of the Fund, substantially in the form of Exhibit
B hereto, approving, authorizing and instructing the Custodian on a
continuous and ongoing basis until instructed to the contrary by a
Certificate actually received by the Custodian to deposit in the
Depository all Securities specifically allocated to such Series
eligible for deposit therein, and to utilize the Depository to the
extent possible with respect to such Securities in connection with
its performance hereunder, including, without limitation, in
connection with settlements of purchases and sales of Securities,
loans of Securities, and deliveries and returns of Securities
collateral. Securities and moneys deposited in either the Book-Entry
System or the Depository will be represented in accounts which
include only assets held by the Custodian for customers, including,
but not limited to, accounts in which the Custodian acts in a
fiduciary or representative capacity and will be specifically
allocated on the Custodian's books to the separate account for the
applicable Series. Prior to the Custodian's accepting, utilizing and
acting with respect to Clearing Member confirmations for Options and
transactions in Options for a Series as provided in this Agreement,
the Custodian shall have received a certified resolution of the
Fund's Board of Directors, substantially in the
-6-
<PAGE>
form of Exhibit C hereto, approving, authorizing and instructing the
Custodian on a continuous and on-going basis, until instructed to the
contrary by a Certificate actually received by the Custodian, to
accept, utilize and act in accordance with such confirmations as
provided in this Agreement with respect to such Series.
2. The Custodian shall establish and maintain separate
accounts, in the name of each Series, and shall credit to the
separate account for each Series all moneys received by it for the
account of the Fund with respect to such Series. Money credited to a
separate account for a Series shall be disbursed by the Custodian
only:
(a) As hereinafter provided;
(b) Pursuant to Certificates setting forth the name and
address of the person to whom the payment is to be made, the Series
account from which payment is to be made and the purpose for which
payment is to be made; or
(c) In payment of the fees and in reimbursement of the
expenses and liabilities of the Custodian attributable to such
Series.
3. Promptly after the close of business on each day, the
Custodian shall furnish the Administrator with confirmations and a
summary, on a per Series basis, of all transfers to or from the
account of the Fund for a Series, either hereunder or with any co-
custodian or sub-custodian appointed in accordance with this
Agreement during said day. Where Securities are transferred to the
account of the Fund for a Series, the Custodian shall also by book-
entry or otherwise identify as belonging to such Series a quantity of
Securities in a fungible bulk of Securities registered in the name
of the Custodian (or its nominee) or shown on the Custodian's
account on the books of the Book-Entry System or the Depository. At
least monthly and from time to time, the Custodian shall furnish the
Administrator with a detailed statement, on a per Series basis, of
the Securities and moneys held by the Custodian for the Fund.
4. Except as otherwise provided in paragraph 7 of this Article
and in Article VIII, all Securities held by the Custodian hereunder,
which are issued or issuable only in bearer form, except such
Securities as are held in the Book-Entry System, shall be held by the
Custodian in that form; all other Securities held hereunder may be
registered in the name of the Fund, in the name of any duly appointed
registered nominee of the Custodian as the Custodian may from time to
time determine, or in the name of the Book-Entry System or the
Depository or their successor or successors, or their nominee or
nominees. The Fund agrees to furnish or cause to be furnished
-7-
<PAGE>
to the Custodian appropriate instruments to enable the Custodian to
hold or deliver in proper form for transfer, or to register in the
name of its registered nominee or in the name of the Book-Entry
System or the Depository any Securities which it may hold hereunder
and which may from time to time be registered in the name of the
Fund. The Custodian shall hold all such Securities specifically
allocated to a Series which are not held in the Book-Entry System or
in the Depository in a separate account in the name of such Series
physically segregated at all times from those of any other person or
persons.
5. Except as otherwise provided in this Agreement and unless
otherwise instructed to the contrary by a Certificate, the Custodian
by itself, or through the use of the Book-Entry System or the
Depository with respect to Securities held hereunder and therein
deposited, shall with respect to all Securities held for the Fund
hereunder in accordance with preceding paragraph 4:
(a) Collect all income due or payable;
(b) Present for payment and collect the amount payable
upon such Securities which are called, but only if either (i) the
Custodian receives a written notice of such call, or (ii) notice of
such call appears in one or more of the publications listed in
Appendix C annexed hereto, which may be amended at any time by the
Custodian without the prior notification or consent of the Fund;
(c) Present for payment and collect the amount payable
upon all Securities which mature;
(d) Surrender Securities in temporary form for definitive
Securities;
(e) Execute, as custodian, any necessary declarations or
certificates of ownership under the Federal Income Tax Laws or the
laws or regulations of any other taxing authority now or hereafter
in effect; and
(f) Hold directly, or through the Book-Entry System or the
Depository with respect to Securities therein deposited, for the
account of a Series, all rights and similar securities issued with
respect to any Securities held by the Custodian for such Series
hereunder.
6. Upon receipt of a Certificate and not otherwise, the
Custodian, directly or through the use of the Book-Entry System or
the Depository, shall:
(a) Execute and deliver to such persons as may be
designated in such Certificate proxies, consents, authorizations,
and any other instruments whereby the authority of the
-8-
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Fund as owner of any Securities held by the Custodian hereunder for
the Series specified in such Certificate may be exercised;
(b) Deliver any Securities held by the Custodian hereunder
for the Series specified in such Certificate in exchange for other
Securities or cash issued or paid in connection with the
liquidation, reorganization, refinancing, merger, consolidation or
recapitalization of any corporation, or the exercise of any
conversion privilege and receive and hold hereunder specifically
allocated to such Series any cash or other Securities received in
exchange;
(c) Deliver any Securities held by the Custodian hereunder
for the Series specified in such Certificate to any protective
committee, reorganization committee or other person in connection
with the reorganization, refinancing, merger, consolidation,
recapitalization or sale of assets of any corporation, and receive
and hold hereunder specifically allocated to such Series such
certificates of deposit, interim receipts or other instruments or
documents as may be issued to it to evidence such delivery;
(d) Make such transfers or exchanges of the assets of the
Series specified in such Certificate, and take such other steps as
shall be stated in such Certificate to be for the purpose of
effectuating any duly authorized plan of liquidation,
reorganization, merger, consolidation or recapitalization of the
Fund; and
(e) Present for payment and collect the amount payable
upon Securities not described in preceding paragraph 5(b) of this
Article which may be called as specified in the Certificate.
7. Notwithstanding any provision elsewhere contained herein,
the Custodian shall not be required to obtain possession of any
instrument or certificate representing any Futures Contract, any
Option, or any Futures Contract Option until after it shall have
determined, or shall have received a Certificate from the Fund
stating, that any such instruments or certificates are available. The
Fund shall deliver to the Custodian such a Certificate no later than
the business day preceding the availability of any such instrument or
certificate. Prior to such availability, the Custodian shall comply
with Section 17(f) of the Investment Company Act of 1940, as amended,
in connection with the purchase, sale, settlement, closing out or
writing of Futures Contracts, Options, or Futures Contract Options
by making payments or deliveries specified in Certificates received
by the Custodian in connection with any such purchase, sale, writing,
settlement or closing out upon its receipt from a broker, dealer, or
futures commission merchant of a statement or confirmation
reasonably believed by the Custodian to be in the form customarily
used by
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brokers, dealers, or future commission merchants with respect to such
Futures Contracts, Options, or Futures Contract Options, as the case
may be, confirming that such Security is held by such broker, dealer
or futures commission merchant, in book-entry form or otherwise, in
the name of the Custodian (or any nominee of the Custodian) as
custodian for the Fund, provided, however, that notwithstanding the
foregoing, payments to or deliveries from the Margin Account and
payments with respect to Securities to which a Margin Account
relates, shall be made in accordance with the terms and conditions of
the Margin Account Agreement. Whenever any such instruments or
certificates are available, the Custodian shall, notwithstanding any
provision in this Agreement to the contrary, make payment for any
Futures Contract, Option, or Futures Contract Option for which such
instruments or such certificates are available only against the
delivery to the Custodian of such instrument or such certificate, and
deliver any Futures Contract, Option or Futures Contract Option for
which such instruments or such certificates are available only
against receipt by the Custodian of payment therefor. Any such
instrument or certificate delivered to the Custodian shall be held
by the Custodian hereunder in accordance with, and subject to, the
provisions of this Agreement.
ARTICLE IV
PURCHASE AND SALE OF INVESTMENTS OF THE FUND
OTHER THAN OPTIONS, FUTURES CONTRACTS AND
FUTURES CONTRACT OPTIONS
1. Promptly after each purchase of Securities by the Fund,
other than a purchase of an Option, a Futures Contract, or a Futures
Contract Option, the Fund shall deliver or cause the Administrator to
deliver to the Custodian (i) with respect to each purchase of
Securities which are not Money Market Securities, a Certificate, and
(ii) with respect to each purchase of Money Market Securities, a
Certificate or Oral Instructions, specifying with respect to each
such purchase: (a) the Series to which such Securities are to be
specifically allocated; (b) the name of the issuer and the title of
the Securities; (c) the number of shares or the principal amount
purchased and accrued interest, if any; (d) the date of purchase and
settlement; (e) the purchase price per unit; (f) the total amount
payable upon such purchase; (g) the name of the person from whom or
the broker through whom the purchase was made, and the name of the
clearing broker, if any; and (h) the name of the broker to whom
payment is to be made. The Custodian shall, upon receipt of
Securities purchased by or for the Fund, pay to the broker specified
in the Certificate out of the moneys held for the account of such
Series the total
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amount payable upon such purchase, provided that the same conforms
to the total amount payable as set forth in such Certificate or Oral
Instructions.
2. Promptly after each sale of Securities by the Fund, other
than a sale of any Option, Futures Contract, Futures Contract Option,
or any Reverse Repurchase Agreement, the Fund shall deliver or cause
the Administrator to deliver to the Custodian (i) with respect to
each sale of Securities which are not Money Market Securities, a
Certificate, and (ii) with respect to each sale of Money Market
Securities, a Certificate or Oral Instructions, specifying with
respect to each such sale: (a) the Series to which such Securities
were specifically allocated; (b) the name of the issuer and the
title of the Security; (c) the number of shares or principal amount
sold, and accrued interest, if any; (d) the date of sale; (e) the
sale price per unit; (f) the total amount payable to the Fund upon
such sale; (g) the name of the broker through whom or the person to
whom the sale was made, and the name of the clearing broker, if any;
and (h) the name of the broker to whom the Securities are to be
delivered. The Custodian shall deliver the Securities specifically
allocated to such Series to the broker specified in the Certificate
against payment upon receipt of the total amount payable to the Fund
upon such sale, provided that the same conforms to the total amount
payable as set forth in such Certificate or Oral Instructions.
ARTICLE V
OPTIONS
1. Promptly after the purchase of any Option by the Fund, the
Fund shall deliver or cause the Administrator to deliver to the
Custodian a Certificate specifying with respect to each Option
purchased: (a) the Series to which such Option is specifically
allocated; (b) the type of Option (put or call); (c) the name of the
issuer and the title and number of shares subject to such Option or,
in the case of a Stock Index Option, the stock index to which such
Option relates and the number of Stock Index Options purchased; (d)
the expiration date; (e) the exercise price; (f) the dates of
purchase and settlement; (g) the total amount payable by the Fund in
connection with such purchase; (h) the name of the Clearing Member
through whom such Option was purchased; and (i) the name of the
broker to whom payment is to be made. The Custodian shall pay, upon
receipt of a Clearing Member's statement confirming the purchase of
such Option held by such Clearing Member for the account of the
Custodian (or any duly appointed and registered nominee of the
Custodian) as custodian for the Fund, out of moneys held for the
account of the Series to which such Option is to be specifically
allocated, the total amount payable upon such purchase to the
Clearing Member
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through whom the purchase was made, provided that the same conforms
to the total amount payable as set forth in such Certificate.
2. Promptly after the sale of any Option purchased by the Fund
pursuant to paragraph 1 hereof, the Fund shall deliver or cause the
Administrator to deliver to the Custodian a Certificate specifying
with respect to each such sale: (a) the Series to which such Option
was specifically allocated; (b) the type of Option (put or call); (c)
the name of the issuer and the title and number of shares subject to
such Option or, in the case of a Stock Index Option, the stock index
to which such Option relates and the number of Stock Index Options
sold; (d) the date of sale; (e) the sale price; (f) the date of
settlement; (g) the total amount payable to the Fund upon such sale;
and (h) the name of the Clearing Member through whom the sale was
made. The Custodian shall consent to the delivery of the Option sold
by the Clearing Member which previously supplied the confirmation
described in preceding paragraph 1 of this Article with respect to
such Option against payment to the Custodian of the total amount
payable to the Fund, provided that the same conforms to the total
amount payable as set forth in such Certificate.
3. Promptly after the exercise by the Fund of any Call Option
purchased by the Fund pursuant to paragraph 1 hereof, the Fund shall
deliver or cause the Administrator to deliver to the Custodian a
Certificate specifying with respect to such Call Option: (a) the
Series to which such Call Option was specifically allocated; (b) the
name of the issuer and the title and number of shares subject to the
Call Option; (c) the expiration date; (d) the date of exercise and
settlement; (e) the exercise price per share; (f) the total amount to
be paid by the Fund upon such exercise; and (g) the name of the
Clearing Member through whom such Call Option was exercised. The
Custodian shall, upon receipt of the Securities underlying the Call
Option which was exercised, pay out of the moneys held for the
account of the Series to which such Call Option was specifically
allocated the total amount payable to the Clearing Member through
whom the Call Option was exercised, provided that the same conforms
to the total amount payable as set forth in such Certificate.
4. Promptly after the exercise by the Fund of any Put Option
purchased by the Fund pursuant to paragraph 1 hereof, the Fund shall
deliver or cause the Administrator to deliver to the Custodian a
Certificate specifying with respect to such Put Option: (a) the
Series to which such Put Option was specifically allocated; (b) the
name of the issuer and the title and number of shares subject to the
Put Option; (c) the expiration date; (d) the date of exercise and
settlement; (e) the exercise price per share; (f) the total amount to
be paid to the Fund upon such exercise; and (g) the name of the
Clearing
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Member through whom such Put Option was exercised. The Custodian
shall, upon receipt of the amount payable upon the exercise of the
Put Option, deliver or direct the Depository to deliver the
Securities specifically allocated to such Series, provided the same
conforms to the amount payable to the Fund as set forth in such
Certificate.
5. Promptly after the exercise by the Fund of any Stock Index
Option purchased by the Fund pursuant to paragraph 1 hereof, the Fund
shall deliver or cause the Administrator to deliver to the Custodian
a Certificate specifying with respect to such Stock Index Option: (a)
the Series to which such Stock Index Option was specifically
allocated; (b) the type of Stock Index Option (put or call); (c) the
number of Options being exercised; (d) the stock index to which such
Option relates; (e) the expiration date; (f) the exercise price; (g)
the total amount to be received by the Fund in connection with such
exercise; and (h) the Clearing Member from whom such payment is to
be received.
6. Whenever the Fund writes a Covered Call Option, the Fund
shall deliver or cause the Administrator to deliver to the Custodian
a Certificate specifying with respect to such Covered Call Option:
(a) the Series for which such Covered Call Option was written; (b)
the name of the issuer and the title and number of shares for which
the Covered Call Option was written and which underlie the same; (c)
the expiration date; (d) the exercise price; (e) the premium to be
received by the Fund; (f) the date such Covered Call Option was
written; and (g) the name of the Clearing Member through whom the
premium is to be received. The Custodian shall deliver or cause to be
delivered, in exchange for receipt of the premium specified in the
Certificate with respect to such Covered Call Option, such receipts
as are required in accordance with the customs prevailing among
Clearing Members dealing in Covered Call Options and shall impose, or
direct the Depository to impose, upon the underlying Securities
specified in the Certificate specifically allocated to such Series
such restrictions as may be required by such receipts.
Notwithstanding the foregoing, the Custodian has the right, upon
prior written notification to the Fund, at any time to refuse to
issue any receipts for Securities in the possession of the Custodian
and not deposited with the Depository underlying a Covered Call
Option.
7. Whenever a Covered Call Option written by the Fund and
described in the preceding paragraph of this Article is exercised,
the Fund shall deliver or cause the Administrator to deliver to the
Custodian a Certificate instructing the Custodian to deliver, or to
direct the Depository to deliver, the Securities subject to such
Covered Call Option and specifying: (a) the Series for which such
Covered Call Option was written; (b) the name of the issuer and the
title and number of shares subject to the Covered Call Option; (c)
the Clearing Member to
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whom the underlying Securities are to be delivered; and (d) the total
amount payable to the Fund upon such delivery. Upon the return and/or
cancellation of any receipts delivered pursuant to paragraph 6 of
this Article, the Custodian shall deliver, or direct the Depository
to deliver, the underlying Securities as specified in the Certificate
against payment of the amount to be received as set forth in such
Certificate.
8. Whenever the Fund writes a Put Option, the Fund shall
deliver or cause the Administrator to deliver to the Custodian a
Certificate specifying with respect to such Put Option: (a) the
Series for which such Put Option was written; (b) the name of the
issuer and the title and number of shares for which the Put Option is
written and which underlie the same; (c) the expiration date; (d) the
exercise price; (e) the premium to be received by the Fund; (f) the
date such Put Option is written; (g) the name of the Clearing Member
through whom the premium is to be received and to whom a Put Option
guarantee letter is to be delivered; (h) the amount of cash, and/or
the amount and kind of Securities, if any, specifically allocated to
such Series to be deposited in the Senior Security Account for such
Series; and (i) the amount of cash and/or the amount and kind of
Securities specifically allocated to such Series to be deposited
into the Collateral Account for such Series. The Custodian shall,
after making the deposits into the Collateral Account specified in
the Certificate, issue a Put Option guarantee letter substantially
in the form utilized by the Custodian on the date hereof, and deliver
the same to the Clearing Member specified in the Certificate against
receipt of the premium specified in said Certificate.
Notwithstanding the foregoing, the Custodian shall be under no
obligation to issue any Put Option guarantee letter or similar
document if it is unable to make any of the representations contained
therein.
9. Whenever a Put Option written by the Fund and described in
the preceding paragraph is exercised, the Fund shall deliver or cause
the Administrator to deliver to the Custodian a Certificate
specifying: (a) the Series to which such Put Option was written; (b)
the name of the issuer and title and number of shares subject to the
Put Option; (c) the Clearing Member from whom the underlying
Securities are to be received; (d) the total amount payable by the
Fund upon such delivery; (e) the amount of cash and/or the amount and
kind of Securities specifically allocated to such Series to be
withdrawn from the Collateral Account for such Series and (f) the
amount of cash and/or the amount and kind of Securities, specifically
allocated to such Series, if any, to be withdrawn from the Senior
Security Account. Upon the return and/or cancellation of any Put
Option guarantee letter or similar document issued by the Custodian
in connection with such Put Option, the Custodian shall pay out of
the moneys held for the
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account of the Series to which such Put Option was specifically
allocated the total amount payable to the Clearing Member specified
in the Certificate as set forth in such Certificate against delivery
of such Securities, and shall make the withdrawals specified in such
Certificate.
10. Whenever the Fund writes a Stock Index Option, the Fund
shall deliver or cause the Administrator to deliver to the Custodian
a Certificate specifying with respect to such Stock Index Option: (a)
the Series for which such Stock Index Option was written; (b) whether
such Stock Index Option is a put or a call; (c) the number of options
written; (d) the stock index to which such Option relates; (e) the
expiration date; (f) the exercise price; (g) the Clearing Member
through whom such Option was written; (h) the premium to be received
by the Fund; (i) the amount of cash and/or the amount and kind of
Securities, if any, specifically allocated to such Series to be
deposited in the Senior Security Account for such Series; (j) the
amount of cash and/or the amount and kind of Securities, if any,
specifically allocated to such Series to be deposited in the
Collateral Account for such Series; and (k) the amount of cash and/or
the amount and kind of Securities, if any, specifically allocated to
such Series to be deposited in a Margin Account, and the name in
which such account is to be or has been established. The Custodian
shall, upon receipt of the premium specified in the Certificate, make
the deposits, if any, into the Senior Security Account specified in
the Certificate, and either (1) deliver such receipts, if any, which
the Custodian has specifically agreed to issue, which are in
accordance with the customs prevailing among Clearing Members in
Stock Index Options and make the deposits into the Collateral Account
specified in the Certificate, or (2) make the deposits into the
Margin Account specified in the Certificate.
11. Whenever a Stock Index Option written by the Fund and
described in the preceding paragraph of this Article is exercised,
the Fund shall deliver or cause the Administrator to deliver to the
Custodian a Certificate specifying with respect to such Stock Index
Option: (a) the Series for which such Stock Index Option was written;
(b) such information as may be necessary to identify the Stock Index
Option being exercised; (c) the Clearing Member through whom such
Stock Index Option is being exercised; (d) the total amount payable
upon such exercise, and whether such amount is to be paid by or to
the Fund; (e) the amount of cash and/or amount and kind of
Securities, if any, to be withdrawn from the Margin Account; and (f)
the amount of cash and/or amount and kind of Securities, if any, to
be withdrawn from the Senior Security Account for such Series; and
the amount of cash and/or the amount and kind of Securities, if any,
to be withdrawn from the Collateral Account for such Series. Upon
the return and/or cancellation of the receipt, if any, delivered
pursuant to the preceding paragraph of this Article, the Custodian
shall pay
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out of the moneys held for the account of the Series to which such
Stock Index Option was specifically allocated to the Clearing Member
specified in the Certificate the total amount payable, if any, as
specified therein.
12. Whenever the Fund purchases any Option identical to a
previously written Option described in paragraphs, 6, 8 or 10 of this
Article in a transaction expressly designated as a "Closing Purchase
Transaction" in order to liquidate its position as a writer of an
Option, the Fund shall deliver or cause the Administrator to deliver
to the Custodian a Certificate specifying with respect to the Option
being purchased: (a) that the transaction is a Closing Purchase
Transaction; (b) the Series for which the Option was written; (c) the
name of the issuer and the title and number of shares subject to the
Option, or, in the case of a Stock Index Option, the stock index to
which such Option relates and the number of Options held; (d) the
exercise price; (e) the premium to be paid by the Fund; (f) the
expiration date; (g) the type of Option (put or call); (h) the date
of such purchase; (i) the name of the Clearing Member to whom the
premium is to be paid; and (j) the amount of cash and/or the amount
and kind of Securities, if any, to be withdrawn from the Collateral
Account, a specified Margin Account, or the Senior Security Account
for such Series. Upon the Custodian's payment of the premium and the
return and/or cancellation of any receipt issued pursuant to
paragraphs 6, 8 or 10 of this Article with respect to the Option
being liquidated through the Closing Purchase Transaction, the
Custodian shall remove, or direct the Depository to remove, the
previously imposed restrictions on the Securities underlying the Call
Option.
13. Upon the expiration, exercise or consummation of a Closing
Purchase Transaction with respect to any Option purchased or written
by the Fund and described in this Article, the Custodian shall delete
such Option from the statements delivered to the Fund pursuant to
paragraph 3 Article III herein, and upon the return and/or
cancellation of any receipts issued by the Custodian, shall make
such withdrawals from the Collateral Account, and the Margin Account
and/or the Senior Security Account as may be specified in a
Certificate received in connection with such expiration, exercise, or
consummation.
ARTICLE VI
FUTURES CONTRACTS
1. Whenever the Fund shall enter into a Futures Contract, the
Fund shall deliver or cause the Administrator to deliver to the
Custodian a Certificate specifying with respect to such Futures
Contract, (or with respect to any number of
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identical Futures Contract(s)): (a) the Series for which the Futures
Contract is being entered; (b) the category of Futures Contract (the
name of the underlying stock index or financial instrument); (c) the
number of identical Futures Contracts entered into; (d) the delivery
or settlement date of the Futures Contract(s); (e) the date the
Futures Contract(s) was (were) entered into and the maturity date;
(f) whether the Fund is buying (going long) or selling (going short)
on such Futures Contract(s); (g) the amount of cash and/or the amount
and kind of Securities, if any, to be deposited in the Senior
Security Account for such Series; (h) the name of the broker, dealer,
or futures commission merchant through whom the Futures Contract was
entered into; and (i) the amount of fee or commission, if any, to be
paid and the name of the broker, dealer, or futures commission
merchant to whom such amount is to be paid. The Custodian shall make
the deposits, if any, to the Margin Account in accordance with the
terms and conditions of the Margin Account Agreement. The Custodian
shall make payment out of the moneys specifically allocated to such
Series of the fee or commission, if any, specified in the Certificate
and deposit in the Senior Security Account for such Series the amount
of cash and/or the amount and kind of Securities specified in said
Certificate.
2. (a) Any variation margin payment or similar payment
required to be made by the Fund to a broker, dealer, or futures
commission merchant with respect to an outstanding Futures Contract,
shall be made by the Custodian in accordance with the terms and
conditions of the Margin Account Agreement.
(b) Any variation margin payment or similar payment from a
broker, dealer, or futures commission merchant to the Fund with
respect to an outstanding Futures Contract, shall be received and
dealt with by the Custodian in accordance with the terms and
conditions of the Margin Account Agreement.
3. Whenever a Futures Contract held by the Custodian hereunder
is retained by the Fund until delivery or settlement is made on such
Futures Contract, the Fund shall deliver or cause the Administrator
to deliver to the Custodian a Certificate specifying: (a) the
Futures Contract and the Series to which the same relates; (b) with
respect to a Stock Index Futures Contract, the total cash settlement
amount to be paid or received, and with respect to a Financial
Futures Contract, the Securities and/or amount of cash to be
delivered or received; (c) the broker, dealer, or futures commission
merchant to or from whom payment or delivery is to be made or
received; and (d) the amount of cash and/or Securities to be
withdrawn from the Senior Security Account for such Series.
The Custodian shall make the payment or delivery specified in the
Certificate, and delete such Futures Contract from the statements
delivered to the Fund pursuant to paragraph 3 of Article III herein.
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4. Whenever the Fund shall enter into a Futures Contract to
offset a Futures Contract held by the Custodian hereunder, the Fund
shall deliver or cause the Administrator to deliver to the Custodian
a Certificate specifying: (a) the items of information required in a
Certificate described in paragraph 1 of this Article, and (b) the
Futures Contract being offset. The Custodian shall make payment out
of the money specifically allocated to such Series of the fee or
commission, if any, specified in the Certificate and delete the
Futures Contract being offset from the statements delivered to the
Fund pursuant to paragraph 3 of Article III herein, and make such
withdrawals from the Senior Security Account for such Series as may
be specified in such Certificate. The withdrawals, if any, to be made
from the Margin Account shall be made by the Custodian in accordance
with the terms and conditions of the Margin Account Agreement.
ARTICLE VII
FUTURES CONTRACT OPTIONS
1. Promptly after the purchase of any Futures Contract Option
by the Fund, the Fund shall deliver or cause the Administrator to
deliver to the Custodian a Certificate specifying with respect to
such Futures Contract Option: (a) the Series to which such Option is
specifically allocated; (b) the type of Futures Contract Option (put
or call); (c) the type of Futures Contract and such other
information as may be necessary to identify the Futures Contract
underlying the Futures Contract Option purchased; (d) the expiration
date; (e) the exercise price; (f) the dates of purchase and
settlement; (g) the amount of premium to be paid by the Fund upon
such purchase; (h) the name of the broker or futures commission
merchant through whom such option was purchased; and (i) the name of
the broker, or futures commission merchant, to whom payment is to be
made. The Custodian shall pay out of the moneys specifically
allocated to such Series, the total amount to be paid upon such
purchase to the broker or futures commissions merchant through whom
the purchase was made, provided that the same conforms to the amount
set forth in such Certificate.
2. Promptly after the sale of any Futures Contract Option
purchased by the Fund pursuant to paragraph 1 hereof, the Fund shall
deliver or cause the Administrator to deliver to the Custodian a
Certificate specifying with respect to each such sale: (a) Series to
which such Futures Contract Option was specifically allocated; (b)
the type of Future Contract Option (put or call); (c) the type of
Futures Contract and such other information as may be necessary to
identify the Futures Contract underlying the Futures Contract Option;
(d) the date of sale; (e) the sale price; (f) the date of settlement;
(g) the total amount payable to the Fund upon such sale;
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and (h) the name of the broker of futures commission merchant through
whom the sale was made. The Custodian shall consent to the
cancellation of the Futures Contract Option being closed against
payment to the Custodian of the total amount payable to the Fund,
provided the same conforms to the total amount payable as set forth
in such Certificate.
3. Whenever a Futures Contract Option purchased by the Fund
pursuant to paragraph 1 is exercised by the Fund, the Fund shall
deliver or cause the Administrator to deliver to the Custodian a
Certificate specifying: (a) the Series to which such Futures Contract
Option was specifically allocated; (b) the particular Futures
Contract Option (put or call) being exercised; (c) the type of
Futures Contract underlying the Futures Contract Option; (d) the date
of exercise; (e) the name of the broker or futures commission
merchant through whom the Futures Contract Option is exercised; (f)
the net total amount, if any, payable by the Fund; (g) the amount, if
any, to be received by the Fund; and (h) the amount of cash and/or
the amount and kind of Securities to be deposited in the Senior
Security Account for such Series. The Custodian shall make, out of
the moneys and Securities specifically allocated to such Series, the
payments, if any, and the deposits, if any, into the Senior Security
Account as specified in the Certificate. The deposits, if any, to be
made to the Margin Account shall be made by the Custodian in
accordance with the terms and conditions of the Margin Account
Agreement.
4. Whenever the Fund writes a Futures Contract Option, the
Fund shall deliver or cause the Administrator to deliver to the
Custodian a Certificate specifying with respect to such Futures
Contract Option: (a) the Series for which such Futures Contract
Option was written; (b) the type of Futures Contract Option (put or
call); (c) the type of Futures Contract and such other information as
may be necessary to identify the Futures Contract underlying the
Futures Contract Option; (d) the expiration date; (e) the exercise
price; (f) the premium to be received by the Fund; (g) the name of
the broker or futures commission merchant through whom the premium
is to be received; and (h) the amount of cash and/or the amount and
kind of Securities, if any, to be deposited in the Senior Security
Account for such Series. The Custodian shall, upon receipt of the
premium specified in the Certificate, make out of the moneys and
Securities specifically allocated to such Series the deposits into
the Senior Security Account, if any, as specified in the Certificate.
The deposits, if any, to be made to the Margin Account shall be made
by the Custodian in accordance with the terms and conditions of the
Margin Account Agreement.
5. Whenever a Futures Contract Option written by the Fund
which is a call is exercised, the Fund shall deliver or cause the
Administrator to deliver to the Custodian a Certificate specifying:
(a) the Series to which such Futures Contract
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Option was specifically allocated; (b) the particular Futures
Contract Option exercised; (c) the type of Futures Contract
underlying the Futures Contract Option; (d) the name of the broker or
futures commission merchant through whom such Futures Contract
Option was exercised; (e) the net total amount, if any, payable to
the Fund upon such exercise; (f) the net total amount, if any,
payable by the Fund upon such exercise; and (g) the amount of cash
and/or the amount and kind of Securities to be deposited in the
Senior Security Account for such Series. The Custodian shall, upon
its receipt of the net total amount payable to the Fund, if any,
specified in such Certificate make the payments, if any, and the
deposits, if any, into the Senior Security Account as specified in
the Certificate. The deposits, if any, to be made to the Margin
Account shall be made by the Custodian in accordance with the terms
and conditions of the Margin Account Agreement.
6. Whenever a Futures Contract Option which is written by the
Fund and which is a put is exercised, the Fund shall deliver or cause
the Administrator to deliver to the Custodian a Certificate
specifying: (a) the Series to which such Option was specifically
allocated; (b) the particular Futures Contract Option exercised; (c)
the type of Futures Contract underlying such Futures Contract
Option; (d) the name of the broker or futures commission merchant
through whom such Futures Contract Option is exercised; (e) the net
total amount, if any, payable to the Fund upon such exercise; (f) the
net total amount, if any, payable by the Fund upon such exercise; and
(g) the amount and kind of Securities and/or cash to be withdrawn
from or deposited in, the Senior Security Account for such Series, if
any. The Custodian shall, upon its receipt of the net total amount
payable to the Fund, if any, specified in the Certificate, make out
of the moneys and Securities specifically allocated to such Series,
the payments, if any, and the deposits, if any, into the Senior
Security Account as specified in the Certificate. The deposits to
and/or withdrawals from the Margin Account, if any, shall be made by
the Custodian in accordance with the terms and conditions of the
Margin Account Agreement.
7. Whenever the Fund purchases any Futures Contract Option
identical to a previously written Futures Contract Option described
in this Article in order to liquidate its position as a writer of
such Futures Contract Option, the Fund shall deliver or cause the
Administrator to deliver to the Custodian a Certificate specifying
with respect to the Futures Contract Option being purchased: (a) the
Series to which such Option is specifically allocated; (b) that the
transaction is a closing transaction; (c) the type of Future Contract
and such other information as may be necessary to identify the
Futures Contract underlying the Futures Option Contract; (d) the
exercise price; (e) the premium to be paid by the Fund; (f) the
expiration date; (g) the name of the broker or futures commission
merchant to whom the premium is to be paid; and (h)
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the amount of cash and/or the amount and kind of Securities, if any,
to be withdrawn from the Senior Security Account for such Series. The
Custodian shall effect the withdrawals from the Senior Security
Account specified in the Certificate. The withdrawals, if any, to be
made from the Margin Account shall be made by the Custodian in
accordance with the terms and conditions of the Margin Account
Agreement.
8. Upon the expiration, exercise, or consummation of a closing
transaction with respect to, any Futures Contract Option written or
purchased by the Fund and described in this Article, the Custodian
shall (a) delete such Futures Contract Option from the statements
delivered to the Fund pursuant to paragraph 3 of Article III herein
and, (b) make such withdrawals from and/or in the case of an
exercise such deposits into the Senior Security Account as may be
specified in a Certificate. The deposits to and/or withdrawals from
the Margin Account, if any, shall be made by the Custodian in
accordance with the terms and conditions of the Margin Account
Agreement.
9. Futures Contracts acquired by the Fund through the exercise
of a Futures Contract Option described in this Article shall be
subject to Article VI hereof.
ARTICLE VIII
SHORT SALES
1. Promptly after any short sales by any Series of the Fund,
the Fund shall deliver or cause the Administrator to deliver to the
Custodian a Certificate specifying: (a) the Series for which such
short sale was made; (b) the name of the issuer and the title of the
Security; (c) the number of shares or principal amount sold, and
accrued interest or dividends, if any; (d) the dates of the sale and
settlement; (e) the sale price per unit; (f) the total amount
credited to the Fund upon such sale, if any, (g) the amount of cash
and/or the amount and kind of Securities, if any, which are to be
deposited in a Margin Account and the name in which such Margin
Account has been or is to be established; (h) the amount of cash
and/or the amount and kind of Securities, if any, to be deposited in
a Senior Security Account, and (i) the name of the broker through
whom such short sale was made. The Custodian shall upon its receipt
of a statement from such broker confirming such sale and that the
total amount credited to the Fund upon such sale, if any, as
specified in the Certificate is held by such broker for the account
of the Custodian (or any nominee of the Custodian) as custodian of
the Fund, issue a receipt or make the deposits into the Margin
Account and the Senior Security Account specified in the
Certificate.
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2. In connection with the closing-out of any short sale, the
Fund shall deliver or cause the Administrator to deliver to the
Custodian a Certificate specifying with respect to each such closing
out: (a) the Series for which such transaction is being made; (b) the
name of the issuer and the title of the Security; (c) the number of
shares or the principal amount, and accrued interest or dividends,
if any, required to effect such closing-out to be delivered to the
broker; (d) the dates of closing-out and settlement; (e) the purchase
price per unit; (f) the net total amount payable to the Fund upon
such closing-out; (g) the net total amount payable to the broker upon
such closing-out; (h) the amount of cash and the amount and kind of
Securities to be withdrawn, if any, from the Margin Account; (i) the
amount of cash and/or the amount and kind of Securities, if any, to
be withdrawn from the Senior Security Account; and (j) the name of
the broker through whom the Fund is effecting such closing-out. The
Custodian shall, upon receipt of the net total amount payable to the
Fund upon such closing-out, and the return and/or cancellation of
the receipts, if any, issued by the Custodian with respect to the
short sale being closed-out, pay out of the moneys held for the
account of the Fund to the broker the net total amount payable to the
broker, and make the withdrawals from the Margin Account and the
Senior Security Account, as the same are specified in the
Certificate.
ARTICLE IX
REVERSE REPURCHASE AGREEMENTS
1. Promptly after the Fund enters a Reverse Repurchase
Agreement with respect to Securities and money held by the Custodian
hereunder, the Fund shall deliver or cause the Administrator to
deliver to the Custodian a Certificate, or in the event such Reverse
Repurchase Agreement is a Money Market Security, a Certificate or
Oral Instructions specifying: (a) the Series for which the Reverse
Repurchase Agreement is entered; (b) the total amount payable to the
Fund in connection with such Reverse Repurchase Agreement and
specifically allocated to such Series; (c) the broker or dealer
through or with whom the Reverse Repurchase Agreement is entered; (d)
the amount and kind of Securities to be delivered by the Fund to such
broker or dealer; (e) the date of such Reverse Repurchase Agreement;
and (f) the amount of cash and/or the amount and kind of Securities,
if any, specifically allocated to such Series to be deposited in a
Senior Security Account for such Series in connection with such
Reverse Repurchase Agreement. The Custodian shall, upon receipt of
the total amount payable to the Fund specified in the Certificate or
Oral Instructions make the delivery to the broker or dealer, and the
deposits, if any, to the Senior Security Account, specified in such
Certificate or Oral Instructions.
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2. Upon the termination of a Reverse Repurchase Agreement
described in preceding paragraph 1 of this Article, the Fund shall
deliver or cause the Administrator to deliver a Certificate or, in
the event such Reverse Repurchase Agreement is a Money Market
Security, a Certificate or Oral Instructions to the Custodian
specifying: (a) the Reverse Repurchase Agreement being terminated
and the Series for which same was entered; (b) the total amount
payable by the Fund in connection with such termination; (c) the
amount and kind of Securities to be received by the Fund and
specifically allocated to such Series in connection with such
termination; (d) the date of termination; (e) the name of the broker
or dealer with or through whom the Reverse Repurchase Agreement is to
be terminated; and (f) the amount of cash and/or the amount and kind
of Securities to be withdrawn from the Senior Securities Account for
such Series. The Custodian shall, upon receipt of the amount and kind
of Securities to be received by the Fund specified in the Certificate
or Oral Instructions, make the payment to the broker or dealer, and
the withdrawals, if any, from the Senior Security Account, specified
in such Certificate or Oral Instructions.
ARTICLE X
LOAN OF PORTFOLIO SECURITIES OF THE FUND
1. Promptly after each loan of portfolio Securities
specifically allocated to a Series held by the Custodian here-under,
the Fund shall deliver or cause the Administrator to deliver to the
Custodian a Certificate specifying with respect to each such loan:
(a) the Series to which the loaned Securities are specifically
allocated; (b) the name of the issuer and the title of the
Securities, (c) the number of shares or the principal amount loaned,
(d) the date of loan and delivery, (e) the total amount to be
delivered to the Custodian against the loan of the Securities,
including the amount of cash collateral and the premium, if any,
separately identified, and (f) the name of the broker, dealer, or
financial institution to which the loan was made. The Custodian shall
deliver the Securities thus designated to the broker, dealer or
financial institution to which the loan was made upon receipt of the
total amount designated as to be delivered against the loan of
Securities. The Custodian may accept payment in connection with a
delivery otherwise than through the Book-Entry System or Depository
only in the form of a certified or bank cashier's check payable to
the order of the Fund or the Custodian drawn on New York Clearing
House funds and may deliver Securities in accordance with the customs
prevailing among dealers in securities.
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2. Promptly after each termination of the loan of Securities
by the Fund, the Fund shall deliver or cause the Administrator to
deliver to the Custodian a Certificate specifying with respect to
each such loan termination and return of Securities: (a) the Series
to which the loaned Securities are specifically allocated; (b) the
name of the issuer and the title of the Securities to be returned,
(c) the number of shares or the principal amount to be returned, (d)
the date of termination, (e) the total amount to be delivered by the
Custodian (including the cash collateral for such Securities minus
any offsetting credits as described in said Certificate), and (f) the
name of the broker, dealer, or financial institution from which the
Securities will be returned. The Custodian shall receive all
Securities returned from the broker, dealer, or financial institution
to which such Securities were loaned and upon receipt thereof shall
pay, out of the moneys held for the account of the Fund, the total
amount payable upon such return of Securities as set forth in the
Certificate.
ARTICLE XI
CONCERNING MARGIN ACCOUNTS, SENIOR SECURITY
ACCOUNTS, AND COLLATERAL ACCOUNTS
1. The Custodian shall, from time to time, make such deposits
to, or withdrawals from, a Senior Security Account as specified in a
Certificate received by the Custodian. Such Certificate shall specify
the Series for which such deposit or withdrawal is to be made and the
amount of cash and/or the amount and kind of Securities specifically
allocated to such Series to be deposited in, or withdrawn from, such
Senior Security Account for such Series. In the event the Certificate
fails to specify the Series, the name of the issuer, the title and
the number of shares or the principal amount of any particular
Securities to be deposited by the Custodian into, or withdrawn from,
a Senior Securities Account, the Custodian shall be under no
obligation to make any such deposit or withdrawal and shall so notify
the Administrator.
2. The Custodian shall make deliveries or payments from a
Margin Account to the broker, dealer, futures commission merchant or
Clearing Member in whose name, or for whose benefit, the account was
established as specified in the Margin Account Agreement.
3. Amounts received by the Custodian as payments or
distributions with respect to Securities deposited in any Margin
Account shall be dealt with in accordance with the terms and
conditions of the Margin Account Agreement.
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4. The Custodian shall have a continuing lien and security
interest in and to any property at any time held by the Custodian in
any Collateral Account described herein. In accordance with
applicable law the Custodian may enforce its lien and realize on any
such property whenever the Custodian has made payment or delivery
pursuant to any Put Option guarantee letter or similar document or
any receipt issued hereunder by the Custodian. In the event the
Custodian should realize on any such property net proceeds which are
less than the Custodian's obligations under any Put Option guarantee
letter or similar document or any receipt, such deficiency shall be a
debt owed the Custodian by the Fund within the scope of Article XIV
herein.
5. On each business day the Custodian shall furnish the Fund
with a statement with respect to each Margin Account in which money
or Securities are held specifying as of the close of business on the
previous business day: (a) the name of the Margin Account; (b) the
amount and kind of Securities held therein; and (c) the amount of
money held therein. The Custodian shall make available upon request
to any broker, dealer, or futures commission merchant specified in
the name of a Margin Account a copy of the statement furnished the
Fund with respect to such Margin Account.
6. Promptly after the close of business on each business day
in which cash and/or Securities are maintained in a Collateral
Account for any Series, the Custodian shall furnish the Administrator
with a statement with respect to such Collateral Account specifying
the amount of cash and/or the amount and kind of Securities held
therein. No later than the close of business next succeeding the
delivery to the Fund of such statement, the Fund shall deliver or
cause the Administrator to deliver to the Custodian a Certificate
specifying the then market value of the Securities described in such
statement. In the event such then market value is indicated to be
less than the Custodian's obligation with respect to any outstanding
Put Option guarantee letter or similar document, the Fund shall
promptly specify or cause the Administrator to promptly specify in a
Certificate the additional cash and/or Securities to be deposited in
such Collateral Account to eliminate such deficiency.
ARTICLE XII
PAYMENT OF DIVIDENDS OR DISTRIBUTIONS
1. The Fund shall deliver or cause the Administrator to
deliver to the Custodian a copy of the resolution of the Board of
Directors of the Fund, certified by the Secretary, the Clerk, any
Assistant Secretary or any Assistant Clerk, either (i) setting forth
with respect to the Series specified therein
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the date of the declaration of a dividend or distribution, the date
of payment thereof, the record date as of which shareholders
entitled to payment shall be determined, the amount payable per Share
of such Series to the shareholders of record as of that date and the
total amount payable to the Dividend Agent and any sub-dividend agent
or co-dividend agent of the Fund on the payment date, or (ii)
authorizing with respect to the Series specified therein the
declaration of dividends and distributions on a daily basis and
authorizing the Custodian to rely on Oral Instructions or a
Certificate setting forth the date of the declaration of such
dividend or distribution, the date of payment thereof, the record
date as of which shareholders entitled to payment shall be
determined, the amount payable per Share of such Series to the
shareholders of record as of that date and the total amount payable
to the Dividend Agent on the payment date.
2. Upon the payment date specified in such resolution, Oral
Instructions or Certificate, as the case may be, the Custodian shall
pay out of the moneys held for the account of each Series the total
amount payable to the Dividend Agent and any sub-dividend agent or
co-dividend agent of the Fund with respect to such Series.
ARTICLE XIII
SALE AND REDEMPTION OF SHARES
1. Whenever the Fund shall sell any Shares, it shall deliver
or cause the Administrator to deliver to the Custodian a Certificate
duly specifying:
(a) The Series, the number of Shares sold, trade date, and
price; and
(b) The amount of money to be received by the Custodian
for the sale of such Shares and specifically allocated to the
separate account in the name of such Series.
2. Upon receipt of such money from the Transfer Agent, the
Custodian shall credit such money to the separate account in the name
of the Series for which such money was received.
3. Upon issuance of any Shares of any Series described in the
foregoing provisions of this Article, the Custodian shall pay, out of
the money held for the account of such Series, all original issue or
other taxes required to be paid by the Fund in connection with such
issuance upon the receipt of a Certificate specifying the amount to
be paid.
4. Except as provided hereinafter, whenever the Fund desires
the Custodian to make payment out of the money held by
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the Custodian hereunder in connection with a redemption of any
Shares, it shall deliver or cause the Administrator to deliver to the
Custodian a Certificate specifying:
(a) The number and Series of Shares redeemed; and
(b) The amount to be paid for such Shares.
5. Upon receipt from the Transfer Agent of an advice setting
forth the Series and number of Shares received by the Transfer Agent
for redemption and that such Shares are in good form for redemption,
the Custodian shall make payment to the Transfer Agent out of the
moneys held in the separate account in the name of the Series the
total amount specified in the Certificate delivered pursuant to the
foregoing paragraph 4 of this Article.
6. Notwithstanding the above provisions regarding the
redemption of any Shares, whenever any Shares are redeemed pursuant
to any check redemption privilege which may from time to time be
offered by the Fund, the Custodian, unless otherwise instructed by a
Certificate, shall, upon receipt of an advice from the Fund or its
agent setting forth that the redemption is in good form for
redemption in accordance with the check redemption procedure, honor
the check presented as part of such check redemption privilege out of
the moneys held in the separate account of the Series of the Shares
being redeemed.
ARTICLE XIV
OVERDRAFTS OR INDEBTEDNESS
1. If the Custodian, should in its sole discretion advance
funds on behalf of any Series which results in an overdraft because
the moneys held by the Custodian in the separate account for such
Series shall be insufficient to pay the total amount payable upon a
purchase of Securities specifically allocated to such Series, as set
forth in a Certificate or Oral Instructions, or which results in an
overdraft in the separate account of such Series for some other
reason, or if the Fund is for any other reason indebted to the
Custodian with respect to a Series, including any indebtedness to The
Bank of New York under the Fund's Cash Management and Related
Services Agreement, (except a borrowing for investment or for
temporary or emergency purposes using Securities as collateral
pursuant to a separate agreement and subject to the provisions of
paragraph 2 of this Article), such overdraft or indebtedness shall
be deemed to be a loan made by the Custodian to the Fund for such
Series payable on demand and shall bear interest from the date
incurred at a rate per annum (based on a 360-day year for the actual
number of days involved) equal to 1/2% over
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Custodian's prime commercial lending rate in effect from time to
time, such rate to be adjusted on the effective date of any change in
such prime commercial lending rate but in no event to be less than 6%
per annum. In addition, the Fund hereby agrees that the Custodian
shall have a continuing lien and security interest in and to any
property specifically allocated to such Series at any time held by
it for the benefit of such Series or in which the Fund may have an
interest which is then in the Custodian's possession or control or in
possession or control of any third party acting in the Custodian's
behalf. The Fund authorizes the Custodian, in its sole discretion,
at any time to charge any such overdraft or indebtedness together
with interest due thereon against any balance of account standing to
such Series' credit on the Custodian's books. In addition, the Fund
hereby covenants that on each Business Day on which either it intends
to enter a Reverse Repurchase Agreement and/or otherwise borrow from
a third party, or which next succeeds a Business Day on which at the
close of business the Fund had outstanding a Reverse Repurchase
Agreement or such a borrowing, it shall prior to 9 a.m., New York
City time, advise the Custodian, in writing, of each such borrowing,
shall specify the Series to which the same relates, and shall not
incur any indebtedness not so specified other than from the
Custodian.
2. The Fund will cause to be delivered to the Custodian by any
bank (including, if the borrowing is pursuant to a separate
agreement, the Custodian) from which it borrows money for investment
or for temporary or emergency purposes using Securities held by the
Custodian hereunder as collateral for such borrowings, a notice or
undertaking in the form currently employed by any such bank setting
forth the amount which such bank will loan to the Fund against
delivery of a stated amount of collateral. The Fund shall promptly
deliver to the Custodian a Certificate specifying with respect to
each such borrowing: (a) the Series to which such borrowing relates;
(b) the name of the bank, (c) the amount and terms of the borrowing,
which may be set forth by incorporating by reference an attached
promissory note, duly endorsed by the Fund, or other loan agreement,
(d) the time and date, if known, on which the loan is to be entered
into, (e) the date on which the loan becomes due and payable, (f) the
total amount payable to the Fund on the borrowing date, (g) the
market value of Securities to be delivered as collateral for such
loan, including the name of the issuer, the title and the number of
shares or the principal amount of any particular Securities, and (h)
a statement specifying whether such loan is for investment purposes
or for temporary or emergency purposes and that such loan is in
conformance with the Investment Company Act of 1940 and the Fund's
prospectus. The Custodian shall deliver on the borrowing date
specified in a Certificate the specified collateral and the executed
promissory note, if any, against delivery by the lending bank of the
total amount of the loan payable, provided that the same conforms to
the total amount
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payable as set forth in the Certificate. The Custodian may, at the
option of the lending bank, keep such collateral in its possession,
but such collateral shall be subject to all rights therein given the
lending bank by virtue of any promissory note or loan agreement. The
Custodian shall deliver such Securities as additional collateral as
may be specified in a Certificate to collateralize further any
transaction described in this paragraph. The Fund shall cause all
Securities released from collateral status to be returned directly
to the Custodian, and the Custodian shall receive from time to time
such return of collateral as may be tendered to it. In the event that
the Fund fails to specify in a Certificate the Series, the name of
the issuer, the title and number of shares or the principal amount of
any particular Securities to be delivered as collateral by the
Custodian, the Custodian shall not be under any obligation to deliver
any Securities.
ARTICLE XV
TERMINAL LINK
1. At no time and under no circumstances shall the
Administrator on behalf of the Fund be obligated to have or utilize
the Terminal Link, and the provisions of this Article shall apply if,
but only if, the Fund in its sole and absolute discretion directs the
Administrator to utilize the Terminal Link to transmit Certificates
to the Custodian.
2. The Terminal Link shall be utilized by the Administrator
on behalf of the Fund only for the purpose of providing Certificates
to the Custodian with respect to transactions involving Securities or
for the transfer of money to be applied to the payment of dividends,
distributions or redemptions of Fund Shares, and shall be utilized
by the Custodian only for the purpose of providing notices to the
Administrator. Such use shall commence only after the Fund shall
have delivered or caused the Administrator to have delivered to the
Custodian a Certificate substantially in the form of Exhibit D and
shall have established access codes. Each use of the Terminal Link
by the Administrator shall constitute a representation and warranty
that the Terminal Link is being used only for the purposes permitted
hereby, that at least two Officers have each utilized an access code,
that such safekeeping procedures have been established, and that
such use does not contravene the Investment Company Act of 1940, as
amended, or the rules or regulations thereunder.
3. The Administrator shall obtain and maintain at its own cost
and expense all equipment and services, including, but not limited to
communications services, necessary for it to utilize the Terminal
Link, and the Custodian shall not be responsible for the reliability
or availability of any such equipment or services.
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4. The Fund and the Administrator acknowledges that any data
bases made available as part of, or through the Terminal Link and any
proprietary data, software, processes, information and documentation
(other than any such which are or become part of the public domain
or are legally required to be made available to the public)
(collectively, the "Information"), are the exclusive and
confidential property of the Custodian. The Fund and the
Administrator shall, and shall cause others to which either discloses
the Information, to keep the Information confidential by using the
same care and discretion it uses with respect to its own confidential
property and trade secrets, and shall neither make nor permit any
disclosure without the express prior written consent of the
Custodian.
5. Upon termination of this Agreement for any reason, the Fund
and the Administrator shall return to the Custodian any and all
copies of the Information which are in its respective possession or
under its respective control, or which either distributed to third
parties. The provisions of this Article shall not affect the
copyright status of any of the Information which may be copyrighted
and shall apply to all Information whether or not copyrighted.
6. The Custodian reserves the right to modify the Terminal
Link from time to time without notice to the Fund or the
Administrator except that the Custodian shall give the Administrator
notice not less than 75 days in advance of any modification which
would materially adversely affect the Administrator's operation, and
the Administrator agrees that it shall not modify or attempt to
modify the Terminal Link without the Custodian's prior written
consent. The Fund acknowledges that any software or procedures
provided the Fund as part of the Terminal Link are the property of
the Custodian and, accordingly, the Administrator agrees that any
modifications to the Terminal Link, whether by the Administrator, or
by the Custodian and whether with or without the Custodian's consent,
shall become the property of the Custodian.
7. Neither the Custodian nor any manufacturers and suppliers
it utilizes or the Fund utilizes in connection with the Terminal Link
makes any warranties or representations, express or implied, in fact
or in law, including but not limited to warranties of merchantability
and fitness for a particular purpose.
8. The Administrator will cause its officers and employees to
treat the authorization codes and the access codes applicable to
Terminal Link with extreme care, and the Fund and the Administrator
irrevocably authorizes the Custodian to act in accordance with and
rely on Certificates received by it through the Terminal Link. The
Fund and the Administrator acknowledge that it is their respective
responsibility to
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assure that only Officers use the Terminal Link, and that Custodian
shall not be responsible nor liable for use of the Terminal Link by
persons other than such persons or Officers, or by only a single
Officer, nor for any alteration, omission, or failure to promptly
forward.
9(a). Except as otherwise specifically provided in Section
9(b) of this Article, the Custodian shall have no liability for any
losses, damages, injuries, claims, costs or expenses arising out of
or in connection with any failure, malfunction or other problem
relating to the Terminal Link except for money damages suffered as
the direct result of the negligence of the Custodian in an amount not
exceeding for any incident $25,000 provided, however, that the
Custodian shall have no liability under this Section 9 if the
Administrator fails to comply with the provisions of Section 11.
9(b). The Custodian's liability for its negligence in
executing or failing to execute in accordance with a Certificate
received through Terminal Link shall be only with respect to a
transfer of funds which is not made in accordance with such
Certificate after such Certificate shall have been duly acknowledged
by the Custodian, and shall be contingent upon the Administrator
complying with the provisions of Section 12 of this Article, and
shall be limited to (i) restoration of the principal amount
mistransferred, if and to the extent that the Custodian would be
required to make such restoration under applicable law, and (ii) the
lesser of (A) the Fund's actual pecuniary loss incurred by reason of
its loss of use of the mistransferred funds or the funds which were
not transferred, as the case may be, or (B) compensation for the loss
of the use of the mistransferred funds or the funds which were not
transferred, as the case may be, at a rate per annum equal to the
average federal funds rate as computed from the Federal Reserve Bank
of New York's daily determination of the effective rate for federal
funds, for the period during which a Fund has lost use of such funds.
In no event shall the Custodian have any liability for failing to
execute in accordance with a Certificate a transfer of funds where
the Certificate is received by the Custodian through Terminal Link
other than through the applicable transfer module for the particular
instructions contained in such Certificate.
10. Without limiting the generality of the foregoing, in no
event shall the Custodian or any manufacturer or supplier of its
computer equipment, software or services relating to the Terminal
Link be responsible for any special, indirect, incidental or
consequential damages which the Fund or the Administrator may incur
or experience by reason of its use of the Terminal Link even if the
Custodian or any manufacturer or supplier has been advised of the
possibility of such damages, nor with respect to the use of the
Terminal Link shall the Custodian or any such manufacturer or
supplier be liable for acts of God, or with respect to the following
to the extent
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beyond such person's reasonable control: machine or computer
breakdown or malfunction, interruption or malfunction of
communication facilities, labor difficulties or any other similar or
dissimilar cause.
11. The Fund shall cause the Administrator to notify the
Custodian of any errors, omissions or interruptions in, or delay or
unavailability of, the Terminal Link as promptly as practicable, and
in any event within 24 hours after the earliest of (i) discovery
thereof, (ii) the Business Day on which discovery should have
occurred through the exercise of reasonable care and (iii) in the
case of any error, the date of actual receipt of the earliest notice
which reflects such error, it being agreed that discovery and receipt
of notice may only occur on a business day. The Custodian shall
promptly advise the Fund whenever the Custodian learns of any errors,
omissions or interruption in, or delay or unavailability of, the
Terminal Link.
12. The Custodian shall verify to the Administrator, by use of
the Terminal Link, receipt of each Certificate the Custodian
receives through the Terminal Link, and in the absence of such
verification the Custodian shall not be liable for any failure to act
in accordance with such Certificate and neither the Fund nor the
Administrator may claim that such Certificate was received by the
Custodian. Such verification, which may occur after the Custodian has
acted upon such Certificate, shall be accomplished on the same day on
which such Certificate is received.
ARTICLE XVI
DUTIES OF THE CUSTODIAN WITH RESPECT TO PROPERTY
OF ANY SERIES HELD OUTSIDE OF THE UNITED STATES
1. The Custodian is authorized and instructed to employ,
as sub-custodian for each Series' Foreign Securities (as such term is
defined in paragraph (c)(1) of Rule 17f-5 under the Investment
Company Act of 1940, as amended) and other assets, the foreign
banking institutions and foreign securities depositories and clearing
agencies designated on Schedule I hereto ("Foreign Sub-Custodians")
to carry out their respective responsibilities in accordance with the
terms of the sub-custodian agreement between each such Foreign Sub-
Custodian and the Custodian, copies of which have been previously
delivered to the Fund and receipt of which is hereby acknowledged
(each such agreement, a "Foreign Sub-Custodian Agreement"). The
Custodian shall be liable for the acts and
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<PAGE>
omissions of each Foreign Sub-Custodian constituting negligence or
willful misconduct in the conduct of its responsibilities under the
terms of the Foreign Sub-Custodian Agreement. Upon receipt of a
Certificate, together with a certified resolution substantially in
the form attached as Exhibit E of the Fund's Board of Directors, the
Fund may designate any additional foreign sub-custodian with which
the Custodian has an agreement for such entity to act as the
Custodian's agent, as its sub-custodian and any such additional
foreign sub-custodian shall be deemed added to Schedule I. Upon
receipt of a Certificate, the Custodian shall cease the employment of
any one or more Foreign Sub-Custodians for maintaining custody of the
Fund's assets and such Foreign Sub-Custodian shall be deemed deleted
from Schedule I.
2. Each Foreign Sub-Custodian Agreement shall be
substantially in the form previously delivered to the Fund and will
not be amended in a way that materially adversely affects the Fund
without the Fund's prior written consent.
3. The Custodian shall identify on its books as belonging
to each Series of the Fund the Foreign Securities of such Series held
by each Foreign Sub-Custodian. At the election of the Fund, it shall
be entitled to be subrogated to the rights of the Custodian with
respect to any claims by the Fund or any Series against a Foreign
Sub-Custodian as a consequence of any loss, damage, cost, expense,
liability or claim sustained or incurred by the Fund or any Series
if and to the extent that the Fund or such Series has not been made
whole for any such loss, damage, cost, expense, liability or claim.
4. Upon request of the Fund, the Custodian will,
consistent with the terms of the applicable Foreign Sub-Custodian
Agreement, use reasonable efforts to arrange for the independent
accountants of the Fund to be afforded access to the books and
records of any Foreign Sub-Custodian insofar as such books and
records relate to the performance of such Foreign Sub-Custodian under
its agreement with the Custodian on behalf of the Fund.
5. The Custodian will supply to the Fund from time to
time, as mutually agreed upon, statements in respect of the
securities and other assets of each Series held by Foreign Sub-
Custodians, including but not limited to, an identification of
entities having possession of each Series' Foreign Securities and
other assets, and advices or notifications of any transfers of
Foreign Securities to or from each custodial account maintained by a
Foreign Sub-Custodian for the Custodian on behalf of the Series.
6. The Custodian shall furnish annually to the Fund, as
mutually agreed upon, information concerning the Foreign Sub-
Custodians employed by the Custodian. Such information shall be
similar in kind and scope to that furnished to
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the Fund in connection with the Fund's initial approval of such
Foreign Sub-Custodians and, in any event, shall include information
pertaining to (i) the Foreign Custodians' financial strength,
general reputation and standing in the countries in which they are
located and their ability to provide the custodial services required,
and (ii) whether the Foreign Sub-Custodians would provide a level of
safeguards for safe-keeping and custody of securities not materially
different from those prevailing in the United States. The Custodian
shall monitor the general operating performance of each Foreign Sub-
Custodian, and at least annually obtain and review the annual
financial report published by such Foreign Sub-Custodian to determine
that it meets the financial criteria of an "Eligible Foreign
Custodian" under Rule 17f-5(c)(2)(i) or (ii). The Custodian will
promptly inform the Fund in the event that the Custodian learns that
a Foreign Sub-Custodian no longer satisfies the financial criteria of
an "Eligible Foreign Custodian" under such Rule. The Custodian agrees
that it will use reasonable care in monitoring compliance by each
Foreign Sub-Custodian with the terms of the relevant Foreign Sub-
Custodian Agreement and that if it learns of any breach of such
Foreign Sub-Custodian Agreement believed by the Custodian to have a
material adverse effect on the Fund or any Series it will promptly
notify the Fund of such breach. The Custodian also agrees to use
reasonable and diligent efforts to enforce its rights under the
relevant Foreign Sub-Custodian Agreement.
7. The Custodian shall transmit promptly to the Fund all
notices, reports or other written information received pertaining to
the Fund's Foreign Securities, including without limitation, notices
of corporate action, proxies and proxy solicitation materials.
8. Notwithstanding any provision of this Agreement to the
contrary, settlement and payment for securities received for the
account of any Series and delivery of securities maintained for the
account of such Series may be effected in accordance with the
customary or established securities trading or securities processing
practices and procedures in the jurisdiction or market in which the
transaction occurs, including, without limitation, delivery of
securities to the purchaser thereof or to a dealer therefor (or an
agent for such purchaser or dealer) against a receipt with the
expectation of receiving later payment for such securities from such
purchaser or dealer.
ARTICLE XVII
CONCERNING THE CUSTODIAN
1. Except as hereinafter provided, or as provided in Article
XVI neither the Custodian nor its nominee shall be
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liable for any loss or damage, including counsel fees, resulting
from its action or omission to act or otherwise, either hereunder or
under any Margin Account Agreement, except for any such loss or
damage arising out of its own negligence or willful misconduct. In no
event shall the Custodian be liable to the Fund or any third party
for special, indirect or consequential damages or lost profits or
loss of business, arising under or in connection with this Agreement,
even if previously informed of the possibility of such damages and
regardless of the form of action. The Custodian may, with respect to
questions of law arising hereunder or under any Margin Account
Agreement, apply for and obtain the advice and opinion of counsel to
the Fund or of its own counsel, at the expense of the Fund, and shall
be fully protected with respect to anything done or omitted by it in
good faith in conformity with such advice or opinion. The Custodian
shall be liable to the Fund for any loss or damage resulting from the
use of the Book-Entry System or any Depository arising by reason of
any negligence or willful misconduct on the part of the Custodian or
any of its employees or agents.
2. Without limiting the generality of the foregoing, the
Custodian shall be under no obligation to inquire into, and shall not
be liable for:
(a) The validity of the issue of any Securities purchased,
sold, or written by or for the Fund, the legality of the purchase,
sale or writing thereof, or the propriety of the amount paid or
received therefor;
(b) The legality of the sale or redemption of any Shares,
or the propriety of the amount to be received or paid therefor;
(c) The legality of the declaration or payment of any
dividend by the Fund;
(d) The legality of any borrowing by the Fund using
Securities as collateral;
(e) The legality of any loan of portfolio Securities, nor
shall the Custodian be under any duty or obligation to see to it that
any cash collateral delivered to it by a broker, dealer, or financial
institution or held by it at any time as a result of such loan of
portfolio Securities of the Fund is adequate collateral for the Fund
against any loss it might sustain as a result of such loan. The
Custodian specifically, but not by way of limitation, shall not be
under any duty or obligation periodically to check or notify the Fund
that the amount of such cash collateral held by it for the Fund is
sufficient collateral for the Fund, but such duty or obligation shall
be the sole responsibility of the Fund. In addition, the Custodian
shall be under no duty or obligation to see that any broker, dealer
or financial institution
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<PAGE>
to which portfolio Securities of the Fund are lent pursuant to
Article XIV of this Agreement makes payment to it of any dividends
or interest which are payable to or for the account of the Fund
during the period of such loan or at the termination of such loan,
provided, however, that the Custodian shall promptly notify the Fund
in the event that such dividends or interest are not paid and
received when due; or
(f) The sufficiency or value of any amounts of money
and/or Securities held in any Margin Account, Senior Security Account
or Collateral Account in connection with transactions by the Fund. In
addition, the Custodian shall be under no duty or obligation to see
that any broker, dealer, futures commission merchant or Clearing
Member makes payment to the Fund of any variation margin payment or
similar payment which the Fund may be entitled to receive from such
broker, dealer, futures commission merchant or Clearing Member, to
see that any payment received by the Custodian from any broker,
dealer, futures commission merchant or Clearing Member is the amount
the Fund is entitled to receive, or to notify the Fund of the
Custodian's receipt or non-receipt of any such payment.
3. The Custodian shall not be liable for, or considered to be
the Custodian of, any money, whether or not represented by any check,
draft, or other instrument for the payment of money, received by it
on behalf of the Fund until the Custodian actually receives and
collects such money directly or by the final crediting of the account
representing the Fund's interest at the Book-Entry System or the
Depository.
4. The Custodian shall have no responsibility and shall not be
liable for ascertaining or acting upon any calls, conversions,
exchange offers, tenders, interest rate changes or similar matters
relating to Securities held in the Depository, unless the Custodian
shall have actually received timely notice from the Depository. In
no event shall the Custodian have any responsibility or liability for
the failure of the Depository to collect, or for the late collection
or late crediting by the Depository of any amount payable upon
Securities deposited in the Depository which may mature or be
redeemed, retired, called or otherwise become payable. However, upon
receipt of a Certificate from the Fund of an overdue amount on
Securities held in the Depository the Custodian shall make a claim
against the Depository on behalf of the Fund, except that the
Custodian shall not be under any obligation to appear in, prosecute
or defend any action suit or proceeding in respect to any Securities
held by the Depository which in its opinion may involve it in expense
or liability, unless indemnity satisfactory to it against all expense
and liability be furnished as often as may be required.
5. The Custodian shall not be under any duty or obligation to
take action to effect collection of any amount due to
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<PAGE>
the Fund from the Transfer Agent of the Fund nor to take any action
to effect payment or distribution by the Transfer Agent of the Fund
of any amount paid by the Custodian to the Transfer Agent of the
Fund in accordance with this Agreement.
6. The Custodian shall not be under any duty or obligation to
take action to effect collection of any amount if the Securities upon
which such amount is payable are in default, or if payment is refused
after due demand or presentation, unless and until (i) it shall be
directed to take such action by a Certificate and (ii) it shall be
assured to its satisfaction of reimbursement of its costs and
expenses in connection with any such action.
7. The Custodian may in addition to the employment of Foreign
Sub-Custodians pursuant to Article XVI appoint one or more banking
institutions as Depository or Depositories, as Sub-Custodian or Sub-
Custodians, or as Co-Custodian or Co-Custodians including, but not
limited to, banking institutions located in foreign countries, of
Securities and moneys at any time owned by the Fund, upon such terms
and conditions as may be approved in a Certificate or contained in an
agreement executed by the Custodian, the Fund and the appointed
institution.
8. The Custodian shall not be under any duty or obligation
(a) to ascertain whether any Securities at any time delivered to, or
held by it or by any Foreign Sub-Custodian, for the account of the
Fund and specifically allocated to a Series are such as properly may
be held by the Fund or such Series under the provisions of its then
current prospectus, or (b) to ascertain whether any transactions by
the Fund, whether or not involving the Custodian, are such
transactions as may properly be engaged in by the Fund.
9. The Custodian shall be entitled to receive and the Fund
agrees to pay to the Custodian all out-of-pocket expenses and such
compensation as may be agreed upon from time to time between the
Custodian and the Fund. The Fund represents that the Administrator
has agreed to pay such compensation and expenses promptly upon
receipt of statements therefor, and hereby directs the Custodian to
(i) send all statements for compensation to its attention care of
Fund/Plan at the following address: Fund/Plan Services, Inc., 2 W.
Elm Street, Conshohocken, PA 19428, Attention: Mr. Elmer Gardner,
Senior Vice President, and (ii) accept all payments made by Fund/Plan
in the Fund's name as if such payments were made directly by the
Fund. The Fund shall pay to Fund/Plan fees for services (including
custodian services provided by the Custodian) in accordance with the
Administration Agreement. The Custodian's compensation for services
rendered hereunder is set forth in a separate agreement between the
Custodian and Fund/Plan. Should Fund/Plan fail to pay or remit such
compensation to the Custodian, the Custodian will be entitled to
debit the Custody
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<PAGE>
Account directly for such compensation. The Custodian may charge such
compensation and any expenses with respect to a Series incurred by
the Custodian in the performance of its duties pursuant to such
agreement against any money specifically allocated to such Series.
Unless and until the Fund or the Administrator instructs the
Custodian by a Certificate to apportion any loss, damage, liability
or expense among the Series in a specified manner, the Custodian
shall also be entitled to charge against any money held by it for the
account of a Series such Series' pro rata share (based on such Series
net asset value at the time of the charge to the aggregate net asset
value of all Series at that time) of the amount of any loss, damage,
liability or expense, including counsel fees, for which it shall be
entitled to reimbursement under the provisions of this Agreement.
The expenses for which the Custodian shall be entitled to
reimbursement hereunder shall include, but are not limited to, the
expenses of sub-custodians and foreign branches of the Custodian
incurred in settling outside of New York City transactions involving
the purchase and sale of Securities of the Fund.
10. The Custodian shall be entitled to rely upon any
Certificate, notice or other instrument in writing received by the
Custodian and reasonably believed by the Custodian to be a
Certificate. The Custodian shall be entitled to rely upon any Oral
Instructions actually received by the Custodian. The Fund agrees to
forward or cause the Administrator to forward to the Custodian a
Certificate or facsimile thereof confirming such Oral Instructions in
such manner so that such Certificate or facsimile thereof is received
by the Custodian, whether by hand delivery, telecopier or other
similar device, or otherwise, by the close of business of the same
day that such Oral Instructions are given to the Custodian. The Fund
agrees that the fact that such confirming instructions are not
received by the Custodian shall in no way affect the validity of the
transactions or enforceability of the transactions hereby authorized
by the Fund. The Fund agrees that the Custodian shall incur no
liability to the Fund in acting upon Oral Instructions given to the
Custodian hereunder concerning such transactions provided such
instructions reasonably appear to have been received from an Officer.
11. The Custodian shall be entitled to rely upon any
instrument, instruction or notice received by the Custodian and
reasonably believed by the Custodian to be given in accordance with
the terms and conditions of any Margin Account Agreement. Without
limiting the generality of the foregoing, the Custodian shall be
under no duty to inquire into, and shall not be liable for, the
accuracy of any statements or representations contained in any such
instrument or other notice including, without limitation, any
specification of any amount to be paid to a broker, dealer, futures
commission merchant or Clearing Member.
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<PAGE>
12. The books and records pertaining to the Fund which are in
the possession of the Custodian shall be the property of the Fund.
Such books and records shall be prepared and maintained as required
by the Investment Company Act of 1940, as amended, and other
applicable securities laws and rules and regulations. The Fund, or
the Fund's authorized representatives, shall have access to such
books and records during the Custodian's normal business hours. Upon
the reasonable request of the Fund, copies of any such books and
records shall be provided by the Custodian to the Fund or the Fund's
authorized representative, and the Fund shall reimburse the Custodian
its expenses of providing such copies. Upon reasonable request of the
Fund, the Custodian shall provide in hard copy or on micro-film,
whichever the Custodian elects, any records included in any such
delivery which are maintained by the Custodian on a computer disc,
or are similarly maintained, and the Fund shall reimburse the
Custodian for its expenses of providing such hard copy or micro-film.
13. The Custodian shall provide the Fund with any report
obtained by the Custodian on the system of internal accounting
control of the Book-Entry System, the Depository or O.C.C., and with
such reports on its own systems of internal accounting control as
the Fund may reasonably request from time to time.
14. The Fund agrees to indemnify the Custodian against and save
the Custodian harmless from all liability, claims, losses and demands
whatsoever, including attorney's fees, howsoever arising or incurred
because of or in connection with this Agreement, including the
Custodian's payment or non payment of checks pursuant to paragraph 6
of Article XIII as part of any check redemption privilege program of
the Fund, except for any such liability, claim, loss and demand
arising out of the Custodian's own negligence or willful misconduct.
15. Subject to the foregoing provisions of this Agreement,
including, without limitation, those contained in Article XVI the
Custodian may deliver and receive Securities, and receipts with
respect to such Securities, and arrange for payments to be made and
received by the Custodian in accordance with the customs prevailing
from time to time among brokers or dealers in such Securities. When
the Custodian is instructed to deliver Securities against payment,
delivery of such Securities and receipt of payment therefor may not
be completed simultaneously. The Fund assumes all responsibility and
liability for all credit risks involved in connection with the
Custodian's delivery of Securities pursuant to Certificates or
instructions of the Fund or the Administrator which responsibility
and liability shall continue until final payment in full has been
received by the Custodian.
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<PAGE>
16. In the event the Custodian is advised by the Fund that the
Fund is no longer utilizing the services of the Administrator, then
the Custodian shall furnish or give to the Fund the statements or
notices described above as to be furnished or given to the
Administrator.
17. The Custodian shall have no duties or responsibilities
whatsoever except such duties and responsibilities as are
specifically set forth in this Agreement, and no covenant or
obligation shall be implied in this Agreement against the Custodian.
Without limiting the generality of the foregoing, the Custodian shall
have no duties or responsibilities by reason of any terms or
provisions in the Administration Agreement, and if such
Administration Agreement shall cease to be in effect the Custodian
shall have no additional duties hereunder.
ARTICLE XVIII
TERMINATION
1. Either of the parties hereto may terminate this Agreement
by giving to the other party a notice in writing specifying the date
of such termination, which shall be not less than ninety (90) days
after the date of giving of such notice. In the event such notice is
given by the Fund, it shall be accompanied by a copy of a resolution
of the Board of Directors of the Fund, certified by the Secretary,
the Clerk, any Assistant Secretary or any Assistant Clerk, electing
to terminate this Agreement and designating a successor custodian or
custodians, each of which shall be a bank or trust company having not
less than $2,000,000 aggregate capital, surplus and undivided
profits. In the event such notice is given by the Custodian, the Fund
shall, on or before the termination date, deliver to the Custodian a
copy of a resolution of the Board of Directors of the Fund, certified
by the Secretary, the Clerk, any Assistant Secretary or any Assistant
Clerk, designating a successor custodian or custodians. In the
absence of such designation by the Fund, the Custodian may designate
a successor custodian which shall be a bank or trust company having
not less than $2,000,000 aggregate capital, surplus and undivided
profits. Upon the date set forth in such notice this Agreement shall
terminate, and the Custodian shall upon receipt of a notice of
acceptance by the successor custodian on that date deliver directly
to the successor custodian all Securities and moneys then owned by
the Fund and held by it as Custodian, after deducting all fees,
expenses and other amounts for the payment or reimbursement of which
it shall then be entitled.
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<PAGE>
2. If a successor custodian is not designated by the Fund or
the Custodian in accordance with the preceding paragraph, the Fund
shall upon the date specified in the notice of termination of this
Agreement and upon the delivery by the Custodian of all Securities
(other than Securities held in the Book-Entry System which cannot be
delivered to the Fund) and moneys then owned by the Fund be deemed to
be its own custodian and the Custodian shall thereby be relieved of
all duties and responsibilities pursuant to this Agreement, other
than the duty with respect to Securities held in the Book Entry
System which cannot be delivered to the Fund to hold such Securities
hereunder in accordance with this Agreement.
ARTICLE XIX
MISCELLANEOUS
1. Annexed hereto as Appendix A is a Certificate signed by two
of the present Officers of the Fund under its seal, setting forth the
names and the signatures of the present Officers. The Fund agrees to
furnish to the Custodian a new Certificate in similar form in the
event that any such present Officer ceases to be an Officer or in the
event that other or additional Officers are elected or appointed.
Until such new Certificate shall be received, the Custodian shall be
fully protected in acting under the provisions of this Agreement upon
Oral Instructions or signatures of the present Officers as set forth
in the last delivered Certificate.
2. Any notice or other instrument in writing, authorized or
required by this Agreement to be given to the Custodian, shall be
sufficiently given if addressed to the Custodian and mailed or
delivered to it at its offices at 90 Washington Street, New York,
New York 10286, or at such other place as the Custodian may from time
to time designate in writing.
3. Any notice or other instrument in writing, authorized or
required by this Agreement to be given to the Fund shall be
sufficiently given if addressed to the Fund and mailed or delivered
to it at its office at the address for the Fund first above written,
or at such other place as the Fund may from time to time designate in
writing, and any notice or other instrument in writing authorized or
required to be given to the Administrator shall be sufficiently given
if addressed to the Administrator at such address as the
Administrator may from time to time designate in writing.
4. This Agreement may not be amended or modified in any manner
except by a written agreement executed by both parties with the same
formality as this Agreement and approved by a resolution of the Board
of Directors of the Fund.
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<PAGE>
5. This Agreement shall extend to and shall be binding upon
the parties hereto, and their respective successors and assigns;
provided, however, that this Agreement shall not be assignable by the
Fund without the written consent of the Custodian, or by the
Custodian without the written consent of the Fund, authorized or
approved by a resolution of the Fund's Board of Directors.
6. This Agreement shall be construed in accordance with the
laws of the State of New York without giving effect to conflict of
laws principles thereof. Each party hereby consents to the
jurisdiction of a state or federal court situated in New York City,
New York in connection with any dispute arising hereunder and hereby
waives its right to trial by jury.
7. This Agreement may be executed in any number of
counterparts, each of which shall be deemed to be an original, but
such counterparts shall, together, constitute only one instrument .
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<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be executed by their respective Officers, thereunto duly authorized
and their respective seals to be hereunto affixed, as of the day and
year first above written.
STRATTON MONTHLY DIVIDEND
SHARES, INC.
[SEAL] By: /s/ Gerald E. ????^
-----------------------
Attest:
/s/ Patricia L. Sloan
-----------------------
THE BANK OF NEW YORK
[SEAL] By: /s/ ????????^
-----------------------
Attest:
/s/ Vincent M. ??????^
-----------------------
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<PAGE>
Exhibit 8(b)
CUSTODY ADMINISTRATION AND AGENCY AGREEMENT
This AGREEMENT, dated as of the 1st day of November, 1994, made by and
between Stratton Monthly Dividend Shares, Inc., (the "Fund"), a corporation
operating as a registered investment company under the Investment Company Act of
1940, as amended, and duly organized and existing under the laws of the state of
Maryland and Fund/Plan Services, Inc. ("Fund/Plan"), a corporation duly
------------------------
organized and existing under the laws of the State of Delaware (collectively,
the "Parties").
WITNESSETH THAT:
WHEREAS, the Fund desires to retain Fund/Plan to perform certain
custody administration services; and
WHEREAS, the Fund desires that Fund/Plan act as its agent for the
specific purpose of taking receipt of, and making payment for, custody services
performed on the Fund's behalf by The Bank of New York pursuant to an agreement
between The Bank of New York and the Fund; and
WHEREAS, Fund/Plan is willing to serve in such capacity and perform
such functions upon the terms and conditions set forth below;
NOW, THEREFORE, in consideration of the premises and mutual covenants
contained herein, the Parties hereto, intending to be legally bound, do hereby
agree as follows:
APPOINTMENT OF FUND/PLAN AS AGENT
Section 1. The Fund hereby grants to Fund/Plan, and Fund/Plan hereby
----------
accepts such grant, as an agent of the Fund for the limited purpose of: (i)
accepting invoices for custody services from The Bank of New York which invoices
reflect charges to the Fund for custody services performed by The Bank of New
York on the Fund's behalf, and (ii) remitting payment to The Bank of New York
for such services performed in amounts as set forth in Schedule "A" attached
hereto.
CUSTODY ADMINISTRATION SERVICES
Section 2. As Custody Administrator, Fund/Plan shall:
----------
a) coordinate and process portfolio trades through client terminal
links with The Bank of New York
b) input and verify portfolio trades
c) monitor pending and failed security trades
d) coordinate communications between brokers and banks to resolve any
operational
- --------------------------------------------------------------------------------
Custody Administration and Agency Agreement between Stratton Monthly
Dividend Shares, Inc., and Fund/Plan Services, Inc.
Page 1 of 6 pages.
<PAGE>
problems
e) advise the Fund of any corporate action information, address and
follow up on any dividend or interest discrepancies
f) process the Funds' expenses
g) interface with the Accounting Services and the Transfer Agent to
research and resolve Custody cash problems
h) provide daily and monthly reports
FEES
Section 3. The Fund agrees to pay Fund/Plan compensation for its services
----------
and to reimburse Fund/Plan for actual expenses incurred, at the rates and
amounts as set forth in Schedule "A" attached hereto which the Fund hereby
authorizes Fund/Plan to collect by debiting the Fund's custody account for
invoices which are rendered for the applicable function. The invoices performed
will be sent to the Fund after such debiting with the indication that payment
has been made.
For the purpose of determining fees payable to Fund/Plan, the value of
Fund's net assets shall be computed at the times and in the manner specified in
Fund's then current Prospectus and Statement of Additional Information.
During the term of this Agreement, should the Fund seek services or
functions in addition to those stated, a written amendment to this Agreement
specifying the additional services and corresponding compensation shall be
executed by both Fund/Plan and the Fund.
GENERAL PROVISIONS
Section 4.
----------
(a) Fund/Plan, its directors, officers, employees, shareholders and
agents shall only be liable for any error of judgment or mistake of law or for
any loss suffered by the Fund in connection with the performance of this
Agreement that results from willful misfeasance, bad faith, negligence or
reckless disregard on the part of Fund/Plan in the performance of its
obligations and duties under this Agreement.
(b) Any person, even though also a director, officer, employee,
shareholder or agent of Fund/Plan, who may be or become an officer, trustee,
employee, or agent of the Fund, shall be deemed, when rendering services to such
entity or acting on any business of the Fund, (other than services or business
in connection with Fund/Plan's duties hereunder), to be rendering such services
to or acting solely for the Fund and not as a director, officer,
- --------------------------------------------------------------------------------
Custody Administration and Agency Agreement between Stratton Monthly
Dividend Shares, Inc., and Fund/Plan Services, Inc.
Page 2 of 6 pages.
<PAGE>
employee, shareholder or agent of, or one under the control or direction of
Fund/Plan even though that person is being paid salary by Fund/Plan.
(c) Notwithstanding any other provision of this Agreement, the Fund
shall indemnify and hold harmless Fund/Plan, its directors, officers, employees,
shareholders and agents from and against any and all claims, demands, expenses
and liabilities (whether with or without basis in fact or law) of any and every
nature which Fund/Plan may sustain or incur or which may be asserted against
Fund/Plan by any person by reason of, or as a result of (i) any action taken or
omitted to be taken by Fund/Plan in good faith hereunder or (ii) any action
taken or omitted to be taken by Fund/Plan in connection with its appointment
under this agreement, which action or omission was taken in good faith in
reliance upon any law, act, regulation or interpretation of the same even though
the same may thereafter have been altered, changed, amended, or repealed.
Indemnification under this subparagraph, however, shall not apply to actions or
omissions of Fund/Plan or its directors, officers, employees, shareholders, or
agents in cases of its or their own negligence, willful misconduct, bad faith,
or reckless disregard of its or their own duties hereunder.
(d) Fund/Plan shall give written notice to the Fund within ten (10)
business days of receipt by Fund/Plan of a written assertion or claim of any
threatened or pending legal proceeding which may be subject to this
indemnification. The failure to notify the Fund of such written assertion or
claim shall not, however, operate in any manner whatsoever to relieve the Fund
of any liability arising under this Section or otherwise, except to the extent
that failure to give notice prejudices the Fund.
(e) For any legal proceeding giving rise to this indemnification, the
Fund shall be entitled to defend or prosecute any claim in the name of Fund/Plan
at its own expense and through counsel of its own choosing if it gives written
notice to Fund/Plan within ten (10) business days of receiving notice of such
claim. Notwithstanding the foregoing, Fund/Plan may participate in the
litigation at its own expense through counsel of its own choosing. In the event
the Fund chooses to defend or prosecute such claim, the parties shall cooperate
in the defense or prosecution thereof and shall furnish such records and other
information as are reasonably necessary.
(f) The Fund shall not settle any claim under (d) and (e) above
without Fund/Plan's express written consent, which consent shall not be
unreasonably withheld. Fund/Plan shall not settle any such claim under (d) and
(e) above without the Fund's express
- --------------------------------------------------------------------------------
Custody Administration and Agency Agreement between Stratton Monthly
Dividend Shares, Inc., and Fund/Plan Services, Inc.
Page 3 of 6 pages.
<PAGE>
written consent which likewise shall not be unreasonably withheld.
Section 5.
----------
(a) The fee schedule set forth in Schedule "A" attached shall be fixed
for (1) year after the effective date of this Agreement. At the end of the
first year, the fee schedule will be subject to annual review and adjustment.
(b) After one year, the Fund or Fund/Plan may give written notice to
the other of the termination of this Agreement, such termination to take effect
at the time specified in the notice, which date shall not be less than ninety
(90) days after the date of giving notice. Upon the effective termination date,
the Fund shall pay to Fund/Plan such compensation as may be due as of the date
of termination and shall likewise reimburse Fund/Plan for any out-of-pocket
expenses and disbursements reasonably incurred by Fund/Plan to such date.
(c) In the event that a successor to any of Fund/Plan's duties or
responsibilities under this Agreement is designated by the Fund by appropriate
and timely written notice to Fund/Plan, Fund/Plan shall, promptly upon such
termination and at the expense of the Fund, transfer all pertinent records and
shall cooperate in the transfer of such duties and responsibilities.
Section 6. This Agreement may be amended from time to time by a
----------
supplemental agreement executed by the Fund and Fund/Plan.
Section 7. Except as otherwise provided in this Agreement, any notice or
----------
other communication required by or permitted to be given in connection with this
Agreement shall be in writing, and shall be delivered in person or sent by first
class mail, postage prepaid, to the respective parties as follows:
- --------------------------------------------------------------------------------
Custody Administration and Agency Agreement between Stratton Monthly
Dividend Shares, Inc., and Fund/Plan Services, Inc.
Page 4 of 6 pages.
<PAGE>
If to the Fund: If to Fund/Plan:
--------------- ----------------
Stratton Monthly Dividend Shares, Inc. Fund/Plan Services, Inc.
610 W. Germantown Pike, Suite 300 2 West Elm Street
Plymouth Meeting, PA 19462-1050 Conshohocken, PA 19428
Attn: Gerard E. Heffernan, President Attn: Kenneth J. Kempf, President
Section 8. The Fund represents and warrants to Fund/Plan that the
----------
execution and delivery of this Agreement by the undersigned officers of the Fund
has been duly and validly authorized by resolution of the Board of Directors of
the Fund.
Section 9. This Agreement may be executed in two or more counterparts,
----------
each of which when so executed shall be deemed to be an original, but such
counterparts shall together constitute but one and the same instrument.
Section 10. This Agreement shall extend to and shall be binding upon
-----------
the Parties and their respective successors and assigns; provided, however, that
this Agreement shall not be assignable by the Fund without the written consent
of Fund/Plan or by Fund/Plan without the written consent of the Fund, authorized
or approved by a resolution of their Boards of Directors.
Section 11. This Agreement shall be governed by the laws of the
-----------
Commonwealth of Pennsylvania and the venue of any action arising under this
Agreement shall be Montgomery County, Commonwealth of Pennsylvania.
Section 12. No provision of this Agreement may be amended or modified, in
-----------
any manner except in writing, properly authorized and executed by Fund/Plan
and the Fund.
Section 13. If any part, term or provision of this Agreement is held
-----------
by any court to be illegal, in conflict with any law or otherwise invalid, the
remaining portion or portions shall be considered severable and not be affected,
and the rights and obligations of the parties shall be construed and enforced as
if the Agreement did not contain the particular part, term or provision held to
be illegal or invalid provided that the basic Agreement is not thereby
--------
substantially impaired.
- --------------------------------------------------------------------------------
Custody Administration and Agency Agreement between Stratton Monthly
Dividend Shares, Inc., and Fund/Plan Services, Inc.
Page 1 of 6 pages.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement,
consisting in its entirety of six type written pages, together with Schedule
"A," to be signed by their duly authorized officers, as of the day and year
first above written.
Fund/Plan Services, Inc.
-------------------------
/s/ Gerard E. Heffernan /s/ Kenneth J. Kempf
- -------------------------------------- ------------------------------------
By: Gerard E. Heffernan By: Kenneth J. Kempf
President President
- --------------------------------------------------------------------------------
Custody Administration and Agency Agreement between Stratton Monthly
Dividend Shares, Inc., and Fund/Plan Services, Inc.
Page 6 of 6 pages.
<PAGE>
SCHEDULE A
---------------------------------------------
FEE SCHEDULE
FOR
STRATTON MONTHLY DIVIDEND SHARES, INC.
---------------------------------------------
(All fees are quoted a term of one(1) year)
--------------------------------------------------------------------
CUSTODY OF FUND ASSETS
(THROUGH THE BANK OF NEW YORK - BONY)
--------------------------------------------------------------------
I. Annual Custody Fee Schedule per portfolio (1/12th payable monthly)
-----------------------------------------
.00065 on first $ 10 million of average net assets
.00035 on the next $ 20 million of average net assets
.00025 on the next $ 20 million of average net assets
.000175 on the next $ 50 million of average net assets
.00015 over $100 million of average net assets
II. Custody Domestic Securities Transaction Charge:
-----------------------------------------------
Book Entry DTC, Federal Book Entry ........................... $14.00
Physical Securities .......................................... $24.50
OUT-OF-POCKET EXPENSES
----------------------
The Funds will reimburse Fund/Plan Services monthly for all reasonable out-
of-pocket expenses, including telephone, postage, telecommunications,
special reports and record retention. The cost of copying and sending
materials to auditors for audits will be an additional expense.
ADDITIONAL SERVICES
-------------------
To the extent the Funds commences using investment techniques such as
Futures, Security Lending, Swaps, Leveraging, Short Sales, Derivatives,
non-US dollar denominated securities and Precious Metals, additional fees
may apply. Activities of a non-recurring nature such as issuance of
multiple classes of shares, unitholder unkinds, trust consolidations,
mergers or reorganizations will be subject to negotiation. Any
additional/enhanced services or reports will be quoted upon request. Should
there be subsequent regulatory changes/requirements, additional fee
revision may be necessary.
<PAGE>
Exhibit 10(b)
EXHIBIT 10(b)
OPINION AND CONSENT OF COUNSEL UNDER RULE 24E-2 OF THE 1940 ACT
May 24, 1995
Stratton Monthly Dividend Shares, Inc.
Plymouth Meeting Executive Campus
610 W. Germantown Pike, Suite 300
Plymouth Meeting, Pennsylvania 19462
RE: Post-Effective Amendment No. 15 to Registration
Statement on Form N-1A (File No. 2-42379)
-----------------------------------------------
Ladies and Gentlemen:
We acted as counsel to Stratton Monthly Dividend Shares, Inc. (the
"Company") in connection with the preparation and filing with the Securities and
Exchange Commission of Post-Effective Amendment No. 15 to the Company's
Registration Statement on Form N-1A under the Securities Act of 1933, as
amended, registering 646,589.259 shares of the Company's common stock, $1.00 par
value per share, ("Common Stock") to be issued and sold by the Company. The
registration of such Common Stock has been made in reliance upon Rule 24e-2
under the Investment Company Act of 1940, as amended.
In this connection, we have reviewed originals or copies, certified or
otherwise identified to our satisfaction, of the Company's Certificate of
Incorporation, By-Laws, resolutions of its Board of Directors and such other
documents and corporate records as we deem appropriate for the purpose of giving
this opinion. We express no opinion concerning the laws of any jurisdiction
other than the Maryland General Corporation Law and the Federal Law of the
United States of America.
Based upon the foregoing, it is our opinion that the foregoing shares of
Common Stock, when issued for payment as described in the Company's Prospectus
for not less than $1.00 per share, will be validly issued, fully paid and non-
assessable shares of Common Stock of the Company.
We hereby consent to the filing of this opinion as an exhibit to Post-
Effective Amendment No. 15 to the Company's Registration Statement.
Very truly yours,
/s/ Drinker Biddle & Reath
DRINKER BIDDLE & REATH
<PAGE>
Exhibit 11(A)
CONSENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
We consent to the reference to our firm in the Registration Statement, (Form N-
1A), and related Statement of Additional Information of Stratton Monthly
Dividend Shares, Inc. and to the inclusion of our report dated February 10,
1995.
/s/ Tait, Weller & Baker
-------------------------
TAIT, WELLER & BAKER
Philadelphia, Pennsylvania
May 11, 1995
<PAGE>
Exhibit 11(b)
EXHIBIT 11(b)
CONSENT TO DRINKER BIDDLE & REATH
CONSENT OF COUNSEL
We hereby consent to the use of our name and to the references to our Firm
under the caption "Legal Counsel" in the Prospectus that is included in Post-
Effective Amendment No. 15 to the Registration Statement (No. 2-42379) on Form
N-1A under the Securities Act of 1933 and the Investment Company Act of 1940, as
amended, of Stratton Monthly Dividend Shares, Inc. This consent does not
constitute a consent under Section 7 of the Securities Act of 1933, and in
consenting to the use of our name and the references to our Firm under such
caption we have not certified any part of the Registration Statement and do not
otherwise come within the categories of persons whose consent is required under
Section 7 or the rules and regulations thereunder of the Securities and Exchange
Commission.
/s/ Drinker Biddle & Reath
--------------------------------
DRINKER BIDDLE & REATH
Philadelphia, Pennsylvania
May 24, 1995
<PAGE>
BASIC DOCUMENT #01
<PAGE>
BASIC DOCUMENT #01
TABLE OF CONTENTS
Section Page
- ------- ----
ARTICLE 1
GENERAL
1.1 Purpose........................................................... 1
1.2 Trust............................................................. 1
ARTICLE 2
DEFINITIONS
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...................................................... 1
2.8 Custodian......................................................... 1
2.9 Determination Date................................................ 1
2.10 Early Retirement Date............................................. 2
2.11 Earned Income..................................................... 2
2.12 Effective Date.................................................... 2
2.13 Eligibility Computation Period.................................... 2
2.14 Employee.......................................................... 2
2.15 Employer.......................................................... 2
2.16 Employer Contributions............................................ 2
2.17 Entry Dates....................................................... 2
2.18 ERISA............................................................. 2
2.19 Hour of Service................................................... 2
2.20 Integration Level................................................. 3
2.21 Key Employee...................................................... 3
2.22 Leased Employee................................................... 3
2.23 Maximum Disparity Rate............................................ 4
2.24 Maximum Profit Sharing Disparity Rate............................. 4
2.25 Non-Key Employee.................................................. 4
2.26 Normal Retirement Age............................................. 4
2.27 Owner-Employee.................................................... 4
2.28 Participant....................................................... 4
2.29 Plan.............................................................. 4
2.30 Plan Administrator................................................ 4
2.31 Plan Year......................................................... 4
2.32 Self-Employed Individuals......................................... 4
2.33 Shares............................................................ 5
2.34 Sponsor........................................................... 5
2.35 Taxable Wage Base................................................. 5
2.36 Total and Permanent Disability.................................... 5
2.37 Trust............................................................. 5
2.38 Trust Agreement................................................... 5
2.39 Trustee........................................................... 5
2.40 Valuation Date.................................................... 5
2.41 Vesting Computation Period........................................ 5
2.42 Year of Service................................................... 5
i
<PAGE>
Section Page
- ------- ----
ARTICLE 3
ELIGIBILITY AND YEARS OF SERVICE
3.1 Eligibility Requirements.......................................... 5
3.2 Participation and Service Upon Reemployment....................... 5
3.3 Predecessor Employers............................................. 5
ARTICLE 4
CONTRIBUTIONS
4.1 Employer Contributions............................................ 6
4.2 Payment........................................................... 6
4.3 Nondeductible Voluntary Contributions by Participants............. 6
4.4 Rollovers......................................................... 6
4.5 Direct Transfers.................................................. 6
ARTICLE 5
ALLOCATIONS
5.1 Individual Accounts............................................... 7
5.2 Minimum Allocation................................................ 7
5.3 Allocation of Employer Contributions and Forfeitures.............. 8
5.4 Coordination of Social Security Integration....................... 8
5.5 Withdrawals and Distributions..................................... 8
5.6 Determination of Value of Trust Fund and of Net Earnings
or Losses......................................................... 8
5.7 Allocation of Net Earnings or Losses.............................. 9
5.8 Responsibilities of the Plan Administrator........................ 9
ARTICLE 6
LIMITATIONS ON ALLOCATIONS
6.1 Employers Who Do Not Maintain Other Qualified Plans............... 9
6.2 Employers Who Maintain Other Qualified Master
or Prototype Defined Contribution Plans........................... 10
6.3 Employers Who, In Addition to This Plan, Maintain Other
Qualified Plans Which are Defined Contribution Plans
Other Than Master or Prototype Plan............................... 10
6.4 Employers, Who In Addition To This Plan, Maintain A
Qualified Defined Benefit Plan.................................... 10
6.5 Definitions....................................................... 10
ARTICLE 7
TRUST FUND
7.1 Receipt of Contributions by Trustee............................... 12
7.2 Investment Responsibility......................................... 12
7.3 Investment Limitations............................................ 13
ARTICLE 8
VESTING
8.1 Nondeductible Voluntary Contributions and Earnings................ 13
8.2 Rollovers, Transfers and Earnings................................. 13
8.3 Employer Contributions and Earnings............................... 13
8.4 Amendments to Vesting Schedule.................................... 13
8.5 Determination of Years of Service................................. 14
8.6 Forfeiture of Nonvested Amounts................................... 14
8.7 Reinstatement of Benefit.......................................... 14
ii
<PAGE>
Section Page
- ------- ----
ARTICLE 9
JOINT AND SURVIVOR ANNUITY REQUIREMENTS
9.1 General........................................................... 14
9.2 Qualified Joint and Survivor Annuity.............................. 14
9.3 Qualified Preretirement Survivor Annuity.......................... 14
9.4 Definitions....................................................... 14
9.5 Notice Requirements............................................... 15
9.6 Safe Harbor Rules................................................. 16
9.7 Transitional Rules................................................ 17
ARTICLE 10
DISTRIBUTION PROVISIONS
10.1 Vesting on Distribution Before Break in Service................... 17
10.2 Restrictions on Immediate Distributions........................... 18
10.3 Commencement of Benefits.......................................... 18
10.4 Early Retirement With Age and Service Requirement................. 19
10.5 Nontransferability of Annuities................................... 19
10.6 Conflicts With Annuity Contracts.................................. 19
ARTICLE 11
TIMING AND MODES OF DISTRIBUTION
11.1 General Rules..................................................... 19
11.2 Required Beginning Date........................................... 19
11.3 Limits on Distribution Periods.................................... 19
11.4 Determination of Amount to be Distributed Each Year............... 19
11.5 Death Distribution Provisions..................................... 20
11.6 Designation of Beneficiary........................................ 20
11.7 Definitions....................................................... 20
11.8 Transitional Rule................................................. 21
11.9 Optional Forms of Benefit......................................... 22
ARTICLE 12
WITHDRAWALS
12.1 Withdrawal of Nondeductible Voluntary Contributions............... 22
12.2 Hardship Withdrawals.............................................. 23
12.3 Manner of Making Withdrawals...................................... 23
12.4 Limitations on Withdrawals........................................ 23
ARTICLE 13
LOANS
13.1 General Provisions................................................ 23
13.2 Administration of Loan Program.................................... 24
13.3 Amount of Loan.................................................... 24
13.4 Manner of Making Loans............................................ 24
13.5 Terms of Loan..................................................... 24
13.6 Security for Loan................................................. 24
13.7 Segregated Investment............................................. 24
13.8 Repayment of Loan................................................. 24
13.9 Default on Loan................................................... 25
13.10 Unpaid Amounts.................................................... 25
iii
<PAGE>
Section Page
- ------- ----
ARTICLE 14
INSURANCE
14.1 Insurance......................................................... 25
14.2 Policies.......................................................... 25
14.3 Beneficiary....................................................... 25
14.4 Payment of Premiums............................................... 25
14.5 Limitation on Insurance Premiums.................................. 25
14.6 Insurance Company................................................. 26
14.7 Distribution of Policies.......................................... 26
14.8 Policy Features................................................... 26
14.9 Changed Conditions................................................ 27
14.10 Conflicts......................................................... 27
ARTICLE 15
ADMINISTRATION
15.1 Duties and Responsibilities of Fiduciaries; Allocation of
Fiduciary Responsibility.......................................... 27
15.2 Powers and Responsibilities of the Plan Administrator............. 27
15.3 Allocation of Duties and Responsibilities......................... 28
15.4 Appointment of the Plan Administrator............................. 28
15.5 Expenses.......................................................... 28
15.6 Liabilities....................................................... 28
15.7 Claims Procedure.................................................. 28
ARTICLE 16
AMENDMENT, TERMINATION AND MERGER
16.1 Sponsor's Power to Amend.......................................... 29
16.2 Amendment by Adopting Employer.................................... 29
16.3 Vesting Upon Plan Termination..................................... 29
16.4 Vesting Upon Complete Discontinuance of Contributions............. 29
16.5 Maintenance of Benefits Upon Merger............................... 29
16.6 Special Amendments................................................ 29
ARTICLE 17
MISCELLANEOUS
17.1 Exclusive Benefit of Participants and Beneficiaries............... 29
17.2 Nonguarantee of Employment........................................ 29
17.3 Rights to Trust Assets............................................ 30
17.4 Nonalienation of Benefits......................................... 30
17.5 Aggregation Rules................................................. 30
17.6 Failure of Qualification.......................................... 30
17.7 Applicable Law.................................................... 30
iv
<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 standardized prototype paired defined contribution
plan and is designed to permit adoption of profit sharing provisions, money
purchase pension provisions, or both. The provisions herein and the selections
made by the Employer by execution of the money purchase pension or profit
sharing Adoption Agreement or Agreements, shall constitute the Plan. It is
intended that the Plan and Trust qualify under sections 401 and 501 of the
Internal Revenue Code of 1986, as amended and that it comply with the provisions
of the Employee Retirement Income Security Act of 1974, as amended.
1.2 Trust. The Employer has simultaneously adopted a Trust to receive,
invest, and distribute funds in accordance with the Plan.
ARTICLE 2
DEFINITIONS
2.1 Account. The aggregate of the individual bookkeeping subaccounts
established for each Participant, as provided in section 5.1.
2.2 Adoption Agreement. The written agreement or agreements of the
Employer and the Trustee by which the Employer establishes this Plan and adopts
the Trust Agreement forming a part hereof, as the same may be amended from time
to time. The Adoption Agreement contains all the options that may be selected by
the Employer. The information set forth in the Adoption Agreement executed by
the Employer shall be deemed to be a part of this Plan as if set forth in full
herein.
2.3 Affiliated Employers. The Employer and any corporation which is a
member of a controlled group of corporations (as defined in section 414(b) of
the Code) which includes the Employer, any trade or business (whether or not
incorporated) which is under common control (as defined in section 414(c) of the
Code) with the Employer, or any service organization (whether or not
incorporated) which is a member of an affiliated service group (as defined in
sections 414(m) and (o) of the Code) which includes the Employer.
2.4 Beneficiary. The person or persons (natural or otherwise) designated
by a Participant in accordance with section 11.6 to receive any undistributed
amounts credited to the Participant's Account under the Plan at the time of the
Participant's death.
2.5 Break in Service. An Eligibility Computation Period or Vesting
Computation Period in which an Employee fails to complete more than five hundred
(500) Hours of Service.
2.6 Code. The Internal Revenue Code of 1986, as amended from time to
time, or any successor statute.
2.7 Compensation.
(a) Compensation will mean all of each Participant's W-2 earnings.
(b) For any self-employed individual covered under the Plan,
Compensation will mean Earned Income.
(c) Compensation shall include only that Compensation that is actually
paid to the Participant during the Plan Year.
(d) Notwithstanding the above, if elected by the Employer in the
Adoption Agreement, Compensation shall include any amount which is
contributed by the Employer pursuant to a salary reduction agreement and
which is not includable in the gross income of the Employee under sections
125, 402(a)(8), 402(h) or 403(b) of the Code. The effective date of this
subsection shall be elected by the Employer in the Adoption Agreement.
(e) The annual Compensation of each Participant taken into account
under the Plan for any year shall not exceed two hundred thousand dollars
($200,000), as adjusted by the Secretary at the same time and in the same
manner as under section 415(d) of the Code. In determining the Compensation
of a Participant for purposes of this limitation, the rules of section
414(q)(6) of the Code shall apply, except in applying such rules, the term
"family" shall include only the Spouse of the Participant and any lineal
descendants of the Participant who have not attained age nineteen (19)
before the close of the year. If, as a result of the application of such
rules, the adjusted two hundred thousand dollar ($200,000) limitation is
exceeded, then (except for purposes of determining the portion of
Compensation up to the Integration Level to the extent this Plan provides
for permitted disparity), the limitation shall be prorated among the
affected individuals in proportion to each such individual's Compensation
as determined under this section prior to the application of this
limitation.
(f) The effective date of this subsection shall be the first Plan Year
beginning on or after January 1, 1989.
2.8 Custodian. The custodian, if any, designated in the Adoption
Agreement.
2.9 Determination Date. With respect to any Plan Year subsequent to the
first Plan Year, the last day of the preceding Plan Year. For the first Plan
Year of the Plan, the last day of that Plan Year.
1
<PAGE>
2.10 Early Retirement Date. The first day of the month coincident with or
next following the date upon which the Participant satisfies the early
retirement age and service requirements in the Adoption Agreement; provided,
however, such requirements may not be less than age fifty-five (55), nor more
than fifteen (15) Years of Service.
2.11 Earned Income. The net earnings from self-employment in the trade or
business with respect to which the Plan is established, for which personal
services of the individual are a material income-producing factor. Net earnings
will be determined without regard to items not included in gross income and the
deductions allocable to such items. Net earnings are reduced by contributions
to a qualified plan to the extent deductible under section 404 of the Code. Net
earnings shall be determined with regard to the deduction allowed to the
Employer by section 164(f) of the Code for taxable years beginning after
December 31, 1989.
2.12 Effective Date. The first day of the first Plan Year for which the
Plan is effective as specified in the Adoption Agreement.
2.13 Eligibility Computation Period. For purposes of determining Years of
Service and Breaks in Service for eligibility to participate, the initial
Eligibility Computation Period shall be the twelve (12) consecutive month period
beginning with the day the Employee first performs an Hour of Service for the
Employer (employment commencement date). The succeeding twelve (12) consecutive
month periods commence with the first anniversary of the Employee's employment
commencement date.
2.14 Employee. Any person, including a Self-Employed Individual, who is
employed by the Employer maintaining the Plan or any other employer required to
be aggregated with such Employer under sections 414(b), (c), (m) or (o) of the
Code. The term "Employee" shall also include any Leased Employee deemed to be
an Employee of any Employer described above as provided in sections 414(n) or
(o) of the Code.
2.15 Employer. The corporation, proprietorship, partnership or other
organization that adopts the Plan by execution of an Adoption Agreement.
2.16 Employer Contributions. The contribution of the Employer to the Plan
and Trust as set forth in section 4.1 and the Adoption Agreement.
2.17 Entry Dates. The Effective Date shall be the first Entry Date.
Thereafter, the Entry Dates shall be the first day of each Plan Year and the
first day of the seventh month of each Plan Year.
2.18 ERISA. The Employee Retirement Income Security Act of 1974, as
amended.
2.19 Hour of Service.
(a) Each hour for which an Employee is paid, or entitled to payment,
for the performance of duties for the Employer. These hours shall be
credited to the Employee only for the computation period or periods in
which the duties are performed; and
(b) Each hour for which an Employee is paid, or entitled to payment,
by the Employer on account of a period of time during which no duties are
performed (irrespective of whether the employment relationship has
terminated) due to vacation, holiday, illness, incapacity (including
disability), layoff, jury duty, military duty, or leave of absence. No more
than five hundred one (501) Hours of Service shall be credited under this
paragraph to an Employee on account of any single, continuous period during
which the Employee performs no duties (whether or not such period occurs in
a single computation period). Hours under this paragraph will be calculated
and credited pursuant to section 2530.200b-2 of the Department of Labor
regulations which are incorporated herein by this reference.
(c) Each hour for which back pay, irrespective of mitigation of
damages, is either awarded or agreed to by the Employer. The same Hours of
Service shall not be credited both under paragraph (a) or paragraph (b), as
the case may be, and under this paragraph (c). These hours shall be
credited to the Employee for the computation period or periods to which the
award or agreement pertains rather than the computation period in which the
award, agreement, or payment is made.
(d) Solely for purposes of determining whether an Employee has a Break
in Service, Hours of Service shall also include an uncompensated authorized
leave of absence not in excess of two (2) years, or military leave while
the Employee's reemployment rights are protected by law or such additional
or other periods as granted by the Employer as military leave (credited on
the basis of forty (40) Hours of Service per each week or eight (8) Hours
of Service per working day), provided the Employee returns to employment at
the end of his leave of absence or within ninety (90) days of the end of
his military leave, whichever is applicable.
(e) Hours of Service will be credited for employment with other
members of an affiliated service group (under section 414(m)), a controlled
group of corporations (under section 414(b)), or a group of trades or
businesses under common control (under section 414(c)) of which the
adopting Employer is a member, and any other entity required to be
aggregated with the Employer pursuant to section 414(o) and the regulations
thereunder. Hours of Service will also be credited for any individual
considered an Employee for purposes of this Plan under section 414(n) or
section 414(o) and the regulations thereunder.
(f) Solely for purposes of determining whether an Employee has a Break
in Service, Hours of Service shall also include absence from work for
maternity or paternity reasons, if the absence begins on or after the first
day of the first Plan Year beginning after 1984. During this absence, the
Employee shall be credited with the Hours of Service which would have been
credited but for the absence, or, if such hours cannot be determined with
eight (8) hours per day. An absence from work for maternity or paternity
reasons means an absence:
2
<PAGE>
(i) by reason of the pregnancy of an Employee;
(ii) by reason of the birth of a child of the Employee;
(iii) by reason of the placement of a child with the Employee in
connection with adoption; or
(iv) for purposes of caring for such a child for a period
immediately following such birth or placement.
These Hours of Service shall be credited in the computation period following the
computation period in which the absence begins, except as necessary to prevent a
Break in Service in the computation period in which the absence begins. However,
no more than five hundred one (501) Hours of Service will be credited for
purposes of any such maternity or paternity absence from work.
(g) The Employer may elect to compute Hours of Service by the use of one of
the service equivalencies in the Adoption Agreement. Only one method may be
selected. If selected, the service equivalency must be applied to all Employees
covered under the Plan.
(h) If the Employer amends the method of crediting service from the elapsed
time method described in section 1.410(a)-7 of the Treasury regulations to the
Hours of Service computation method by the adoption of this Plan, or an Employee
transfers from a plan under which service is determined on the basis of elapsed
time, the following rules shall apply for purposes of determining the Employee's
service under this Plan up to the time of amendment or transfer:
(i) the Employee shall receive credit, as of the date of amendment or
transfer, for a number of Years of Service equal to the number of one (1)
year periods of service credited to the Employee as of the date of the
amendment or transfer; and
(ii) the Employee shall receive credit in the applicable computation
period which includes the date of amendment or transfer, for a number of
Hours of Service determined by applying the weekly service equivalency
specified in paragraph (g) to any fractional part of a year credited to the
Employee under this paragraph (h) as of the date of amendment or transfer.
The use of the weekly service equivalency shall apply to all Employees who
formerly were credited with service under the elapsed time method.
2.20 Integration Level. The Taxable Wage Base or such lesser amount elected by
the Employer in the Adoption Agreement.
2.21 Key Employee.
(a) Any Employee or former Employee (and the Beneficiaries of such
Employee) who at any time during the determination period was an officer of the
Employer if such individual's annual Compensation exceeds fifty percent (50%) of
the dollar limitation under section 415(b)(1)(A) of the Code; an owner (or
considered an owner under section 318 of the Code) of one of the ten (10)
largest interests in the Employer if such individual's Compensation exceeds one
hundred percent (100%) of the dollar limitation under section 415(c)(1)(A) of
the Code; a Five Percent (5%) Owner of the Employer; or a one percent (1%) owner
of the Employer who has annual Compensation of more than one hundred fifty
thousand dollars ($150,000).
(b) For purposes of this section, annual Compensation means compensation as
defined in section 415(c)(3) of the Code, but including amounts contributed by
the Employer pursuant to a salary reduction agreement which are excludable from
the Employee's gross income under sections 125, 402(a)(8), 402(h) or 403(b) of
the Code.
(c) For purposes of this section, determination period is the Plan Year
containing the Determination Date and the four (4) preceding Plan Years.
2.22 Leased Employee.
(a) Any person (other than an Employee of any of the Affiliated Employers)
who, pursuant to an agreement between any of the Affiliated Employers and any
other person ("leasing organization"), has performed service for any of the
Affiliated Employers (or for any of the Affiliated Employers and related persons
determined in accordance with section 414(n)(6) of the Code) on a substantially
full-time basis for a period of at least one (1) year and such services are of a
type historically performed by employees in the Affiliated Employer's business
field. Contributions or benefits provided a Leased Employee by the leasing
organization which are attributable to services performed for the Affiliated
Employer shall be treated as provided by the Affiliated Employer.
(b) A Leased Employee shall not be considered an Employee of an Affiliated
Employer if:
(i) such employee is covered by a money purchase pension plan
providing:
(1) a nonintegrated employer contribution rate of at least ten
percent (10%) of compensation (as defined in section 415(c)(3) of the
Code), but including amounts contributed pursuant to a salary
reduction agreement which are excludable from the employee's gross
income under sections 125, 402(a)(8), 402(h) or 403(b) of the Code;
(2) immediate participation; and
(3) full and immediate vesting.
and
3
<PAGE>
(ii) Leased Employees do not constitute more than twenty percent (20%)
of the Affiliated Employer's non-Highly-Compensated workforce.
(c) The determination of whether a person is a Leased Employee will be made
pursuant to section 414(n) of the Code.
2.23 Maximum Disparity Rate. The lesser of:
(a) five and seven-tenths percent (5.7%);
(b) the applicable percentage determined in accordance with the table
below:
<TABLE>
<CAPTION>
If the Integration Level is
The Applicable
More Than But Not More Than Percentage Is:
--------- ----------------- --------------
<S> <C> <C>
$0 X */ 5.7%
X of TWB 80% of TWB 4.3%
80% of TWB Y **/ 5.4%
</TABLE>
*/ X = the greater of $10,000 or 20% of the Taxable Wage Base.
**/ Y = any amount more than 80% of the Taxable Wage Base but less than 100% of
the Taxable Wage Base.
"TWB" means the Taxable Wage Base.
If the Integration Level used is equal to the Taxable Wage Base, the applicable
percentage is five and seven-tenths percent (5.7%).
2.24 Maximum Profit Sharing Disparity Rate. The lesser of:
(a) two and seven-tenths percent (2.7%);
(b) the applicable percentage determined in accordance with the table
below:
If the Integration Level is
<TABLE>
<CAPTION>
The Applicable
More Than But Not More Than Percentage Is:
--------- ----------------- --------------
<S> <C> <C>
$0 X */ 2.7%
X of TWB 80% of TWB 1.3%
80% of TWB Y **/ 2.4%
</TABLE>
*/ X = the greater of $10,000 or 20% of the Taxable Wage Base.
- -
**/ Y = any amount more than 80% of the Taxable Wage Base but less than 100% of
the Taxable Wage Base.
"TWB" means the Taxable Wage Base.
If the Integration Level used is equal to the Taxable Wage Base, the applicable
percentage is two and seven-tenths percent (2.7%).
2.25 Non-Key Employee. Any Employee or former Employee who is not a Key
Employee. In addition, any Beneficiary of a Non-Key Employee shall be treated
as a Non-Key Employee.
2.26 Normal Retirement Age. The age selected in the Adoption Agreement,
but not less than age fifty-five (55). If the Employer enforces a mandatory
retirement age, the Normal Retirement Age is the lesser of that mandatory age or
the age specified in the Adoption Agreement.
2.27 Owner-Employee. An individual who is a sole proprietor, or who is a
partner owning more than ten percent (10%) of either the capital or profits
interest of a partnership.
2.28 Participant. A person who has met the eligibility requirements of
section 3.1 and whose Account hereunder has been neither completely forfeited
nor completely distributed.
2.29 Plan. The prototype paired defined contribution profit sharing and
money purchase pension plan provided under this basic plan document. References
to the Plan shall refer to the profit sharing provisions, the money purchase
pension provisions, or both, as the context may require.
2.30 Plan Administrator. The person, persons or entity appointed by the
Employer pursuant to ARTICLE 15 to manage and administer the Plan.
2.31 Plan Year. The twelve (12) consecutive month period designated by the
Employer in the Adoption Agreement.
2.32 Self-Employed Individual. An individual who has Earned Income for the
taxable year from the trade or business for which the Plan is established, or an
individual who would have had Earned Income for the taxable year but for the
fact that the trade or business had no net profits for the taxable year.
4
<PAGE>
2.33 Shares. Shares of stock in any regulated investment company
registered under the Investment Company Act of 1940 that are made available for
investment purposes as an investment option under this Plan.
2.34 Sponsor. The sponsor designated in the Adoption Agreement which has
made this Plan available to the Employer.
2.35 Taxable Wage Base. The maximum amount of earnings which may be
considered wages for a year under section 3121(a)(1) of the Code in effect as of
the beginning of the Plan Year.
2.36 Total and Permanent Disability. The inability of the Participant to
engage in any substantial gainful activity by reason of any medically
determinable physical or mental impairment, which condition, in the opinion of a
physician chosen by the Plan Administrator, can be expected to result in death
or which has lasted or can be expected to last for a continuous period of not
less than twelve (12) months.
2.37 Trust. The fund maintained by the Trustee for the investment of Plan
assets in accordance with the terms and conditions of the Trust Agreement.
2.38 Trust Agreement. The agreement between the Employer and the Trustee
under which the assets of the Plan are held, administered, and managed. The
provisions of the Trust Agreement shall be considered an integral part of this
Plan as if set forth fully herein.
2.39 Trustee. The individual or corporate Trustee or Trustees under the
Trust Agreement as they may be constituted from time to time.
2.40 Valuation Date. The last day of each Plan Year and such other dates
as may be determined by the Plan Administrator, as provided in section 5.6 for
valuing the Trust assets.
2.41 Vesting Computation Period. The Plan Year.
2.42 Year of Service. An Eligibility Computation Period, Vesting
Computation Period, or Plan Year, whichever is applicable, during which an
Employee has completed at least one thousand (1,000) Hours of Service (whether
or not continuous). The Employer may, in the Adoption Agreement, specify a
fewer number of hours.
ARTICLE 3
ELIGIBILITY AND YEARS OF SERVICE
3.1 Eligibility Requirements.
(a) Each Employee of the Affiliated Employers shall become a
Participant in the Plan as of the first Entry Date after the date on which
the Employee has satisfied the minimum age and service requirements
specified in the Adoption Agreement.
(b) The Employer may elect in the Adoption Agreement to exclude from
participation:
(i) Employees included in a unit of employees covered by a
collective bargaining agreement between the Employer and Employee
representatives, if retirement benefits were the subject of good faith
bargaining. For this purpose, the term "Employee representatives"
does not include any organization more than half of whose members are
Employees who are owners, officers, or executives of the Employer; and
(ii) nonresident aliens who receive no earned income from the
Employer which constitutes income from sources within the United
States.
3.2 Participation and Service Upon Reemployment. Upon the reemployment of
any Employee, the following rules shall determine his eligibility to participate
in the Plan and his credit for prior service.
(a) Participation. If the reemployed Employee was a Participant in
the Plan during his prior period of employment, he shall be eligible upon
reemployment to resume participation in the Plan. If the reemployed
Employee was not a Participant in the Plan, he shall be considered a new
Employee and required to meet the requirements of section 3.1 in order to
be eligible to participate in the Plan, subject to the reinstatement of
credit for prior service under paragraph (b) below.
(b) Credit for Prior Service. In the case of any Employee who is
reemployed before or after incurring a Break in Service, any Hour of
Service and Year of Service credited to the Employee at the end of his
prior period of employment shall be reinstated as of the date of his
reemployment.
3.3 Predecessor Employers. If specified in the Adoption Agreement, Years
of Service with a predecessor employer will be treated as service for the
Employer for eligibility purposes; provided, however, if the Employer maintains
the plan of a predecessor employer, Years of Service with such employer will be
treated as service with the Employer without regard to any election.
5
<PAGE>
ARTICLE 4
CONTRIBUTIONS
4.1 Employer Contributions.
(a) Money Purchase Pension Contributions. For each Plan Year, the
Employer shall contribute to the Trust an amount equal to such uniform
percentage of Compensation of each eligible Participant as may be
determined by the Employer in accordance with the money purchase pension
contribution formula specified in the Adoption Agreement. Subject to the
limitations of section 5.4, the money purchase pension contribution formula
may be integrated with Social Security, as set forth in the Adoption
Agreement.
(b) Profit Sharing Contribution. For each Plan Year, the Employer
shall contribute to the Trust an amount as may be determined by the
Employer in accordance with the profit sharing formula set forth in the
Adoption Agreement.
(c) Eligible Participants. Subject to the Minimum Allocation rules of
section 5.2 and the exclusions specified in this section, each Participant
shall be eligible to share in the Employer Contribution. An Employer may
elect in the Adoption Agreement that Participants who terminate employment
during the Plan Year with not more than five hundred (500) Hours of Service
and who are not Employees as of the last day of the Plan Year (other than
Participants who die, retire or become totally and Permanently Disabled
during the Plan Year) shall not be eligible to share in the Employer
Contribution. An Employer may further elect in the Adoption Agreement to
allocate a contribution on behalf of a Participant who completes fewer than
five hundred (500) Hours of Service and is otherwise ineligible to share in
the Employer Contribution. If the Employer fails to specify in the Adoption
Agreement the number of Hours of Service required to share in the Employer
Contribution, the number shall be five hundred (500) Hours of Service.
(d) Contribution Limitation. In no event shall any Employer
Contribution exceed the maximum amount deductible from the Employer's
income under section 404 of the Code, or the maximum limitations under
section 415 of the Code provided in ARTICLE 6.
4.2 Payment. All Employer Contributions to the Trust for any Plan Year
shall be made either in one lump-sum or in installments in U.S. currency, by
check, or in Shares within the time prescribed by law, including extensions
granted by the Internal Revenue Service, for filing the Employer's federal
income tax return for the taxable year with or within which such Plan Year ends.
All Employer Contributions to the Trust for a money purchase pension plan for
any Plan Year shall be made within the time prescribed by regulations under
section 412(c)(10) of the Code.
4.3 Nondeductible Voluntary Contributions by Participants.
(a) This Plan will not accept nondeductible Employee contributions for
Plan Years beginning after the Plan Year in which this Plan is adopted by
the Employer. Employee contributions made with respect to Plan years
beginning after December 31, 1986 will be limited so as to meet the
nondiscrimination test of section 401(m).
(b) A separate account shall be maintained by the Trustee for the
nondeductible Employee contributions of each Participant.
(c) Employee contributions and earnings thereon shall be fully vested
and nonforfeitable at all times.
(d) The provisions of this section shall apply to Employee
contributions made prior to the first Plan Year after the Plan Year in
which the Employer adopts this Plan.
4.4 Rollovers.
(a) Subject to the approval of the Plan Administrator, a participant
who has participated in any other qualified plan described in section
401(a) of the Code or in a qualified annuity plan described in section
403(a) of the Code shall be permitted to make a rollover contribution in
the form of cash to the Trustee of an amount received by the Participant
that is attributable to participation in such other plan (reduced by any
nondeductible voluntary contributions he made to the plan), provided that
the rollover contribution complies with all requirements of sections
402(a)(5) or 403(a)(4) of the Code, whichever is applicable.
(b) Before approving such a Participant rollover, the Plan
Administrator may request from the Participant or the Employer any
documents which the Plan Administrator, in its discretion, deems necessary
for such rollover.
(c) Any rollover contribution to the Trust shall be credited to the
Participant's rollover subaccount established under section 5.1 and
separately accounted for.
4.5 Direct Transfers.
(a) The Plan shall accept a transfer of assets directly from another
plan qualified under sections 401(a) or 403(a) of the Code only if the Plan
Administrator, in its sole discretion, agrees to accept such a transfer. In
determining whether to accept such a transfer the Plan Administrator shall
consider the administrative inconvenience engendered by such a transfer and
any risks to the continued qualification of the Plan under section 401(a)
of the Code. Acceptance of any such transfer shall not preclude the Plan
Administrator from refusing any subsequent such transfers.
6
<PAGE>
(b) Any transfer of assets accepted under this section shall be
credited to the Participant's direct transfer subaccount and shall be
separately accounted for at all times and shall remain subject to the
provisions of the transferor plan (as it existed at the time of such
transfer) to the extent required by section 411(d)(6) of the Code
(including, but not limited to, any rights to Qualified Joint and Survivor
Annuities and qualified preretirement survivor annuities) as if such
provisions were part of the Plan. In all other respects, however, such
transferred assets will be subject to the provisions of the Plan.
(c) Assets accepted under this section shall be fully vested and
nonforfeitable.
(d) Before approving such a direct transfer, the Plan Administrator
may request from the Participant or the Employer (or the prior employer)
any documents the Plan Administrator, in its discretion, deems necessary
for such direct transfer.
ARTICLE 5
ALLOCATIONS
5.1 Individual Accounts. The Plan Administrator shall establish and
maintain an Account in the name of each Participant. The Account shall contain
the following subaccounts:
(a) A money purchase pension contribution subaccount to which shall be
credited each such Participant's share of (i) Employer Contributions under
section 4.1(a); (ii) the net earnings or net losses on the investment of
the assets of the Trust; (iii) distributions; and (iv) dividends, capital
gain distributions and other earnings received on any Shares credited to
the Participant's subaccount;
(b) A profit sharing contribution subaccount to which shall be
credited each such Participant's share of (i) Employer Contributions under
section 4.1(b); (ii) forfeitures; (iii) the net earnings or net losses on
the investment of the assets of the trust; (iv) distributions; and (v)
dividends, capital gain distributions and other earnings received on any
Shares credited to the Participant's subaccount;
(c) A nondeductible voluntary contribution subaccount to which shall
be credited (i) nondeductible voluntary contributions by the Participant
under section 4.3; (ii) the net earnings or net losses on the investment of
the assets of the Trust; (iii) distributions; and (iv) dividends, capital
gain distributions and other earnings received on any Shares credited to
the Participant's subaccount;
(d) A direct transfer subaccount to which shall be credited (i)
contributions to the Trust accepted under section 4.5(a); (ii) the net
earnings or net losses on the investment of the assets of the Trust; (iii)
distributions; and (iv) dividends, capital gain distributions and other
earnings received on any Shares credited to the Participant's subaccount;
(e) A rollover subaccount to which shall be credited (i) contributions
to the Trust accepted under section 4.4(a); (ii) the net earnings or net
losses on the investment of the assets of the Trust; (iii) distributions;
and (iv) dividends, capital gain distributions and other earnings received
on any Shares credited to the Participant's subaccount.
5.2 Minimum Allocation.
(a) Except as otherwise provided in this section, the Employer
Contributions and forfeitures allocated on behalf of any Participant who is
not a Key Employee shall not be less than the lesser of three percent (3%)
of such Participant's Compensation or in the case where the Employer has no
defined benefit plan which designates this Plan to satisfy section 401 of
the Code, the largest percentage of Employer Contributions and forfeitures,
as a percentage of the first two hundred thousand dollars ($200,000) of the
Key Employee's Compensation, allocated on behalf of any Key Employee for
that year. The minimum allocation is determined without regard to any
Social Security contribution. This minimum allocation shall be made even
though, under other Plan provisions, the Participant would not otherwise be
entitled to receive an allocation, or would have received a lesser
allocation for the year because of (i) the Participant's failure to
complete one thousand (1,000) Hours of Service (or any equivalent provided
in the Plan); or (ii) the Participant's failure to make mandatory Employee
contributions to the Plan; or (iii) Compensation less than a stated amount.
For purposes of this subsection, all defined contribution plans required to
be included in an aggregation group under section 416(g)(2)(A)(i) shall be
treated as a single plan.
(b) For purposes of computing the minimum allocation, Compensation
shall mean Compensation as defined in section 6.5(b) of the Plan.
(c) The provision in subsection (a) above shall not apply to any
Participant who was not employed by the Employer on the last day of the
Plan Year.
(d) The provision in subsection (a) above shall not apply to any
Participant to the extent the Participant is covered under any other plan
or plans of the Employer and the Employer has provided in the Adoption
Agreement that the minimum allocation or benefit requirement applicable to
topheavy plans will be met in the other plan or plans.
(e) The minimum allocation required (to the extent required to be
nonforfeitable under section 416(b)) may not be forfeited under section
411(a)(3)(B) or 411(a)(3)(D).
7
<PAGE>
5.3 Allocation of Employer Contributions and Forfeitures.
(a) All money purchase pension contributions for a given Plan Year
shall be allocated to the Account of the Participant for whom such
contribution was made. Any forfeiture from a Participant's money purchase
pension contribution subaccount arising under the Plan for a given Plan
Year shall be applied as specified in the Adoption Agreement, either: (i)
to reduce the Employer Contribution in that year, or if in excess of the
Employer Contribution for such Plan Year, the excess amounts shall be used
to reduce the Employer Contribution in the next succeeding Plan Year or
Years or (ii) to be added to the Employer Contributions and allocated
accordingly.
(b) All profit sharing contributions and forfeitures from a
Participant's profit sharing contribution subaccount will be allocated to
the Account of each Participant in the ratio that such Participant's
Compensation bears to the Compensation of all Participants. However, if the
profit sharing contribution formula selected in the Adoption Agreement is
integrated with Social Security, profit sharing contributions for the Plan
Year plus any forfeitures will be allocated to Participants' Accounts as
follows:
(i) Step One. Contributions and forfeitures will be allocated to
each Participant's Account in the ratio that each Participant's total
Compensation bears to all Participants' total Compensation, but not in
excess of three percent (3%) of each Participant's Compensation. (Step
One is not applicable if the Employer enters into the money purchase
pension Adoption Agreement).
(ii) Step Two. Any contributions and forfeitures remaining after
the allocation in Step One (if any) will be allocated to each
Participant's Account in the ratio that each Participant's
Compensation for the Plan Year in excess of the Integration Level
bears to the excess Compensation of all Participants, but not in
excess of three percent (3%). (Step Two is not applicable if the
Employer enters into the money purchase pension Adoption Agreement).
(iii) Step Three. Any contributions and forfeitures remaining
after the allocation in Step Two (if any) will be allocated to each
Participant's Account in the ratio that the sum of each Participant's
total Compensation and Compensation in excess of the Integration Level
bears to the sum of all Participants' total Compensation and
Compensation in excess of the Integration Level, but not in excess of
whichever of the following is applicable:
(i) if the Employer has not adopted the money purchase pension
Adoption Agreement, then the Maximum Profit Sharing Disparity Rate; or
(ii) If the Employer has adopted the money purchase pension
Adoption Agreement, then the lesser of:
(1) the percentage of each Participant's Compensation for
the Plan Year up to the Integration Level determined by dividing
the allocation by such Compensation (the base contribution
percentage); or
(2) the Maximum Disparity Rate.
(iv) Step Four. Any remaining contributions or forfeitures will
be allocated to each Participant's Account in the ratio that each
Participant's total Compensation for the Plan Year bears to all
Participants' total Compensation for that year.
(c) Notwithstanding anything in (a) or (b) above to the contrary,
forfeitures arising under a Participant's money purchase pension
contribution subaccount will only be used to reduce the contributions of
the Participant's Employer who adopted this Plan, and forfeitures arising
under a Participant's profit sharing contribution subaccount will be
reallocated only for the benefit of Employees of the Participant's Employer
who adopted this Plan.
5.4 Coordination of Social Security Integration. If the Employer
maintains plans involving integration with Social Security other than this Plan,
and if any Participant is eligible to participate in more than one of such
plans, all such plans will be considered to be integrated if the extent of the
integration of all such plans does not exceed one hundred percent (100%). For
purposes of the preceding sentence, the extent of integration of a plan is the
ratio (expressed as a percentage) which the actual benefits, benefit rate,
offset rate, or Employer Contribution rate under the plan bears to the
integration limitation applicable to such plan. If the Employer enters into
both the money purchase pension Adoption Agreement and the profit sharing
Adoption Agreement under this Plan, integration with Social Security may only be
selected in one Adoption Agreement.
5.5 Withdrawals and Distributions. Any distribution to a Participant or
his Beneficiary, any amount transferred from a Participant's Account directly to
the Trustee of any other qualified plan described in section 401(a) of the Code
or to a qualified annuity plan described in section 403(a) of the Code, or any
withdrawal by a Participant shall be charged to the appropriate subaccount(s) of
the Participant as of the date of the distribution or the withdrawal.
5.6 Determination of Value of Trust Fund and of Net Earnings or Losses.
As of each Valuation Date the Trustee shall determine for the period then ended
the sum of the net earnings or losses of the Trust (excluding with respect to
Shares and other assets specifically allocated to a
specific Participant's subaccount, (i) dividends and capital gain distributions
from Shares, (ii) receipts or income attributable to insurance policies, (iii)
income gains and/or losses attributable to a Participant's loans made pursuant
to ARTICLE 13 or to any other assets) which shall reflect accrued but unpaid
interest, dividends, gains, or losses realized from the sale, exchange or
collection of assets, other income received, appreciation in the fair market
value of assets, depreciation in the fair market value of
8
<PAGE>
assets, administration expenses, and taxes and other expenses paid. Gains or
losses realized and adjustments for appreciation or depreciation in fair market
value shall be computed with respect to the difference between such value as of
the preceding Valuation Date or date of purchase, whichever is applicable, and
the value as of the date of disposition or the current Valuation Date, whichever
is applicable.
5.7 Allocation of Net Earnings or Losses.
(a) As of each Valuation Date the net earnings or losses of the Trust
(excluding with respect to Shares and other assets specifically allocated
to a specific Participant's subaccount, (i) dividends and capital gain
distributions from Shares, (ii) dividends or credits attributable to
insurance policies, (iii) income gains and/or losses attributable to a
Participant's loans made pursuant to ARTICLE 13 or to any other assets, all
of which shall be allocated to such Participant's subaccount) for the
valuation period then ending shall be allocated to the Accounts of all
Participants (or Beneficiaries) having credits in the fund both on such
date and at the beginning of such valuation period. Such allocation shall
be made by the application of a fraction, the numerator of which is the
value of the Account of a specific Participant (or Beneficiary) as of the
immediately preceding Valuation Date, reduced by any distributions
therefrom since such preceding Valuation Date, and the denominator of which
is the total value of all such Accounts as of the preceding Valuation Date,
reduced by any distributions therefrom since such preceding Valuation Date.
(b) To the extent that Shares and other assets are specifically
allocated to a specific Participant's subaccount: (i) dividends and capital
gain distributions from Shares; (ii) dividends or credits attributable to
insurance policies; and (iii) income gains and/or losses attributable to a
Participant's loans made pursuant to ARTICLE 13 or to any other assets, all
shall be allocated to such Participant's subaccount.
5.8 Responsibilities of the Plan Administrator. The Plan Administrator
shall maintain accurate records with respect to the contributions made by or on
behalf of Participants under the Plan, and shall furnish the Trustee with
written instructions directing the Trustee to allocate all Plan contributions to
the Trust among the separate Accounts of Participants in accordance with section
5.1 above. In making any such allocation, the Trustee shall be fully entitled
to rely on the instructions furnished by the Plan Administrator, and shall be
under no duty to make any inquiry or investigation with respect thereto.
ARTICLE 6
LIMITATIONS ON ALLOCATIONS
6.1 Employers Who Do Not Maintain Other Qualified Plans.
===================================================
(a) If the Participant does not participate in, and has never
participated in another qualified plan or a welfare benefit fund, as
defined in section 419(e) of the Code, maintained by the Employer, or an
individual medical account, as defined in section 415(l)(2) of the Code,
maintained by the Employer, which provides an Annual Addition as defined in
section 6.5(a), the amount of Annual Additions that may be credited to the
Participant's Account for any Limitation Year will not exceed the lesser of
the Maximum Permissible Amount or any other limitation contained in this
Plan. If the Employer Contribution that would otherwise be contributed or
allocated to the Participant's Account would cause the Annual Additions for
the Limitation Year to exceed the Maximum Permissible Amount, the amount
contributed or allocated will be reduced so that the Annual Additions for
the Limitation Year will equal the Maximum Permissible Amount.
(b) Prior to determining the Participant's actual Compensation for the
Limitation Year, the Employer may determine the Maximum Permissible Amount
for a Participant on the basis of a reasonable estimation of the
Participant's Compensation for the Limitation Year, uniformly determined
for all Participants similarly situated.
(c) As soon as is administratively feasible after the end of the
Limitation Year, the Maximum Permissible Amount for the Limitation Year
will be determined on the basis of the Participant's actual Compensation
for the Limitation Year.
(d) If, pursuant to subsection (c) or as a result of the allocation of
forfeitures, there is an Excess Amount the excess will be disposed of as
follows:
(i) Any nondeductible voluntary Employee contributions, to the
extent they would reduce the Excess Amount, will be returned to the
Participant;
(ii) If after the application of paragraph (i) an Excess Amount
still exists, and the Participant is covered by the Plan at the end of
the Limitation Year, the Excess Amount in the Participant's Account
will be used to reduce Employer Contributions (including any
allocation of forfeitures) for such Participant in the next Limitation
Year, and each succeeding Limitation Year if necessary;
(iii) If after the application of paragraph (i) an Excess Amount
still exists, and the Participant is not covered by the Plan at the
end of the Limitation Year, the Excess Amount will be held unallocated
in a suspense account. The suspense account will be applied to reduce
future Employer Contributions (including allocation of any
forfeitures) for all remaining Participants in the next Limitation
Year, and each succeeding Limitation Year if necessary;
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(iv) If a suspense account is in existence at any time during the
Limitation Year pursuant to this section, it will not participate in
the allocation of the Trust's investment gains and losses. If a
suspense account is in existence at any time during a particular
Limitation Year, all amounts in the suspense account must be allocated
and reallocated to Participants' Accounts before any Employer or any
Employee contributions may be made to the Plan for that Limitation
Year. Excess amounts may not be distributed to Participants or former
Participants.
6.2 Employers Who Maintain Other Qualified Master or Prototype Defined
Contribution Plans.
(a) This section applies if, in addition to this Plan, the Participant
is covered under another qualified master or prototype defined contribution
plan maintained by the Employer, a welfare benefit fund, as defined in
section 419(e) of the Code maintained by the Employer or an individual
medical account, as defined in section 415(l)(2) of the Code, maintained by
the Employer which provides an Annual Addition as defined in section
6.5(a), during any Limitation Year. The Annual Additions that may be
credited to a Participant's Account under this Plan for any such Limitation
Year will not exceed the Maximum Permissible Amount reduced by the Annual
Additions credited to a Participant's Account under the other plans and
welfare benefit funds for the same Limitation Year. If the Annual Additions
with respect to the Participant under other defined contribution plans and
welfare benefit funds maintained by the Employer are less than the Maximum
Permissible Amount and the Employer Contribution that would otherwise be
contributed or allocated to the Participant's Account under this Plan would
cause the Annual Additions for the Limitation Year to exceed this
limitation, the amount contributed or allocated will be reduced so that the
Annual Additions under all such plans and funds for the Limitation Year
will equal the Maximum Permissible Amount. If the Annual Additions with
respect to the Participant under such other defined contribution plans and
welfare benefit funds in the aggregate are equal to or greater than the
Maximum Permissible Amount, no amount will be contributed or allocated to
the Participant's Account under this Plan for the Limitation Year.
(b) Prior to determining the Participant's actual Compensation for the
Limitation Year, the Employer may determine the Maximum Permissible Amount
for a Participant in the manner described in section 6.1(b).
(c) As soon as is administratively feasible after the end of the
Limitation Year, the Maximum Permissible Amount for the Limitation Year
will be determined on the basis of the Participant's actual Compensation
for the Limitation Year.
(d) If, pursuant to section 6.2(c), or as a result of the allocation
of forfeitures, a Participant's Annual Additions under this Plan and such
other plans would result in an Excess Amount for a Limitation Year, the
Excess Amount will be deemed to consist of the Annual Additions last
allocated, except that Annual Additions attributable to a welfare benefit
fund or individual medical account will be deemed to have been allocated
first regardless of the actual allocation date.
(e) If an Excess Amount was allocated to a Participant on an
allocation date of this Plan which coincides with an allocation date of
another plan, the Excess Amount attributed to this Plan will be the product
of:
(i) the total Excess Amount allocated as of such date, times
(ii) the ratio of (1) the Annual Additions allocated to the
Participant for the Limitation Year as of such date under this Plan to
(2) the total Annual Additions allocated to the Participant for the
Limitation Year as of such date under this and all the other qualified
master or prototype defined contribution plans.
(f) Any Excess Amount attributed to this Plan will be disposed of in
the manner described in section 6.1(d).
6.3 Employers Who, In Addition to this Plan, Maintain Other Qualified
Plans Which Are Defined Contribution Plans Other than Master or Prototype Plans.
If the Participant is covered under another qualified defined contribution plan
maintained by the Employer which is not a Master or Prototype Plan, Annual
Additions which may be credited to the Participant's Account under this Plan for
any Limitation Year will be limited in accordance with section 6.2 as though the
other plan were a Master or Prototype Plan unless the Employer provides other
limitations in the Adoption Agreement.
6.4 Employers Who, In Addition to This Plan, Maintain A Qualified Defined
Benefit Plan. If the Employer maintains, or at any time maintained, a qualified
defined benefit plan covering any Participant in this Plan, the sum of the
Participant's Defined Benefit Fraction and Defined Contribution Fraction will
not exceed 1.0 in any Limitation Year. The Annual Additions which may be
credited to the Participant's Account under this Plan for any Limitation Year
will be limited in accordance with the Adoption Agreement.
6.5 Definitions. Unless otherwise expressly provided herein, for purposes
of this ARTICLE only, the following definitions and rules of interpretation
shall apply:
(a) Annual Additions. The sum of the following amounts credited to a
Participant's Account for the Limitation Year:
(i) Employer Contributions;
(ii) Employee contributions;
(iii) forfeitures; and
(iv) amounts allocated after March 31, 1984 to an individual
medical account, as defined in section 415(l)(2) of the Code, which is
part of a pension or annuity plan maintained by the Employer, are
treated as Annual Additions to a defined contribution plan. Also,
amounts derived from contributions paid or accrued after December 31,
1985, in taxable years ending after
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such date, which are attributable to post-retirement medical benefits
allocated to the separate account of a key employee, as defined in
section 419A(d)(3) of the Code, under a welfare benefit fund, as
defined in section 419(e) of the Code, maintained by the Employer, are
treated as Annual Additions to a defined contribution plan.
For this purpose, any Excess Amount applied under sections 6.1(d) or 6.2(f) in
the Limitation Year to reduce Employer Contributions will be considered Annual
Additions for such Limitation Year.
(b) Compensation. A Participant's earned income, wages, salaries, and
fees for professional services and other amounts received for personal services
actually rendered in the course of employment with the Employer maintaining the
Plan (including, but not limited to, commissions paid salesmen, compensation for
services on the basis of a percentage of profits, commissions on insurance
premiums, tips and bonuses), and excluding the following:
(i) Employer contributions to a plan of deferred compensation
which are not includable in the Employee's gross income for the
taxable year in which contributed, or Employer Contributions under a
simplified employee pension plan to the extent such contributions are
excluded from the Employee's gross income, or any distributions from a
plan of deferred compensation;
(ii) Amounts realized from the exercise of a nonqualified stock
option, or when restricted stock (or property) held by the Employee
either becomes freely transferable or is no longer subject to a
substantial risk of forfeiture;
(iii) Amounts realized from the sale, exchange or other
disposition of stock acquired under a qualified stock option; and
(iv) Other amounts which received special tax benefits, or
contributions made by the Employer (whether or not under a salary
reduction agreement) towards the purchase of an annuity described in
section 403(b) of the Code (whether or not the amounts are actually
excludable from the gross income of the Employee).
For purposes of applying the limitations of this ARTICLE, Compensation
for a Limitation Year is the Compensation actually paid or includable in
gross income during such year.
Notwithstanding the preceding sentence, Compensation for a Participant
in a defined contribution plan who is Totally and Permanently Disabled (as
defined in section 22(e)(3) of the Code) is the Compensation such
Participant would have received for the Limitation Year if the Participant
had been paid at the rate of Compensation paid immediately before becoming
permanently and totally disabled; such imputed Compensation for the
disabled Participant may be taken into account only if the Participant is
not a Highly-Compensated Employee (as defined in section 414(q) of the
Code), and contributions made on behalf of such Participant are
nonforfeitable when made.
(c) Defined Benefit Fraction. A fraction, the numerator of which is
the sum of the Participant's Projected Annual Benefits under all the
defined benefit plans (whether or not terminated) maintained by the
Employer, and the denominator of which is the lesser of one hundred percent
(100%) of the dollar limitation determined for the Limitation Year under
sections 415(b) and (d) of the Code or one hundred forty percent (140%) of
highest average compensation, including any adjustments under section
415(b) of the Code.
Notwithstanding the above, if the Participant was a Participant as of
the first day of the first Limitation Year beginning after December 31,
1986, in one or more defined benefit plans maintained by the Employer which
were in existence on May 6, 1986, the denominator of this fraction will not
be less than one hundred twenty-five percent (125%) of the sum of the
annual benefits under such plans which the Participant had accrued as of
the close of the last Limitation Year beginning before January 1, 1987,
disregarding any changes in the terms and conditions of the Plan after May
5, 1986. The preceding sentence applies only if the defined benefit plans
individually and in the aggregate satisfied the requirements of section 415
of the Code for all Limitation Years beginning before January 1, 1987.
(d) Defined Contribution Dollar Limitation. Thirty thousand dollars
($30,000) or, if greater, one-fourth (1/4) of the defined benefit dollar
limitation set forth in section 415(b)(1) of the Code as in effect for the
Limitation Year.
(e) Defined Contribution Fraction. A fraction, the numerator of which
is the sum of the Annual Additions to the Participant's Account under all
the defined contribution plans (whether or not terminated) maintained by
the Employer for the current and all prior Limitation Years (including the
Annual Additions attributable to the Participant's nondeductible voluntary
contributions to all defined benefit plans, whether or not terminated,
maintained by the Employer, and the Annual Additions attributable to all
welfare benefit funds, as defined in section 419(e) of the Code and
individual medical accounts, as defined in section 415(l)(2) of the Code,
maintained by the Employer), and the denominator of which is the sum of the
maximum aggregate amounts for the current and all prior Limitation Years of
service with the Employer (regardless of whether a defined contribution
plan was maintained by the Employer). The maximum aggregate amount in any
Limitation Year is the lesser of one hundred percent (100%) of the dollar
limitation in effect under section 415(c)(1)(A) of the Code or thirty-five
percent (35%) of the Participant's Compensation for such year.
If the Participant was a Participant as of the end of the first day of
the first Limitation Year beginning after December 31, 1986, in one or more
defined contribution plans maintained by the Employer which were in
existence on May 6, 1986, the numerator of this fraction will be adjusted
if the sum of this fraction and the Defined Benefit Fraction would
otherwise exceed 1.0 under the terms
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of this Plan. Under the adjustment, an amount equal to the product of (1)
the excess of the sum of the fractions over 1.0 times (2) the denominator
of this fraction, will be permanently subtracted from the numerator of this
fraction. The adjustment is calculated using the fractions as they would be
computed as of the end of the last Limitation Year beginning before January
1, 1987, and disregarding any changes in the terms and conditions of the
Plan made after May 5, 1986, but using the section 415 limitation
applicable to the first Limitation Year beginning on or after January 1,
1987. The Annual Addition for any Limitation Year beginning before January
1, 1987, shall not be recomputed to treat all Employee contributions as
Annual Additions.
(f) Employer. For purposes of this ARTICLE, Employer shall mean the
employer that adopts this Plan, and all members of a controlled group of
corporations (as defined in section 414(b) of the Code as modified by
section 415(h) of the Code), all commonly controlled trades or businesses
(as defined in section 414(c) of the Code as modified by section 415(h) of
the Code), or affiliated service groups (as defined in section 414(m) of
the Code) of which the adopting Employer is a part and any other entity
required to be aggregated with the Employer pursuant to regulations under
section 414(o) of the Code.
(g) Excess Amount. The excess of the Participant's Annual Addition
for the Limitation Year over the Maximum Permissible Amount.
(h) Highest Average Compensation. The average compensation for the
three consecutive Plan Years that produce the highest average.
(i) Limitation Year. A Plan Year, or the twelve (12) consecutive
month period elected by the Employer in the Adoption Agreement. All
qualified plans maintained by the Employer must use the same Limitation
Year. If the Limitation Year is amended to a different twelve (12)
consecutive month period, the new Limitation Year must begin on a date
within the Limitation Year in which the amendment is made.
(j) Master or Prototype Plan. A plan the form of which is the subject
of a favorable opinion letter from the Internal Revenue Service.
(k) Maximum Permissible Amount. The maximum Annual Addition that may
be contributed or allocated to a Participant's Account under the Plan for
any Limitation Year shall not exceed the lesser of:
(a) the Defined Contribution Dollar Limitation;
or
(b) twenty-five percent (25%) of the Participant's Compensation
for the Limitation Year.
The Compensation limitation referred to in subsection (b) shall not apply
to any contribution for medical benefits (within the meaning of section 401(h)
or section 419A(f)(2) of the Code) which is otherwise treated as an Annual
Addition under section 415(l)(1) or section 419A(d)(2) of the Code.
If a short Limitation Year is created because of an amendment changing the
Limitation Year to a different twelve (12) consecutive month period, the Maximum
Permissible Amount will not exceed the Defined Contribution Dollar Limitation
multiplied by the following fraction:
Number of Months in the Short Limitation Year
---------------------------------------------
12
(l) Projected Annual Benefit. The annual retirement benefit (adjusted
to an actuarially equivalent straight life annuity if such benefit is
expressed in a form other than a straight life annuity or Qualified Joint
and Survivor Annuity) to which the Participant would be entitled under the
terms of the Plan assuming:
(i) the Participant will continue employment until Normal
Retirement Age under the Plan (or current age, if later), and
(ii) the Participant's Compensation for the current Limitation
Year and all other relevant factors used to determine benefits under
the Plan will remain constant for all future Limitation Years.
ARTICLE 7
TRUST FUND
7.1 Receipt of Contributions by Trustee. All contributions to the Trust
that are received by the Trustee, together with any earnings thereon, shall be
held, managed and administered by the Trustee named in the Adoption Agreement in
accordance with the terms and conditions of the Trust Agreement and the Plan.
The Trustee may use a Custodian designated by the Sponsor to perform
recordkeeping and custodial functions. The Trustee shall be subject to the
proper directions of the Employer or the Plan Administrator made in accordance
with the terms of the Plan and ERISA.
7.2 Investment Responsibility.
(a) If the Employer elects in the Adoption Agreement to exercise
investment authority and responsibility, the selection of the investments in
which assets of the Trust are invested shall be the responsibility of the Plan
Administrator and each Participant will have a ratable interest in all assets of
the Trust.
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(b) If the Adoption Agreement so provides and the Employer elects to
permit each Participant or Beneficiary to select the investments in his
Account, no person, including the Trustee and the Plan Administrator, shall
be liable for any loss or for any breach of fiduciary duty which results
from such Participant's or Beneficiary's exercise of control.
(c) If the Adoption Agreement so provides and the Employer elects to
permit each Participant or Beneficiary to select the investments in his
Account, the Employer or the Plan Administrator must complete a schedule of
Participant designations.
(d) If Participants and Beneficiaries are permitted to select the
investment in their Accounts, all investment related expenses, including
administrative fees charged by brokerage houses, will be charged against
the Accounts of the Participants.
(e) The Plan Administrator may at any time change the selection of
investments in which the assets of the Trust are invested, or subject to
such reasonable restrictions as may be imposed by the Sponsor for
administrative convenience, may submit an amended schedule of Participant
designations. Such amended documents may provide for a variance in the
percentages of contributions to any particular investment or a request that
Shares in the Trust be reinvested in whole or in part in other Shares.
7.3 Investment Limitations. The Sponsor may impose reasonable investment
limitations on the Employer and the Plan Administrator relating to the type of
permissible investments in the Trust or the minimum percentage of Trust assets
to be invested in Shares.
ARTICLE 8
VESTING
8.1 Nondeductible Voluntary Contributions and Earnings. The Participant's
nondeductible voluntary contribution subaccount shall be fully vested and
nonforfeitable at all times and no forfeitures will occur as a result of an
Employee's withdrawal of nondeductible voluntary contributions.
8.2 Rollovers, Transfers and Earnings. The Participant's rollover
subaccount and direct transfer subaccount shall be fully vested and
nonforfeitable at all times.
8.3 Employer Contributions and Earnings. Notwithstanding the vesting
schedule elected by the Employer in the Adoption Agreement, the Participant's
money purchase pension contribution subaccount and profit sharing contribution
subaccount shall be fully vested and nonforfeitable upon the Participant's
death, disability, attainment of Normal Retirement Age, or, if the Adoption
Agreement provides for an Early Retirement Date, attainment of the required age
and completion of the required service. In the absence of any of the preceding
events, the Participant's money purchase contribution subaccount and his profit
sharing contribution subaccount shall vest in accordance with a minimum vesting
schedule specified in the Adoption Agreement. The schedule must be at least as
favorable to Participants as either schedule (a) or (b) below.
(a) Graduated vesting according to the following schedule:
Years of Service Vested Percentage
---------------- -----------------
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%
(b) Full one hundred percent (100%) vesting after three (3) Years of
Service.
8.4 Amendments to Vesting Schedule.
(a) If the Plan's vesting schedule is amended, or the Plan is amended
in any way that directly or indirectly affects the computation of the
Participant's nonforfeitable percentage or if the Plan is deemed amended by
an automatic change to or from a top-heavy vesting schedule, each
Participant with at least three (3) Years of Service with the Employer may
elect, within a reasonable period after the adoption of the amendment or
change, to have the nonforfeitable percentage computed under the Plan
without regard to such amendment or change. For any Participants who do not
have at least one (1) Hour of Service in any Plan Year beginning after
December 31, 1988, the preceding sentence shall be applied by substituting
"five (5) Years of Service" for "three (3) Years of Service" where such
language appears.
(b) The period during which the election may be made shall commence
with the date the amendment is adopted or deemed to be made and shall end
on the latest of:
(i) sixty (60) days after the amendment is adopted;
(ii) sixty (60) days after the amendment becomes effective; or
(iii) sixty (60) days after the Participant is issued written
notice of the amendment by the Employer or Plan
Administrator.
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(c) No amendment to the Plan shall be effective to the extent that it
has the effect of decreasing a Participant's accrued benefit.
Notwithstanding the preceding sentence, a Participant's Account balance may
be reduced to the extent permitted under section 412(c)(8) of the Code. For
purposes of this paragraph, a Plan amendment which has the effect of
decreasing a Participant's Account balance or eliminating an optional form
of benefit, with respect to benefits attributable to service before the
amendment shall be treated as reducing an accrued benefit. Furthermore, if
the vesting schedule of a Plan is amended, in the case of an Employee who
is a Participant as of the later of the date such amendment is adopted or
the date it becomes effective, the nonforfeitable percentage (determined as
of such date) of such Employee's right to his Employer-derived accrued
benefit will not be less than his percentage computed under the Plan
without regard to such amendment.
8.5 Determination of Years of Service. For purposes of determining the
vested and nonforfeitable percentage of the Participant's Employer Contribution
subaccounts, all of the Participant's Years of Service with the Employer or an
Affiliated Employer shall be taken into account. If specified in the Adoption
Agreement, Years of Service with a predecessor employer will be treated as
service for the Employer; provided, however, if the Employer maintains the plan
of a predecessor employer, Years of Service with such predecessor employer will
be treated as service with the Employer without regard to any election.
8.6 Forfeiture of Nonvested Amounts.
(a) For Plan Years beginning before 1985, any portion of a
Participant's Account that is not vested shall be forfeited by him as of
the last day of the Plan Year in which a Break in Service occurs. For Plan
Years beginning after 1984, any portion of a Participant's Account that is
not vested shall be forfeited by him as of the last day of the Plan Year in
which his fifth consecutive Break in Service occurs. Any amounts thus
forfeited shall be reallocated as provided in ARTICLE 5 and shall not be
considered part of a Participant's Account in computing his vested
interest. The remaining portion of the Participant's Account will be
nonforfeitable.
(b) If a distribution is made at a time when a Participant has a
vested right to less than one hundred percent (100%) of the value of the
Participant's Account attributable to Employer Contributions and
forfeitures, as determined in accordance with the provisions of section
8.3, and the nonvested portion of the Participant's Account has not yet
been forfeited in accordance with paragraph (a) above:
(i) a separate remainder subaccount shall be established for the
Participant's interest in the Plan as of the time of the distribution,
and
(ii) at any relevant time the Participant's vested portion of the
separate remainder subaccount shall be equal to an amount ("X")
determined by the following formula:
X = P(AB + (R x D)) - (R x D)
For purposes of applying the formula: P is the vested percentage
at the relevant time; AB is the Account balance at the relevant time;
D is the amount of the distribution; and R is the ratio of the Account
balance at the relevant time to the Account balance after
distribution.
8.7 Reinstatement of Benefit. If a benefit is forfeited because a
Participant or Beneficiary cannot be found, such benefit will be reinstated if a
claim is made by the Participant or Beneficiary.
ARTICLE 9
JOINT AND SURVIVOR ANNUITY REQUIREMENTS
9.1 General. The provisions of this ARTICLE shall apply to any
Participant who is credited with at least one (1) Hour of Service with the
Employer on or after August 23, 1984, and such other Participants as provided in
section 9.7.
9.2 Qualified Joint and Survivor Annuity. Unless an optional form of
benefit is selected pursuant to a Qualified Election within the ninety (90) day
period ending on the Annuity Starting Date, a married Participant's Vested
Account Balance will be paid in the form of a Qualified Joint and Survivor
Annuity and an unmarried Participant's Vested Account Balance will be paid in
the form of a life annuity. The Participant may elect to have such annuity
distributed upon attainment of the Earliest Retirement Age under the Plan.
9.3 Qualified Preretirement Survivor Annuity. Unless an optional form of
benefit has been selected within the Election Period pursuant to a Qualified
Election, if a Participant dies before the Annuity Starting Date, then the
Participant's Vested Account Balance shall be applied toward the purchase of an
annuity for the life of the Surviving Spouse. The Surviving Spouse may elect to
have such annuity distributed within a reasonable period after the Participant's
death.
9.4 Definitions.
(a) Election Period.
(i) The period which begins on the first day of the Plan Year in
which the Participant attains age thirty-five (35) and ends on the
date of the Participant's death. If a Participant separates from
service prior to the first day of the Plan Year in which age thirty-
five (35) is attained, with respect to the Account balance as of the
date of separation, the Election Period shall begin on the date of
separation.
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(ii) A Participant who has not yet attained age thirty-five (35)
as of the end of any current Plan Year may make a special Qualified
Election to waive the qualified preretirement survivor annuity for the
period beginning on the date of such election and ending on the first
day of the Plan Year in which the Participant will attain age thirty-
five (35). Such election shall not be valid unless the Participant
receives a written explanation of the qualified preretirement survivor
annuity in such terms as are comparable to the explanation required
under section 9.5. Qualified preretirement survivor annuity coverage
will be automatically reinstated as of the first day of the Plan Year
in which the Participant attains age thirty-five (35). Any new waiver
on or after such date shall be subject to the full requirements of
this ARTICLE.
(b) Earliest Retirement Age. The earliest date on which, under the
Plan, the Participant could elect to receive retirement benefits.
(c) Qualified Election.
(i) A waiver of a Qualified Joint and Survivor Annuity or a
qualified preretirement survivor annuity. Any waiver of a Qualified
Joint and Survivor Annuity or a qualified preretirement survivor
annuity shall not be effective unless:
(1) the Participant's Spouse consents in writing to the
election;
(2) the election designates a specific Beneficiary, including
any class of Beneficiaries or any contingent Beneficiaries, which
may not be changed without spousal consent (or the Spouse
expressly permits designations by the Participant without any
further spousal consent);
(3) the Spouse's consent acknowledges the effect of the
election; and
(4) the Spouse's consent is witnessed by a Plan
representative or notary public. Additionally, a Participant's
waiver of the Qualified Joint and Survivor Annuity shall not be
effective unless the election designates a form of benefit payment
which may not be changed without spousal consent (or the Spouse
expressly permits designations by the participant without any
further spousal consent). If it is established to the satisfaction
of a Plan representative that there is no Spouse or that the
Spouse cannot be located, a waiver will be deemed a Qualified
Election.
(ii) Any consent by a Spouse obtained under this provision (or
establishment that the consent of Spouse may not be obtained) shall be
effective only with respect to such Spouse. A consent that permits
designations by the Participant without any requirement of further
consent by such Spouse must acknowledge that the Spouse has the right
to limit consent to a specific Beneficiary, and a specific form of
benefit where applicable, and that the Spouse voluntarily elects to
relinquish either or both of such rights. A revocation of a prior
waiver may be made by a Participant without the consent of the Spouse
at any time before the commencement of benefits. The number of
revocations shall not be limited. No consent obtained under this
provision shall be valid unless the Participant has received notice as
provided in section 9.5.
(d) Qualified Joint and Survivor Annuity. An immediate annuity for
the life of the Participant with a survivor annuity for the life of the
Spouse which equals fifty percent (50%) of the amount of the annuity which
is payable during the joint lives of the Participant and the Spouse and
which is the amount of benefit which can be purchased with the
Participant's Vested Account Balance.
(e) Spouse (Surviving Spouse). The Spouse or Surviving Spouse of the
Participant, provided that a former spouse will be treated as the Spouse or
Surviving Spouse and a current Spouse will not be treated as the Spouse or
Surviving Spouse to the extent provided under a qualified domestic
relations order as described in section 414(p) of the Code.
(f) Annuity Starting Date. The first day of the first period for which
an amount is paid as an annuity or any other form.
(g) Vested Account Balance. The aggregate value of the Participant's
Vested Account Balances derived from Employer and Employee contributions
(including rollovers and direct transfers), whether vested before or upon
death, including the proceeds of insurance contracts if any, on the
Participant's life. The provisions of this ARTICLE shall apply to a
Participant who is vested in amounts attributable to Employer
Contributions, Employee contributions (or both) at the time of death or
distribution.
9.5 Notice Requirements.
(a) In the case of a Qualified Joint and Survivor Annuity, the Plan
Administrator shall no less than thirty (30) days and no more than ninety
(90) days prior to the Annuity Starting Date, provide each Participant a
written explanation of:
(i) the terms and conditions of a Qualified Joint and Survivor
Annuity;
(ii) the Participant's right to make and the effect of an election
to waive the Qualified Joint and Survivor Annuity form of benefit;
(iii) the rights of a Participant's Spouse; and
(iv) the right to make, and the effect of, a revocation of a
previous election to waive the Qualified Joint and Survivor Annuity.
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<PAGE>
(b) In the case of a qualified preretirement survivor annuity as
described in section 9.3, the Plan Administrator shall provide each
Participant within the applicable period for such Participant a written
explanation of the qualified preretirement survivor annuity in such terms
and in such manner as would be comparable to the explanation provided for
meeting the requirements of subsection (a) applicable to a Qualified Joint
and Survivor Annuity.
(c) The applicable period for a Participant is whichever of the
following periods ends last:
(i) the period beginning with the first day of the Plan Year in
which the Participant attains age thirty-two (32) and ending with the
close of the Plan Year preceding the Plan Year in which the
Participant attains age thirty-five (35);
(ii) a reasonable period ending after the individual becomes a
Participant;
(iii) a reasonable period ending after subsection (e) ceases to
apply to the Participant;
(iv) a reasonable period ending after this ARTICLE first applies
to the Participant. Notwithstanding the foregoing, notice must be
provided within a reasonable period ending after separation from
service in the case of a Participant who separates from service before
attaining age thirty-five (35).
(d) For purposes of applying subsection (c), a reasonable period
ending after the enumerated events described above in subsections (ii),
(iii) and (iv) is the end of the two-year period beginning one (1) year
prior to the date the applicable event occurs, and ending one (1) year
after that date. In the case of a Participant who separates from service
before the Plan Year in which age thirty-five (35) is attained, notice
shall be provided within the two (2) year period beginning one (1) year
prior to separation and ending one (1) year after separation. If such a
participant thereafter returns to employment with the Employer, the
applicable period for such Participant shall be redetermined.
(e) Notwithstanding the other requirements of this section, the
respective notices prescribed by this section need not be given to a
Participant if:
(i) the Plan "fully subsidizes" the cost of a Qualified Joint and
Survivor Annuity or qualified preretirement survivor annuity; and
(ii) the Plan does not allow the Participant to waive the
Qualified Joint and Survivor Annuity or qualified preretirement
survivor annuity and does not allow a married Participant to designate
a nonspouse Beneficiary.
For purposes of this subsection, a plan fully subsidizes the costs of a
benefit if no increase in cost, or decrease in benefits to the Participant may
result from the Participant's failure to elect another benefit.
9.6 Safe Harbor Rules.
(a) This section shall apply to a Participant in a profit sharing
plan, and to any distribution, made on or after the first day of the first
Plan year beginning after December 31, 1988, from or under a separate
account attributable solely to accumulated deductible Employee
contributions, as defined in section 72(o)(5)(B) of the Code, and
maintained on behalf of a Participant in a money purchase pension plan
(including a target benefit plan) if the following conditions are
satisfied:
(i) the Participant does not or cannot elect payments in the form
of a life annuity; and
(ii) on the death of a Participant, the Participant's Vested
Account Balance will be paid to the Participant's Surviving Spouse,
but if there is no Surviving Spouse, or if the Surviving Spouse has
consented in a manner conforming to a Qualified Election, then to the
Participant's Designated Beneficiary.
(b) The Surviving Spouse may elect to have distribution of the Vested
Account Balance commence within the ninety (90) day period following the
date of the Participant's death. The Account balance shall be adjusted for
gains or losses occurring after the Participant's death in accordance with
the provisions of the Plan governing the adjustment of Account balances for
other types of distributions.
(c) This section shall not be operative with respect to a Participant
in a profit sharing plan if the plan is a direct or indirect transferee of
a defined benefit plan, money purchase plan, a target benefit plan, stock
bonus, or profit sharing plan which is subject to the survivor annuity
requirements of sections 401(a)(11) and 417 of the Code. If this section is
operative, then the provisions of this ARTICLE, other than section 9.7,
shall be inoperative.
(d) The Participant may waive the spousal death benefit described in
this section at any time provided that no such waiver shall be effective
unless it satisfies the conditions of section 9.4(c) (other than the
notification requirement referred to therein) that would apply to the
Participant's waiver of the qualified preretirement survivor annuity.
(e) For purposes of this section, Vested Account Balance shall mean,
in the case of a money purchase pension plan or a target benefit plan, the
Participant's separate Account balance attributable solely to accumulated
deductible Employee contributions within the meaning of section 72(o)(5)(B)
of the Code. In the case of a profit sharing plan, Vested Account Balance
shall have the same meaning as provided in section 9.4(g).
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9.7 Transitional Rules.
(a) Any living Participant not receiving benefits on August 23, 1984,
who would otherwise not receive the benefits prescribed by the previous
sections of this ARTICLE must be given the opportunity to elect to have the
prior sections of this ARTICLE apply if such Participant is credited with
at least one (1) Hour of Service under this Plan or a predecessor plan in a
Plan Year beginning on or after January 1, 1976, and such Participant had
at least ten (10) years of vesting service when he or she separated from
service.
(b) Any living Participant not receiving benefits on August 23, 1984,
who was credited with at least one (1) Hour of Service under this Plan or a
predecessor plan on or after September 2, 1974, and who is not otherwise
credited with any service in a Plan Year beginning on or after January 1,
1976, must be given the opportunity to have his or her benefits paid in
accordance with subsection (d).
(c) The respective opportunities to elect (as described in subsections
(a) and (b) above) must be afforded to the appropriate Participants during
the period commencing on August 23, 1984, and ending on the date benefits
would otherwise commence to said Participants.
(d) Any Participant who has elected pursuant to subsection (b) and any
Participant who does not elect under subsection (a) or who meets the
requirements of subsection (a) except that such Participant does not have
at least ten (10) years of vesting service when he or she separates from
service, shall have his or her benefits distributed in accordance with all
of the following requirements if benefits would have been payable in the
form of a life annuity:
(i) Automatic Joint and Survivor Annuity. If benefits in the form
of a life annuity become payable to a married Participant who:
(1) begins to receive payments under the Plan on or after
Normal Retirement Age; or
(2) dies on or after Normal Retirement Age while still
working for the Employer; or
(3) begins to receive payments on or after the qualified
early retirement age; or
(4) separates from service on or after attaining Normal
Retirement Age (or the qualified early retirement age) and after
satisfying the eligibility requirements for the payment of
benefits under the Plan and thereafter dies before beginning to
receive such benefits;
then such benefits will be received under this Plan in the form of a
Qualified Joint and Survivor Annuity, unless the Participant has elected
otherwise during the Election Period. The Election Period must begin at
least six (6) months before the Participant attains qualified early
retirement age and end not more than ninety (90) days before the
commencement of benefits. Any election hereunder will be in writing and may
be changed by the Participant at any time.
(ii) Election of Early Survivor Annuity. A Participant who is employed
after attaining the qualified early retirement age will be given the
opportunity to elect, during the Election Period, to have a survivor
annuity payable on death. If the Participant elects the survivor annuity,
payments under such annuity must not be less than the payments which would
have been made to the Spouse under the Qualified Joint and Survivor Annuity
if the Participant had retired on the day before his or her death. Any
election under this provision will be in writing and may be changed by the
Participant at any time. The Election Period begins on the later of (1) the
90th day before the Participant attains the qualified early retirement age;
or (2) the date on which participation begins, and ends on the date the
Participant terminates employment.
(e) The following terms shall have the meanings specified herein:
(i) Qualified Early Retirement Age. The latest of:
(1) the earliest date, under the Plan, on which the Participant
may elect to receive retirement benefits;
(2) the first day of the 120th month beginning before the
Participant reaches Normal Retirement Age; or
(3) the date the Participant begins participation.
(ii) Qualified Joint and Survivor Annuity. An annuity for the life of
the Participant with a survivor annuity for the life of the Spouse as
described in section 9.4(d).
ARTICLE 10
DISTRIBUTION PROVISIONS
10.1 Vesting on Distribution Before Break in Service.
(a) If an Employee terminates service, and the value of the Employee's
Vested Account Balance derived from Employer and Employee contributions is
not greater than three thousand five hundred dollars ($3,500), the Employee
will receive a distribution of the value of the entire vested portion of
such Account balance and the nonvested portion will be treated as a
forfeiture. For
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purposes of this section, if the value of an Employee's Vested Account
Balance is zero, the Employee shall be deemed to have received a
distribution of such Vested Account Balance. A Participant's Vested Account
Balance shall not include accumulated deductible Employee contributions
within the meaning of section 72(o)(5)(B) of the Code for Plan Years
beginning prior to January 1, 1989.
(b) If an Employee terminates service and elects, in accordance with
this ARTICLE, to receive the value of his Vested Account Balance, the
nonvested portion will be treated as a forfeiture. If the Employee elects
to have distributed less than the entire vested portion of the Account
balance derived from Employer Contributions, the part of the nonvested
portion that will be treated as a forfeiture is the total nonvested portion
multiplied by a fraction, the numerator of which is the amount of the
distribution attributable to Employer Contributions and the denominator of
which is the total value of the vested Employer derived Account balance.
(c) If an Employee receives a distribution pursuant to this section
and the Employee resumes employment covered under this Plan, the Employee's
Employer-derived Account balance will be restored to the amount on the date
of distribution if the Employee repays to the Plan the full amount of the
distribution attributable to Employer Contributions before the earlier of
five (5) years after the first date on which the Participant is
subsequently reemployed by the Employer, or the date the Participant incurs
five (5) consecutive one (1) year Breaks in Service following the date of
the distribution. If an Employee is deemed to receive a distribution
pursuant to this section, and the Employee resumes employment covered under
this Plan before the date the Participant incurs five (5) consecutive one
(1) year Breaks in Service, upon the reemployment of such Employee, the
Employer-derived Account balance of the Employee will be restored to the
amount on the date of such deemed distribution.
10.2 Restrictions on Immediate Distributions.
(a) If the value of a Participant's Vested Account Balance derived
from Employer and Employee contributions exceeds (or at the time of any
prior distribution exceeded) three thousand five hundred dollars ($3,500)
and the Account balance is immediately distributable, the Participant and
the Participant's Spouse (or where either the Participant or the Spouse has
died, the survivor) must consent to any distribution of such Account
balance. The consent of the Participant and the Participant's Spouse shall
be obtained in writing within the ninety (90) day period ending on the
Annuity Starting Date. The Annuity Starting Date is the first day of the
first period for which an amount is paid as an annuity or any other form.
The Plan Administrator shall notify the Participant and the Participant's
Spouse of the right to defer any distribution until the Participant's
Account balance is no longer immediately distributable. Such notification
shall include a general description of the material features, and an
explanation of the relative values of, the optional forms of benefit
available under the Plan in a manner that would satisfy the notice
requirements of section 417(a)(3), and shall be provided no less than
thirty (30) days and no more than ninety (90) days prior to the Annuity
Starting Date.
(b) Notwithstanding the provisions of subsection (a), only the
Participant need consent to the commencement of a distribution in the form
of a Qualified Joint and Survivor Annuity while the Account balance is
immediately distributable. (Furthermore, if payment in the form of a
Qualified Joint and Survivor Annuity is not required with respect to the
Participant pursuant to section 9.6 of the Plan, only the Participant need
consent to the distribution of an Account balance that is immediately
distributable). Neither the consent of the Participant nor the
Participant's Spouse shall be required to the extent that a distribution is
required to satisfy section 401(a)(9) or section 415 of the Code. In
addition, upon termination of this Plan if the Plan does not offer an
annuity option (purchased from a commercial provider), the Participant's
Account balance may, without the Participant's consent, be distributed to
the Participant or transferred to another defined contribution plan (other
than an employee stock ownership plan as defined in section 4975(e)(7) of
the Code) within the same controlled group.
(c) An Account balance is immediately distributable if any part of the
Account balance could be distributed to the Participant (or Surviving
Spouse) before the Participant attains (or would have attained if not
deceased) the later of Normal Retirement Age or age sixty-two (62).
(d) For purposes of determining the applicability of the foregoing
consent requirements to distributions made before the first day of the
first Plan Year beginning after December 31, 1988, the Participant's Vested
Account Balance shall not include amounts attributable to accumulated
deductible Employee contributions within the meaning of section 72(o)(5)(B)
of the Code.
10.3 Commencement of Benefits.
(a) Unless the Participant elects otherwise, distribution of benefits
will begin no later than the 60th day after the latest of the close of the
Plan Year in which:
(i) the Participant attains age sixty-five (65) (or Normal
Retirement Age, if earlier);
(ii) the 10th anniversary of the year in which the Participant
commenced participation in the Plan occurs; or
(iii) the Participant terminates service with the Employer.
(b) Notwithstanding the foregoing, the failure of a Participant and
Spouse to consent to a distribution while a benefit is immediately
distributable, within the meaning of section 10.2 of the Plan, shall be
deemed to be an election to defer commencement of payment of any benefit
sufficient to satisfy this section.
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10.4 Early Retirement With Age and Service Requirement. If a Participant
separates from service before satisfying the age requirement for early
retirement, but has satisfied the service requirement, the Participant will be
entitled to elect an early retirement benefit upon satisfaction of such age
requirement.
10.5 Nontransferability of Annuities. Any annuity contract distributed
herefrom must be nontransferable.
10.6 Conflicts With Annuity Contracts. The terms of any annuity contract
purchased and distributed by the Plan to a Participant or Spouse shall comply
with the requirements of this Plan.
ARTICLE 11
TIMING AND MODES OF DISTRIBUTION
11.1 General Rules.
(a) Subject to ARTICLE 9, the requirements of this ARTICLE shall apply
to any distribution of a Participant's interest and will take precedence
over any inconsistent provisions of this Plan. Unless otherwise specified,
the provisions of this ARTICLE apply to calendar years beginning after
December 31, 1984.
(b) All distributions required under this ARTICLE shall be determined
and made in accordance with the income tax regulations under section
401(a)(9) of the Code, including the minimum distribution incidental
benefit requirement of section 1.401(a)(9)-2 of the proposed regulations.
11.2 Required Beginning Date. The entire interest of a Participant must be
distributed or begin to be distributed no later than the Participant's Required
Beginning Date.
11.3 Limits on Distribution Periods. As of the first Distribution Calendar
Year, distributions, if not made in a single-sum, may only be made over one of
the following periods (or a combination thereof):
(a) the life of the Participant;
(b) the life of the Participant and a Designated Beneficiary;
(c) a period certain not extending beyond the Life Expectancy of the
Participant; or
(d) a period certain not extending beyond the joint and last survivor
expectancy of the Participant and a Designated Beneficiary.
11.4 Determination of Amount to be Distributed Each Year.
(a) Individual Account.
(i) If a Participant's Benefit is to be distributed over (1) a
period not extending beyond the Life Expectancy of the Participant or
the joint life and last survivor expectancy of the Participant and the
Participant's Designated Beneficiary or (2) a period not extending
beyond the Life Expectancy of the Designated Beneficiary, the amount
required to be distributed for each calendar year, beginning with
distributions for the first Distribution Calendar Year, must at least
equal the quotient obtained by dividing the Participant's Benefit by
the Applicable Life Expectancy.
(ii) For calendar years beginning before January 1, 1989, if the
Participant's Spouse is not the Designated Beneficiary, the method of
distribution selected must assure that at least fifty percent (50%) of
the present value of the amount available for distribution is paid
within the Life Expectancy of the Participant.
(iii) For calendar years beginning after December 31, 1988, the
amount to be distributed each year, beginning with distributions for
the first Distribution Calendar Year shall not be less than the
quotient obtained by dividing the Participant's Benefit by the lesser
of (1) the Applicable Life Expectancy or (2) if the Participant's
Spouse is not the Designated Beneficiary, the applicable divisor
determined from the table set forth in Q&A-4 of section 1.401(a)(9)-2
of the proposed regulations. Distributions after the death of the
Participant shall be distributed using the Applicable Life Expectancy
in subsection (a)(i) above as the relevant divisor without regard to
proposed regulations section 1.401(a)(9)-2.
(iv) The minimum distribution required for the Participant's first
Distribution Calendar Year must be made on or before the Participant's
Required Beginning Date. The minimum distribution for other calendar
years, including the minimum distribution for the Distribution
Calendar Year in which the Employee's Required Beginning Date occurs,
must be made on or before December 31 of that Distribution Calendar
Year.
(b) Other Forms. If the Participant's Benefit is distributed in the
form of an annuity purchased from an insurance company, distributions
thereunder shall be made in accordance with the requirements of section
401(a)(9) of the Code and the proposed regulations thereunder.
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11.5 Death Distribution Provisions.
(a) Distribution Beginning Before Death. If the Participant dies
after distribution of his or her interest has begun, the remaining portion
of such interest will continue to be distributed at least as rapidly as
under the method of distribution being used prior to the Participant's
death.
(b) Distribution Beginning After Death. If the Participant dies
before distribution of his or her interest begins, distribution of the
Participant's entire interest shall be completed by December 31 of the
calendar year containing the fifth anniversary of the Participant's death
except to the extent that an election is made to receive distributions in
accordance with (i) or (ii) below:
(i) if any portion of the Participant's interest is payable to a
Designated Beneficiary, distributions may be made over the life or
over a period certain not greater than the Life Expectancy of the
Designated Beneficiary commencing on or before December 31 of the
calendar year immediately following the calendar year in which the
Participant died;
(ii) if the Designated Beneficiary is the Participant's Surviving
Spouse, the date distributions are required to begin in accordance
with (i) above shall not be earlier than the later of (1) December 31
of the calendar year immediately following the calendar year in which
the Participant died and (2) December 31 of the calendar year in which
the Participant would have attained age seventy and one-half (70 1/2).
(c) If the Participant has not made an election pursuant to this
section by the time of his or her death, the Participant's Designated
Beneficiary must elect the method of distribution no later than the earlier
of (1) December 31 of the calendar year in which distributions would be
required to begin under this section; or (2) December 31 of the calendar
year which contains the fifth anniversary of the date of death of the
Participant. If the Participant has no Designated Beneficiary, or if the
Designated Beneficiary does not elect a method of distribution,
distribution of the Participant's entire interest must be completed by
December 31 of the calendar year containing the fifth anniversary of the
Participant's death.
(d) For purposes of subsection (b) above, if the Surviving Spouse dies
after the Participant, but before payments to such Spouse begin, the
provisions of subsection (b), with the exception of paragraph (ii) therein,
shall be applied as if the Surviving Spouse were the Participant.
(e) For purposes of this section, any amount paid to a child of the
Participant will be treated as if it had been paid to the Surviving Spouse
if the amount becomes payable to the Surviving Spouse when the child
reaches the age of majority.
(f) For the purposes of this section, distribution of a Participant's
interest is considered to begin on the Participant's Required Beginning
Date (or, if subsection (d) above is applicable, the date distribution is
required to begin to the Surviving Spouse pursuant to subsection (b)
above). If distribution in the form of an annuity described in section
11.4(b) above irrevocably commences to the Participant before the Required
Beginning Date, the date distribution is considered to begin is the date
distribution actually commences.
11.6 Designation of Beneficiary. Subject to the rules of ARTICLE 9, a
Participant (or former Participant) may designate from time to time any person
or persons (who may be designated contingently or successively and may be an
entity other than a natural person) as his Beneficiary who will be entitled to
receive any undistributed amounts credited to the Participant's separate Account
under the Plan at the time of the Participant's death. Any such Beneficiary
designation by a Participant shall be made in writing in the manner prescribed
by the Plan Administrator, and shall be effective only when filed with the Plan
Administrator during the Participant's lifetime. A Participant may change or
revoke his Beneficiary designation at any time in the manner prescribed by the
Plan Administrator. If any portion of the Participant's Account is invested in
insurance pursuant to ARTICLE 14, the Beneficiary of the benefits under the
insurance policy shall be the person or persons designated under the policy. If
the Designated Beneficiary (or each of the Designated Beneficiaries) predeceases
the Participant, the Participant's Beneficiary designation shall be ineffective.
If no Beneficiary designation is in effect at the time of the Participant's
death, his Beneficiary shall be his estate.
11.7 Definitions.
(a) Applicable Life Expectancy. The Life Expectancy (or joint and
last survivor expectancy) calculated using the attained age of the
Participant (or Designated Beneficiary) as of the Participant's (or
Designated Beneficiary's) birthday in the applicable calendar year reduced
by one (1) for each calendar year which has elapsed since the date Life
Expectancy was first calculated. If Life Expectancy is being recalculated,
the Applicable Life Expectancy shall be the Life Expectancy as so
recalculated. The applicable calendar year shall be the first Distribution
Calendar Year, and if Life Expectancy is being recalculated such succeeding
calendar year. If annuity payments commence in accordance with section
11.4(b) before the Required Beginning Date, the applicable calendar year is
the year such payments commence. If distribution is in the form of an
immediate annuity purchased after the Participant's death with the
Participant's remaining interest, the applicable calendar year is the year
of purchase.
(b) Designated Beneficiary. The individual who is designated as the
Beneficiary under the Plan in accordance with section 401(a)(9) and the
proposed regulations thereunder.
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(c) Distribution Calendar Year. A calendar year for which a minimum
distribution is required. For distributions beginning before the
Participant's death, the first Distribution Calendar Year is the calendar
year immediately preceding the calendar year which contains the
Participant's Required Beginning Date. For distributions beginning after
the Participant's death, the first Distribution Calendar Year is the
calendar year in which distributions are required to begin pursuant to
section 11.5 above.
(d) Life Expectancy.
(i) Life Expectancy and joint and last survivor expectancy are
computed by use of the expected return multiples in Tables V and VI of
section 1.72-9 of the income tax regulations.
(ii) Unless otherwise elected by the Participant (or Spouse, in
the case of distributions described in section 11.5(b)(ii) above) by
the time distributions are required to begin, life expectancies shall
be recalculated annually. Such election shall be irrevocable as to the
Participant (or Spouse) and shall apply to all subsequent years. The
Life Expectancy of a non-Spouse Beneficiary may not be recalculated.
(e) Participant's Benefit.
(i) The Account balance as of the last valuation date in the
calendar year immediately preceding the Distribution Calendar Year
(valuation calendar year) increased by the amount of any contributions
or forfeitures allocated to the Account balance as of dates in the
valuation calendar year after the valuation date and decreased by
distributions made in the valuation calendar year after the valuation
date.
(ii) For purposes of subsection (i) above, if any portion of the
minimum distribution for the first Distribution Calendar Year is made
in the second Distribution Calendar Year on or before the Required
Beginning Date, the amount of the minimum distribution made in the
second Distribution Calendar Year shall be treated as if it had been
made in the immediately preceding Distribution Calendar Year.
(f) Required Beginning Date.
(i) General Rule. The Required Beginning Date of a Participant is
the first day of April of the calendar year following the calendar
year in which the Participant attains age seventy and one-half (70
1/2).
(ii) Transitional Rules. The Required Beginning Date of a
Participant who attains age seventy and one-half (70 1/2) before
January 1, 1988, shall be determined in accordance with (1) or (2)
below:
(1) Non-Five-Percent Owners. The Required Beginning Date of
a Participant who is not a Five Percent (5%) Owner is the first
day of April of the calendar year following the calendar year in
which the later of retirement or attainment of age seventy and
one-half (70 1/2) occurs.
(2) Five Percent Owners. The Required Beginning Date of a
Participant who is a Five Percent (5%) Owner during any year
beginning after December 31, 1979, is the first day of April
following the later of:
(A) the calendar year in which the Participant attains
age seventy and one-half (70 1/2); or
(B) the earlier of the calendar year with or within
which ends the Plan Year in which the Participant becomes a Five
Percent (5%) Owner, or the calendar year in which the Participant
retires.
The Required Beginning Date of a Participant who is not a Five Percent
(5%) Owner who attains age seventy and one-half (70 1/2) during 1988
and who has not retired as of January 1, 1989, is April 1, 1990.
(iii) Five Percent Owner. A Participant is treated as a Five
Percent (5%) Owner for purposes of this section if such Participant is
a Five Percent (5%) Owner as defined in section 416(i) of the Code
(determined in accordance with section 416 but without regard to
whether the Plan is top-heavy) at any time during the Plan Year ending
with or within the calendar year in which such owner attains age
sixty-six and one-half (66 1/2) or any subsequent year.
(iv) Once distributions have begun to a Five Percent (5%) Owner
under this section, they must continue to be distributed, even if the
Participant ceases to be a Five Percent (5%) Owner in a subsequent
year.
11.8 Transitional Rule.
(a) Notwithstanding the other requirements of this ARTICLE and subject
to the requirements of ARTICLE 9, distribution on behalf of any Employee,
including a Five Percent (5%) Owner, may be made in accordance with all of
the following requirements (regardless of when such distribution
commences):
(i) The distribution by the Trust is one which would not have
disqualified such trust under section 401(a)(9) of the Internal
Revenue Code as in effect prior to amendment by the Deficit Reduction
Act of 1984.
(ii) The distribution is in accordance with a method of
distribution designated by the Employee whose interest in the Trust is
being distributed or, if the Employee is deceased, by a Beneficiary of
such Employee.
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(iii) Such designation was in writing, was signed by the Employee
or the Beneficiary, and was made before January 1, 1984.
(iv) The Employee had accrued a benefit under the Plan as of
December 31, 1983.
(v) The method of distribution designated by the Employee or the
Beneficiary specifies the time at which distributions will be made,
and in the case of any distribution upon the Employee's death, the
Beneficiaries of the Employee listed in order of priority.
(b) A distribution upon death will not be covered by this transitional
rule unless the information in the designation contains the required
information described above with respect to the distributions to be made
upon the death of the Employee.
(c) For any distribution which commences before January 1, 1984, but
continues after December 31, 1983, the Employee, or the Beneficiary, to
whom such distribution is being made, will be presumed to have designated
the method of distribution under which the distribution is being made if
the method of distribution was specified in writing and the distribution
satisfies the requirements in subsections (a)(i) and (a)(v).
(d) If a designation is revoked, any subsequent distribution must
satisfy the requirements of section 401(a)(9) of the Code and the proposed
regulations thereunder. If a designation is revoked subsequent to the date
distributions are required to begin, the Trust must distribute by the end
of the calendar year following the calendar year in which the revocation
occurs the total amount not yet distributed which would have been required
to have been distributed to satisfy section 401(a)(9) of the Code and the
regulations thereunder but for the section 242(b)(2) election. For calendar
years beginning after December 31, 1988, such distributions must meet the
minimum distribution incidental benefit requirements in section
1.401(a)(9)-2 of the proposed regulations. Any changes in the designation
will be considered to be a revocation of the designation. However, the mere
substitution or addition of another beneficiary (one not named in the
designation) under the designation will not be considered to be a
revocation of the designation, so long as such substitution or addition
does not alter the period over which distributions are to be made under the
designation, directly or indirectly (for example, by altering the relevant
measuring life). In the case in which an amount is transferred or rolled
over from one plan to another plan, the rules in Q&A J-2 and Q&A J-3 shall
apply.
11.9 Optional Forms of Benefit.
(a) Except to the extent benefits are required to be paid in the form
of an automatic joint and survivor annuity under ARTICLE 9, any amount
which a Participant shall be entitled to receive under the Plan shall be
distributed in one or a combination of the following ways:
(i) in a lump-sum payment of cash, the amount of which shall be
determined by redeeming all Shares credited to the Participant's
Account under the Plan as of the date of distribution;
(ii) in a lump-sum payment including a distribution in kind of all
Shares credited to the Participant's Account under the Plan as of the
date of distribution;
(iii) in substantially equal monthly, quarterly, or annual
installment payments of cash, or the distribution of Shares in kind,
over a period certain not to exceed the Life Expectancy of the
Participant or the joint and last survivor Life Expectancy of the
Participant and his Beneficiary, determined in each case as of the
earlier of: (1) the end of the Plan Year in which occurs the event
entitling the Participant to a distribution of benefits, or (2) the
date such installments commence;
(iv) if permitted by the Sponsor, in monthly, quarterly, or annual
installment payments of cash, or the distribution of Shares in kind,
so that the amount distributed in each Plan Year equals the quotient
obtained by dividing the Participant's Account at the beginning of
that Plan Year by the joint and last survivor Life Expectancy of the
Participant and the Beneficiary for that Plan Year. The Life
Expectancy will be computed using the recomputation method described
in section 11.7(d). Unless the Spouse of the retired Participant is
the Beneficiary, the actuarial present value of all expected payments
to the retired Participant must be more than fifty percent (50%) of
the actuarial present value of payments to the retired Participant and
the Beneficiary; or
(v) by application of the Participant's vested Account to the
purchase of a nontransferable immediate or deferred annuity contract,
on an individual or group basis. Unless the Spouse of the retired
Participant is the Beneficiary, the actuarial present value of all
expected payments to the retired Participant must be more than fifty
percent (50%) of the actuarial present value of payments to the
retired Participant and the Beneficiary.
(b) If the Participant fails to select a method of distribution,
except as may be required by ARTICLE 9, all amounts which he is entitled to
receive under the Plan shall be distributed to him in a lump-sum payment.
ARTICLE 12
WITHDRAWALS
12.1 Withdrawal of Nondeductible Voluntary Contributions. Subject to the
Qualified Election requirements of ARTICLE 9 and section 12.3, any Participant
who has made nondeductible voluntary contributions may, upon thirty (30) days
notice in writing filed with the Plan Administrator, have paid to him all or any
portion of the fair market value of his nondeductible voluntary contribution
subaccount.
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12.2 Hardship Withdrawals. If the Adoption Agreement so provides and the
Employer elects, this section applies only to the profit sharing contribution
subaccount and only if the profit sharing allocation formula selected in the
Adoption Agreement is not integrated with Social Security.
(a) Demonstration of Need. Subject to the Qualified Election
requirements of ARTICLE 9 and section 12.3, if a Participant establishes an
immediate and heavy financial need for funds because of a hardship
resulting from the purchase or renovation of a primary residence, the
education of the Participant or a member of his immediate family (including
special education), the medical or personal expenses of the Participant or
a member of his immediate family, or other demonstrable emergency as
determined by the Plan Administrator on a uniform and nondiscriminatory
basis, the Participant shall be permitted, subject to the limitations of
subsection (b) below, to make a hardship withdrawal of an amount credited
to his profit sharing contribution subaccount under the Plan.
(b) Amount of Hardship Withdrawal. The amount of any hardship
withdrawal by a Participant under subsection (a) above shall not exceed the
amount required to meet the immediate financial need created by the
hardship and not reasonably available from other resources of the
Participant.
(c) Prior Withdrawal of Nondeductible Voluntary Participant
Contributions. A Participant shall not be permitted to make a hardship
withdrawal under subsection (a) above unless he has already withdrawn, in
accordance with section 12.1, any amount credited to his nondeductible
voluntary contributions subaccount.
12.3 Manner of Making Withdrawals. Any withdrawal by a Participant under
the Plan shall be made only after the Participant files a written request with
the Plan Administrator specifying the nature of the withdrawal (and the reasons
therefor, if a hardship withdrawal), and the amount of funds requested to be
withdrawn. Upon approving any withdrawal, the Plan Administrator shall furnish
the Trustee with written instructions directing the Trustee to make the
withdrawal in a lump-sum payment of cash to the Participant. In making any
withdrawal payment, the Trustee shall be fully entitled to rely on the
instructions furnished by the Plan Administrator, and shall be under no duty to
make any inquiry or investigation with respect thereto. Unless section 9.6 is
applicable, if the Participant is married, his Spouse must consent to the
withdrawal pursuant to a Qualified Election (as defined in section 9.4(c))
within the ninety (90) day period ending on the date of the withdrawal.
12.4 Limitations on Withdrawals. The Plan Administrator may prescribe
uniform and 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.
ARTICLE 13
LOANS
13.1 General Provisions.
(a) If the Adoption Agreement so provides and the Employer so elects,
loans shall be made available to any Participant or Beneficiary who is a
party-in-interest (as defined in section 3(14) of ERISA) on a reasonably
equivalent basis. A Participant or Beneficiary who is not a party-in-
interest (as defined in section 3(14) of ERISA) shall not be eligible to
receive a loan under this ARTICLE.
(b) Loans shall not be made available to Highly-Compensated Employees
(as defined in section 414(q) of the Code) in an amount greater than the
amount made available to other Employees.
(c) Loans must be adequately secured and bear a reasonable interest
rate.
(d) No Participant loan shall exceed the present value of the
Participant's Vested Account Balance.
(e) Unless section 9.6 is applicable, a Participant must obtain the
consent of his or her Spouse, if any, to use of the Account balance as
security for the loan. Spousal consent shall be obtained no earlier than
the beginning of the ninety (90) day period that ends on the date on which
the loan is to be so secured. The consent must be in writing, must
acknowledge the effect of the loan, and must be witnessed by a Plan
representative or notary public. Such consent shall thereafter be binding
with respect to the consenting Spouse or any subsequent Spouse with respect
to that loan. A new consent shall be required if the Account balance is
used for renegotiation, extension, renewal or other revision of the loan.
(f) In the event of default, foreclosure on the note and attachment of
security will not occur until a distributable event occurs under the Plan.
(g) Loans will not be made to any shareholder-employee or Owner-
Employee. For purposes of this requirement, a shareholder-employee means an
Employee or officer of an electing small business (subchapter S)
corporation who owns (or is considered as owning within the meaning of
section 318(a)(1) of the Code), on any day during the taxable year of such
corporation, more than five percent (5%) of the outstanding stock of the
corporation.
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(h) If a valid spousal consent has been obtained in accordance with
subsection (e), then, notwithstanding any other provision of this Plan, the
portion of the Participant's Vested Account Balance used as a security
interest held by the Plan by reason of a loan outstanding to the
Participant shall be taken into account for purposes of determining the
amount of the Account balance payable at the time of death or distribution,
but only if the reduction is used as repayment of the loan. If less than
one hundred percent (100%) of the Participant's Vested Account Balance
(determined without regard to the preceding sentence) is payable to the
Surviving Spouse, then the Account balance shall be adjusted by first
reducing the Vested Account Balance by the amount of the security used as
repayment of the loan, and then determining the benefit payable to the
Surviving Spouse.
13.2 Administration of Loan Program.
(a) The Plan's loan program will be administered by the Plan
Administrator.
(b) Loan requests shall be made on a form prescribed by the Plan
Administrator and shall comply with section 13.4.
(c) Loan requests that comply with all the requirements of this
ARTICLE shall be approved by the Plan Administrator.
(d) The rate of interest to be charged on loans shall be determined
under section 13.5.
(e) The only collateral that may be used as security for a loan, and
the limitations and requirements applicable, are determined under section
13.6.
(f) The rules regarding defaults are set forth in section 13.9.
13.3 Amount of Loan. Loans to any Participant or Beneficiary will not be
made to the extent that such loan, when added to the outstanding balance of all
other loans to the Participant or Beneficiary, would exceed the lesser of:
(a) fifty thousand dollars ($50,000) reduced by the excess (if any) of
the highest outstanding balance of loans during the one (1) year period
ending on the day before the loan is made, over the outstanding balance of
loans from the Plan on the date the loan is made; or
(b) one-half (1/2) the present value of the nonforfeitable accrued
benefit of the Participant.
(c) For the purpose of the above limitation, all loans from all plans
of the Employer and other members of a group of employers described in
sections 414(b), 414(c) and 414(m) of the Code are aggregated.
13.4 Manner of Making Loans. A request by a Participant for a loan shall
be made in writing to the Plan Administrator and shall specify the amount of the
loan, and the subaccount(s) or Shares of the Participant from which the loan
should be made. The terms and conditions on which the Plan Administrator shall
approve loans under the Plan shall be applied on a uniform and nondiscriminatory
basis with respect to all Participants. If a Participant's request for a loan is
approved by the Plan Administrator, the Plan Administrator shall furnish the
Trustee with written instructions directing the Trustee to make the loan in a
lump-sum payment of cash to the Participant. In making any loan payment under
this ARTICLE, the Trustee shall be fully entitled to rely on the instructions
furnished by the Plan Administrator and shall be under no duty to make any
inquiry or investigation with respect thereto.
13.5 Terms of Loan. Loans shall be made on such terms and subject to such
limitations as the Plan Administrator may prescribe. Furthermore, any loan
shall, by its terms, require that repayment (principal and interest) be
amortized in level payments, not less frequently than quarterly, over a period
not extending beyond five (5) years from the date of the loan, unless such loan
is used to acquire a dwelling unit which, within a reasonable time (determined
at the time the loan is made) will be used as the principal residence of the
Participant. The rate of interest to be charged shall be determined by the Plan
Administrator in accordance with the rates quoted by representative financial
institutions in the local area for similar loans.
13.6 Security for Loan. Any loan to a Participant under the Plan shall be
secured by the pledge of all the Participant's right, title, and interest in the
Trust. Such pledge shall be evidenced by the execution of a promissory note by
the Participant which shall provide that, in the event of any default by the
Participant on a loan repayment, the Plan Administrator shall be authorized (to
the extent permitted by law) to deduct the amount of the loan outstanding and
any unpaid interest due thereon from the Participant's wages or salary to be
thereafter paid by the Employer, and to take any and all other actions necessary
and appropriate to enforce collection of the unpaid loan. An assignment or
pledge of any portion of the Participant's interest in the Plan and a loan,
pledge, or assignment with respect to any insurance contract purchased under the
Plan, will be treated as a loan under this section. In the event the value of
the Participant's vested Account at any time is less than one hundred twenty-
five percent (125%) of the outstanding loan balance, the Plan Administrator
shall request additional collateral of sufficient value to adequately secure the
repayment of the loan. Failure to provide such additional collateral upon a
request of the Plan Administrator shall constitute an event of default.
13.7 Segregated Investment. Loans shall be considered a Participant
directed investment and, for the limited purposes of allocating earnings and
losses pursuant to ARTICLE 5, shall not be considered a part of the common fund
under the Trust.
13.8 Repayment of Loan. The Plan Administrator shall have the sole
responsibility for ensuring that a Participant timely makes all loan repayments,
and for notifying the Trustee in the event of any default by the Participant on
the loan. Each loan repayment shall be paid to the Trustee and shall be
accompanied by written instructions from the Plan Administrator that identify
the Participant on whose behalf the loan repayment is being made.
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13.9 Default on Loan.
(a) In the event of a termination of the Participant's employment with
the Affiliated Employers or a default by a Participant on a loan repayment,
all remaining payments on the loan shall be immediately due and payable.
The Employer shall, upon the direction of the Plan Administrator, to the
extent permitted by law, deduct the total amount of the loan outstanding
and any unpaid interest due thereon from the wages or salaries payable to
the Participant by the Employer in accordance with the Participant's
promissory note. In addition, the Plan Administrator shall take any and all
other actions necessary and appropriate to enforce collection of the unpaid
loan. However, attachment of the Participant's Account pledged as security
will not occur until a distributable event occurs under the Plan.
(b) For purposes of this section, the term "default" shall mean
failure, by a period of at least ten (10) days, to make any loan payment
(whether principal or interest or both) that is due and payable. Neither
the Plan Administrator nor any other fiduciary is required to give any
written or oral notice of default.
13.10 Unpaid Amounts. Upon the occurrence of a Participant's
retirement or death, or upon a Participant's fifth consecutive Break in Service
or earlier distribution, the unpaid balance of any loan, including any unpaid
interest, shall be deducted from any payment or distribution from the Trust to
which such Participant or his Beneficiary may be entitled. If after charging
the Participant's Account with the unpaid balance of the loan, including any
unpaid interest, there still remains an unpaid balance of any such loan and
interest, then the remaining unpaid balance of such loan and interest shall be
charged against any property pledged as security with respect to such loan.
ARTICLE 14
INSURANCE
14.1 Insurance. If the Adoption Agreement so provides and the Employer
elects to allocate or permit Participants to allocate a portion of their
Accounts to purchase life insurance, the ensuing subsections of this ARTICLE
shall apply.
14.2 Policies. The Plan Administrator shall instruct the Trustee to
procure one or more life insurance policies on the Participant's life, the terms
of which shall conform to the requirements of the Plan and the Code. The
policies and the companies which write them shall be subject to the approval of
the Plan Administrator and the Trustee. The Trustee shall procure and hold such
policies in its name or the name of the nominee. The Trustee shall be the sole
owner of all contracts purchased hereunder, and it shall be so designated in
each policy and application therefor.
14.3 Beneficiary. The Participant shall have the right to name the
Beneficiary and to choose the benefit option under the policy for the
Beneficiary. The Trustee shall designate the Beneficiary of all such policies in
accordance with the written directions of the Plan Administrator and the policy
terms. Such designations may be outlined in the original application as
forwarded to the issuing company. However, the Plan Administrator shall have
available and shall furnish the Participant with the necessary forms for any
Beneficiary designation or change of Beneficiary and it will keep a copy of all
executed designations as part of its records. Upon a Participant's death, the
Plan Administrator will promptly furnish the Trustee a copy of the last
designation and shall authorize the Trustee to complete such forms as the
insurance company may require in order to effect the benefit option.
14.4 Payment of Premiums. Subject to the provisions of sections 7.3 and
14.5, premium payments to the insurer may be made only by the Trustee with
respect to any insurance policy purchased on behalf of a Participant and shall
constitute first an investment of a portion of the funds of the Participant's
Employer Contribution subaccounts up to the maximum amount of such subaccounts
permitted to be applied toward such premium payments, as provided in section
14.5. If a Participant's subaccounts lack sufficient assets to pay premiums on a
life insurance policy due on his behalf, the Trustee, at the direction of the
Plan Administrator, acting upon the request of the Participant, shall borrow
under the policy loan provisions, if any, the amount necessary to pay such
premiums, using the cash value of the insurance as security, or the Trustee may
liquidate assets held in the Participant's Account, in the same order, of
sufficient value to pay such premiums. Any loans shall be repaid by the
application of earnings, contributions, or forfeitures to the Account of the
Participant insured by such policy. In the absence of the Plan Administrator's
direction to borrow or to liquidate assets to pay premiums, the life insurance
policy shall be put on a paid-up basis or, if it has no cash value, cancelled.
14.5 Limitation on Insurance Premiums. The Trustee shall not pay, nor
shall anyone on behalf of the Trustee pay, any life insurance premium for any
Participant out of the Participant's Employer Contribution subaccounts unless
the amount of such payment, plus all premiums previously so paid on behalf of
the Participant, is less than fifty percent (50%) of the Employer Contributions
and forfeitures allocated to the Participant's Employer Contribution subaccounts
as determined on the date such premium is paid with respect to reserve life
insurance policies and shall be less than twenty-five percent (25%) thereof with
respect to nonreserve (term) policies, or, if both reserve life and term
insurance are purchased on the life of any Participant, the sum of the term
insurance premium plus one-half (1/2) of the reserve life premiums may not
exceed twenty-five percent (25%) of the Employer Contributions made on behalf of
such Participant. For purposes of these incidental insurance provisions,
reserve life insurance contracts are contracts with both nondecreasing death
benefits and nonincreasing premiums. Dividends received on life insurance
policies shall be considered a reduction of premiums paid in such computations.
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If payment of premiums on a Participant's life insurance policy is
prohibited because of the limitation, the Trustee, as directed by the Plan
Administrator, shall permit the Participant to maintain that part of the
coverage made available by the prohibited premiums, either by payment of the
amount of the prohibited premium by the Participant from sources other than the
Trust or by distributing the policy to the extent of the Participant's vested
interest to the Participant and eliminating it from the Trust.
Nothing contained in the foregoing provisions of section 14.4 and this
section shall be deemed to authorize the payment of any premium or premiums for
any Participant which would result in a failure to maintain any mandatory
investment in Shares required by the Sponsor in the Account or subaccounts of
any such Participant.
14.6 Insurance Company. No insurance company which may issue any policies
for the purposes of this Plan shall be required to take or permit any action
contrary to the provisions of said policies, nor shall such insurance company be
deemed to be a party to, or responsible for the validity of, this Plan for any
purpose. No such insurance company shall be required to look into the terms of
this Plan or question any action of the Trustee hereunder, nor be responsible to
see that any action of the Trustee is authorized by the terms of this Plan. Any
such issuing insurance company shall be fully discharged from any and all
liability for any amount paid to the Trustee or paid in accordance with the
direction of the Trustee, as the case may be, or for any change made or action
taken by such insurance company upon such direction and no such insurance
company shall be obliged to see to the distribution or further application of
any monies paid by it. The certificate of the Trustee signed by one of its
trust officers, assistant secretary, or other authorized representative thereof,
may be received by any insurance company as conclusive evidence of any of the
matters mentioned in this Plan and any insurance company shall be fully
protected in taking or permitting any action on the faith thereof and shall
incur no liability or responsibility for so doing.
14.7 Distribution of Policies. Upon a Participant's death, the Trustee,
upon direction of the Plan Administrator, shall procure the payment of the
proceeds of any policy held by the Participant in accordance with its terms and
this Plan. The Trustee shall be required to pay over all the proceeds of any
policy to the Participant's Designated Beneficiary in accordance with the
distribution provisions of this Plan. A Participant's Spouse will be the
Designated Beneficiary unless a Qualified Election has been made in accordance
with section 9.4(c) of the Plan. Under no circumstances shall the Trust retain
any part of the proceeds. Subject to the joint and survivor annuity
requirements of ARTICLE 9, the policies shall be converted or distributed upon
commencement of benefits in accordance with the provisions of this section.
Upon a Participant's retirement at or after his Normal Retirement Age, unless
there is a single sum distribution in which case any policy shall be
distributed, any such policy shall be converted to a paid-up contract and
delivered to the Participant but the Plan Administrator may, with the
Participant's consent, direct that a portion or all of such cash value of the
policy be converted to provide retirement income as permitted within the terms
of the policy and this Plan. Upon a Participant's retirement due to Total and
Permanent Disability, any such policy shall be held for his account and assigned
or delivered to the Participant in addition to any other benefits provided by
this Plan. Upon a Participant's termination of employment for reasons other than
death, Total and Permanent Disability, or retirement as stated above, to the
extent of life insurance purchased by Employer Contributions, he shall be
entitled to a vested interest in any policy held for his account as his interest
is vested in the remainder of his Employer Contribution subaccounts (exclusive
of any such policy). Whenever the Participant is entitled to one hundred percent
(100%) vesting, then such policy shall be assigned and delivered to the
Participant in accordance with its terms and the terms of the Plan. Whenever the
Participant is entitled to vesting of less than one hundred percent (100%), then
the Participant shall be entitled to a vested interest of the cash surrender
value of any such policy equal to his percent of vested interest in his Employer
Contribution subaccounts, exclusive of the policy, and one of the following
distribution procedures shall apply:
(a) If the nonvested portion of the cash surrender value of all
policies held for the Participant's Account is less than the amount of his
vested termination benefit exclusive of the policies, then, such policy
shall be assigned to the Participant and the remainder of the Participant's
vested interest in the Participant's Employer Contribution subaccounts
shall be reduced by the cash surrender value of the nonvested portion of
all policies, after which it shall be paid or distributed to the
Participant in accordance with the terms of the Plan; or
(b) If the nonvested portion of the cash surrender value of all
policies held for the Participant's Account exceeds the Participant's
vested interest in the Employer Contribution subaccount exclusive of such
policies, the Participant shall be given the opportunity to purchase such
policies by paying to the Trustee the amount of such excess within thirty
(30) days after notice to him of the amount to be paid. Upon receipt of
such payment said policy shall be assigned and delivered to the Participant
to the full satisfaction of all termination benefits under this Plan. Any
such policy not so purchased shall be surrendered by the Trustee for its
cash value and the proceeds thereof deposited in the Trust for reallocation
pursuant to ARTICLE 5.
It is the intention hereof that the total termination benefit of a
Participant whose interest is not fully vested shall be equal to the sum of the
vested percentage of his Employer Contribution subaccounts exclusive of all such
policies and the same percentage of the cash value of all such policies held for
his Account. To the extent possible under the foregoing provisions, such total
termination benefits shall be satisfied by the transfer and delivery to the
Participant of one or more such policies with the balance, if any, to be paid in
cash or in kind.
14.8 Policy Features. The Trustee shall arrange, where possible, that all
policies purchased for the benefit of a Participant shall have the same dividend
option which shall be on the premium reduction plan, and as nearly as may be
possible all policies issued under
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the Plan shall have the same anniversary date. To the extent any dividends or
credits earned on insurance policies are not applied toward the next premiums
due, they shall be allocated to the Participant's Employer Contribution
subaccount in the same manner as a Participant's directed investment.
14.9 Changed Conditions. From time to time because of changed conditions,
the Trustee, acting at the direction of the Plan Administrator upon the election
of the Participant concerned, shall obtain an additional contract or policy or
make such change in the contracts or policies maintained by the Trustee on the
life of the Participant as may be required by such changed conditions, within
the limits permitted by the insurance company which issued or is requested to
issue a contract and the limits established by this Plan.
14.10 Conflicts. In the event of any conflict between the terms of the
Plan and the provisions of any contract issued hereunder, the terms of the Plan
shall control.
ARTICLE 15
ADMINISTRATION
15.1 Duties and Responsibilities of Fiduciaries; Allocation of Fiduciary
Responsibility. A fiduciary of the Plan shall have only 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 4;
appointing the Trustee and the Plan Administrator; and determining the funds
available for investment under the Plan. The Plan Administrator shall have the
sole responsibility for the administration of the Plan, as more fully described
in section 15.2. It is intended that each fiduciary shall be responsible only
for the proper exercise of his own powers, duties, responsibilities, and
obligations under the Plan and Trust Agreement, and shall not be responsible for
any act or failure to act of another fiduciary. A fiduciary may serve in more
than one fiduciary capacity with respect to the Plan.
15.2 Powers and Responsibilities of the Plan Administrator.
(a) Administration of the Plan. The Plan Administrator shall have all
powers necessary to administer the Plan, including the power to construe
and interpret the Plan documents; to decide all questions relating to an
individual's eligibility to participate in the Plan; to determine the
amount, manner, and timing of any distribution of benefits or withdrawal
under the Plan; to approve and ensure the repayment of any loan to a
Participant under the Plan; to resolve any claim for benefits in accordance
with section 15.7; and to appoint or employ advisors, including legal
counsel; to render advice with respect to any of the Plan Administrator's
responsibilities under the Plan. Any construction, interpretation, or
application of the Plan by the Plan Administrator shall be final,
conclusive, and binding. All actions by the Plan Administrator shall be
taken pursuant to uniform standards applied to all persons similarly
situated. The Plan Administrator shall have no power to add to, subtract
from, or modify any of the terms of the Plan, or to change or add to any
benefits provided by the Plan, or to waive or fail to apply any
requirements of eligibility for a benefit under the Plan.
(b) Records and Reports. The Plan Administrator shall be responsible
for maintaining sufficient records to reflect the Eligibility Computation
Periods in which an Employee is credited with one or more Years of Service
for purposes of determining his eligibility to participate in the Plan, and
the Compensation of each Participant for purposes of determining the amount
of contributions that may be made by or on behalf of the Participant under
the Plan. The Plan Administrator shall be responsible for submitting all
required reports and notifications relating to the Plan to Participants or
their Beneficiaries, the Internal Revenue Service and the Department of
Labor.
(c) Furnishing Trustee with Instructions. The Plan Administrator
shall be responsible for furnishing the Trustee with written instructions
regarding all contributions to the Trust, all distributions to Participants
in accordance with ARTICLE 10, all withdrawals by Participants in
accordance with ARTICLE 12, all loans to Participants in accordance with
ARTICLE 13 and all purchases of life insurance in accordance with ARTICLE
14. In addition, the Plan Administrator shall be responsible for furnishing
the Trustee with any further information respecting the Plan which the
Trustee may request for the performance of its duties or for the purpose of
making any returns to the Internal Revenue Service or Department of Labor
as may be required of the Trustee.
(d) Rules and Decisions. The Plan Administrator may adopt such rules
as it deems necessary, desirable, or appropriate in the administration of
the Plan. All rules and decisions of the Plan Administrator shall be
applied uniformly and consistently to all Participants in similar
circumstances. When making a determination or calculation, the Plan
Administrator shall be entitled to rely upon information furnished by a
Participant or Beneficiary, the Employer, the legal counsel of the
Employer, or the Trustee.
(e) Application and Forms for Benefits. The Plan Administrator may
require a Participant or Beneficiary to complete and file with it an
application for a benefit, and to furnish all pertinent information
requested by it. The Plan Administrator may rely upon all such information
so furnished to it, including the Participant's or Beneficiary's current
mailing address.
(f) Facility of Payment. Whenever, in the Plan Administrator's
opinion, a person entitled to receive a payment of a benefit or installment
thereof is under a legal disability or is incapacitated in any way so as to
be unable to manage his financial affairs, as determined by a court of
competent jurisdiction, it may direct the Trustee to make payments to such
person or to the legal representative or to a relative or friend of such
person for that person's benefit, or it may direct the Trustee to apply the
payment for the benefit of such person in such manner as it considers
advisable.
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15.3 Allocation of Duties and Responsibilities. The Plan
Administrator may, by written instrument, allocate among its members or
employees any of its duties and responsibilities not already allocated under the
Plan or may designate persons other than members or employees to carry out any
of the Plan Administrator's duties and responsibilities under the Plan. Any
such duties or responsibilities thus allocated must be described in the written
instrument. If a person other than an Employee of the Employer is so
designated, such person must acknowledge in writing his acceptance of the duties
and responsibilities allocated to him.
15.4 Appointment of the Plan Administrator. The Employer shall designate
in the Adoption Agreement the Plan Administrator who shall administer the
Employer's Plan. Such Plan Administrator may consist of an individual, a
committee of two or more individuals, whether or not, in either such case, the
individual or any of such individuals are Employees of the Employer, a
consulting firm or other independent agent, the Trustee (with its consent), or
the Employer itself. The Plan Administrator shall be charged with the full
power and the responsibility for administering the Plan in all its details. If
no Plan Administrator has been appointed by the Employer, or if the person
designated as Plan Administrator by the Employer is not serving as such for any
reason, the Employer shall be deemed to be the Plan Administrator of the Plan.
The Plan Administrator may be removed by the Employer, or may resign by giving
notice in writing to the Employer, and in the event of the removal, resignation,
or death, or other termination of service by the Plan Administrator, the
Employer shall, as soon as practicable, appoint a successor Plan Administrator,
such successor thereafter to have all of the rights, privileges, duties, and
obligations of the predecessor Plan Administrator.
15.5 Expenses. The Employer shall pay all expenses authorized and incurred
by the Plan Administrator in the administration of the Plan except to the extent
such expenses are paid from the Trust.
15.6 Liabilities. The Plan Administrator and each person to whom duties
and responsibilities have been allocated pursuant to section 15.3 may be
indemnified and held harmless by the Employer with respect to any alleged breach
of responsibilities performed or to be performed hereunder. The Employer and
each Affiliated Employer shall indemnify and hold harmless the Sponsor against
all claims, liabilities, fines, and penalties, and all expenses reasonably
incurred by or imposed upon him (including, but not limited to, reasonable
attorney's fees) which arise as a result of actions or failure to act in
connection with the operation and administration of the Plan.
15.7 Claims Procedure.
(a) Filing a Claim. Any Participant or Beneficiary under the Plan may
file a written claim for a Plan benefit with the Plan Administrator or with
a person named by the Plan Administrator to receive claims under the Plan.
(b) Notice of Denial of Claim. In the event of a denial or limitation
of any benefit or payment due to or requested by any Participant or
Beneficiary under the Plan ("claimant"), claimant shall be given a written
notification containing specific reasons for the denial or limitation of
his benefit. The written notification shall contain specific reference to
the pertinent Plan provisions on which the denial or limitation of his
benefit is based. In addition, it shall contain a description of any other
material or information necessary for the claimant to perfect a claim, and
an explanation of why such material or information is necessary. The
notification shall further provide appropriate information as to the steps
to be taken if the claimant wishes to submit his claim for review. This
written notification shall be given to a claimant within ninety (90) days
after receipt of his claim by the Plan Administrator unless special
circumstances require an extension of time for processing the claim. If
such an extension of time for processing is required, written notice of the
extension shall be furnished to the claimant prior to the termination of
said ninety (90) day period, and such notice shall indicate the special
circumstances which make the postponement appropriate.
(c) Right of Review. In the event of a denial or limitation of his
benefit, the claimant or his duly authorized representative shall be
permitted to review pertinent documents and to submit to the Plan
Administrator issues and comments in writing. In addition, the claimant or
his duly authorized representative may make a written request for a full
and fair review of his claim and its denial by the Plan Administrator;
provided, however, that such written request must be received by the Plan
Administrator (or its delegate to receive such requests) within sixty (60)
days after receipt by the claimant of written notification of the denial or
limitation of the claim. The sixty (60) day requirement may be waived by
the Plan Administrator in appropriate cases.
(d) Decision on Review. A decision shall be rendered by the Plan
Administrator within sixty (60) days after the receipt of the request for
review, provided that where special circumstances require an extension of
time for processing the decision, it may be postponed on written notice to
the claimant (prior to the expiration of the initial sixty (60) day period)
for an additional sixty (60) days, but in no event shall the decision be
rendered more than one hundred twenty (120) days after the receipt of such
request for review. Any decision by the Plan Administrator shall be
furnished to the claimant in writing and shall set forth the specific
reasons for the decision and the specific Plan provisions on which the
decision is based.
(e) Court Action. No Participant or Beneficiary shall have the right
to seek judicial review of a denial of benefits, or to bring any action in
any court to enforce a claim for benefits prior to filing a claim for
benefits or exhausting his rights to review under this section.
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ARTICLE 16
AMENDMENT, TERMINATION AND MERGER
16.1 Sponsor's Power to Amend. The Sponsor may amend any part of the Plan.
For purposes of Sponsor's amendments, the mass submitter shall be recognized as
the agent of the Sponsor. If the Sponsor does not adopt the amendments made by
the mass submitter, it will no longer be identical to or a minor modifier of the
mass submitter plan.
16.2 Amendment by Adopting Employer.
(a) The Employer may:
(i) change the choice of options in the Adoption Agreement;
(ii) add overriding language in the Adoption Agreement when such
language is necessary to satisfy section 415 or section 416 of the
Code because of the required aggregation of multiple plans; and
(iii) add certain model amendments published by the Internal
Revenue Service which specifically provide that their adoption will
not cause the Plan to be treated as individually designed.
(b) An Employer that amends the Plan for any other reason, including a
waiver of the minimum funding requirement under section 412(d) of the Code,
will no longer participate in this prototype plan and will be considered to
have an individually designed plan.
16.3 Vesting Upon Plan Termination. In the event of the termination or
partial termination of the Plan, the Account balance of each affected
Participant will be nonforfeitable.
16.4 Vesting Upon Complete Discontinuance of Contributions. In the event
of a complete discontinuance of contributions under the Plan, the Account
balance of each affected Participant will be nonforfeitable.
16.5 Maintenance of Benefits Upon Merger. In the event of a merger or
consolidation with, or transfer of assets to any other plan, each Participant
will receive a benefit immediately after such merger, consolidation or transfer
(if the Plan then terminated) which is at least equal to the benefit the
Participant was entitled to immediately before such merger, consolidation or
transfer (if the Plan had been terminated).
16.6 Special Amendments. The Employer may from time to time make any
amendment to the Plan that may be necessary to satisfy section 415 or 416 of the
Code. Any such amendment will be adopted by the Employer by completing
overriding Plan language in the Adoption Agreement. In the event of such an
amendment, the Employer must obtain a separate determination letter from the
Internal Revenue Service to continue reliance on the Plan's qualified status.
ARTICLE 17
MISCELLANEOUS
17.1 Exclusive Benefit of Participants and Beneficiaries.
(a) All assets of the Trust shall be retained for the exclusive
benefit of Participants and their Beneficiaries, and shall be used only to
pay benefits to such persons or to pay the fees and expenses of the Trust.
The assets of the Trust shall not revert to the benefit of the Employer,
except as otherwise specifically provided in section 17.1(b).
(b) To the extent permitted or required by ERISA and the Code,
contributions to the Trust under this Plan are subject to the following
conditions:
(i) If a contribution or any part thereof is made to the Trust by
the Employer under a mistake of fact, such contribution or part
thereof shall be returned to the Employer within one (1) year after
the date the contribution is made.
(ii) In the event the Plan is determined not to meet the initial
qualification requirements of section 401 of the Code, contributions
made in respect of any period for which such requirements are not met
shall be returned to the Employer within one (1) year after the Plan
is determined not to meet such requirements, but only if the
application for the qualification is made by the time prescribed by
law for filing the Employer's return for the taxable year in which the
Plan is adopted, or such later date as the Secretary of the Treasury
may prescribe.
(iii) Contributions to the Trust are specifically conditioned on
their deductibility under the Code and, to the extent a deduction is
disallowed for any such contribution, such amount shall be returned to
the Employer within one (1) year after the date of the disallowance of
the deduction.
17.2 Nonguarantee of Employment. Nothing contained in this Plan shall be
construed as a contract of employment between the Employer and any Employee, or
as a right of any Employee to be continued in the employment of the Employer, or
as a limitation of the right of the Employer to discharge any of its Employees,
with or without cause.
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17.3 Rights to Trust Assets. No Employee, Participant, or Beneficiary
shall have any right to, or interest in, any assets of the Trust upon
termination of employment or otherwise, except as provided under the Plan. All
payments of benefits under the Plan shall be made solely out of the assets of
the Trust.
17.4 Nonalienation of Benefits. No benefit or interest available hereunder
will be subject to assignment or alienation, either voluntarily or
involuntarily. The preceding sentence shall also apply to the creation,
assignment, or recognition of a right to any benefit payable with respect to a
Participant pursuant to a domestic relations order, unless such order is
determined to be a qualified domestic relations order, as defined in section
414(p) of the Code, or any domestic relations order entered before January 1,
1985.
17.5 Aggregation Rules.
(a) Except as provided in ARTICLE 6, all Employees of the Employer or
any Affiliated Employer will be treated as employed by a single employer.
(b) If this Plan provides contributions or benefits for one or more
Owner-Employees who control both the business for which this Plan is
established and one or more other trades or businesses, this Plan and the
plan established for other trades or businesses must, when looked at as a
single plan, satisfy sections 401(a) and (d) of the Code for the Employees
of this and all other trades or businesses.
(c) If the Plan provides contributions or benefits for one or more
Owner-Employees who control one or more other trades or businesses, the
employees of the other trades or businesses must be included in a plan
which satisfies sections 401(a) and (d) of the Code and which provides
contributions and benefits not less favorable than provided for Owner-
Employees under this Plan.
(d) If an individual is covered as an Owner-Employee under the plans
of two or more trades or businesses which are not controlled and the
individual controls a trade or business, then the contributions or benefits
of the employees under the plan of the trades or businesses which are
controlled must be as favorable as those provided for him under the most
favorable plan of the trade or business which is not controlled.
(e) For purposes of paragraphs (b), (c) and (d), an Owner-Employee, or
two or more Owner-Employees, will be considered to control a trade or
business if the Owner-Employee, or two or more Owner-Employees together:
(i) own the entire interest in an unincorporated trade or
business; or
(ii) in the case of a partnership, own more than fifty percent
(50%) of either the capital interest or the profits interest in the
partnership.
For purposes of the preceding sentence, an Owner-Employee, or two or more
Owner-Employees shall be treated as owning an interest in a partnership which is
owned, directly or indirectly, by a partnership which such Owner-Employee, or
such two or more Owner-Employees, are considered to control within the meaning
of the preceding sentence.
17.6 Failure of Qualification. If the Employer's plan fails to attain or
retain qualification, such plan will no longer participate in this
master/prototype plan and will be considered an individually designed plan.
17.7 Applicable Law. Except to the extent otherwise required by ERISA, as
amended, this Plan shall be construed and enforced in accordance with the laws
of the state in which the Employer's principal place of business is located, as
specified in the Adoption Agreement.
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PROTOTYPE DEFINED CONTRIBUTION TRUST
31
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PROTOTYPE DEFINED CONTRIBUTION TRUST
TABLE OF CONTENTS
-----------------
Article Page
- ------- ----
ARTICLE I ACCOUNTS
1.1 Establishing Accounts........................... 33
1.2 Charges Against Accounts........................ 33
1.3 Prospectus to be Provided....................... 33
ARTICLE II RECEIPT OF CONTRIBUTIONS............................. 33
ARTICLE III INVESTMENT POWERS OF THE TRUSTEE
3.1 Investment of Account Assets.................... 33
3.2 Directed Investments............................ 34
3.3 General Investment Powers....................... 34
3.4 Investment in Combined Funds.................... 35
3.5 Other Powers of the Trustee..................... 35
3.6 General Powers.................................. 35
3.7 Valuation of Trust.............................. 35
3.8 Bonding......................................... 35
3.9 Duties not Assigned............................. 35
ARTICLE IV DISTRIBUTIONS FROM A PARTICIPANT'S ACCOUNT........... 35
ARTICLE V REPORTS OF THE TRUSTEE AND THE PLAN ADMINISTRATOR.... 36
ARTICLE VI TRUSTEE'S FEES AND EXPENSES OF THE TRUST............. 36
ARTICLE VII DUTIES OF THE EMPLOYER AND THE PLAN ADMINISTRATOR.... 36
7.1 Information and Data to be Furnished
the Trustee..................................... 36
7.2 Limitation of Duties............................ 36
ARTICLE VIII LIABILITY OF THE TRUST
8.1 Trustee's Liability............................. 36
ARTICLE IX DELEGATION OF POWERS
9.1 Delegation by the Trustee....................... 37
9.2 Delegation with Employer Approval............... 37
ARTICLE X AMENDMENT............................................ 38
ARTICLE XI RESIGNATION OR REMOVAL OF TRUSTEE.................... 38
ARTICLE XII TERMINATION OF THE TRUST
12.1 Term of the Trust............................... 38
12.2 Termination by the Trustee...................... 38
ARTICLE XIII MISCELLANEOUS
13.1 No Diversion of Assets.......................... 38
13.2 Notices......................................... 38
13.3 Multiple Trustees............................... 38
13.4 Conflict with Plan.............................. 38
13.5 Applicable Law.................................. 39
13.6 Returned Contributions.......................... 39
13.7 General Undertaking............................. 39
13.8 Invalidity of Certain Provisions................ 39
13.9 Counterpart Originals........................... 39
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TRUST AGREEMENT
The Employer has established a Plan for the benefit of Participants
therein pursuant to section 401 of the Internal Revenue Code of 1986. As part
of the Plan, the Employer has requested such person or persons (individual,
corporate, or other entity), as may be designated in the Adoption Agreement, to
serve as Trustee pursuant to the Trust established for the investment of
contributions under the Plan upon the terms and conditions set forth in this
Trust Agreement.
Unless the context of this Trust Agreement clearly indicates
otherwise, the terms defined in ARTICLE 2 of the Plan entered into by the
Employer, of which this Trust Agreement forms a part, shall, when used herein,
have the same meaning as in the Plan.
ARTICLE I
ACCOUNTS
1.1 Establishing Accounts. The Trustee shall open and maintain a
Trust account for the Plan and, as part thereof, Participants' Accounts for such
individuals as the Plan Administrator shall, from time to time, give written
notice to the Trustee as being Participants in the Plan. The Trustee shall also
open and maintain such other subaccounts as may be appropriate or desirable to
aid in the administration of the Plan. Separate subaccounts shall be maintained
for each Participant and shall be credited with the contributions made by the
Employer and with forfeitures allocated to each such Participant pursuant to the
Plan (and all earnings thereon). If nondeductible voluntary contributions by
Participants are permitted by the Plan, the Trustee shall open and maintain as a
part of the Trust a separate subaccount for each Participant who makes such
nondeductible voluntary contributions, each such subaccount to be credited with
the Participant's voluntary contributions (and all earnings attributable to such
contributions). If trustee transfers or rollover contributions from another
qualified plan are received, the Trustee shall open and maintain a separate
rollover subaccount for each Participant, each such subaccount to be credited
with the Participant's trustee transfers or rollover contributions (and all
earnings attributable to such contributions).
1.2 Charges Against Accounts. Upon receipt of written instructions
from the Administrator, the Trustee shall charge the appropriate subaccount of
the Participant for any withdrawals or distributions made under the Plan and any
forfeiture, which may be required under the Plan, of unvested interests
attributable to Employer Contributions. The Plan Administrator will give written
instructions to the Trustee specifying the manner in which Employer
Contributions and any forfeiture of the nonvested portion of Accounts, as
allocated by the Plan Administrator in accordance with the provisions of the
Plan, are to be credited to the various Accounts maintained for Participants.
1.3 Prospectus to be Provided. The Plan Administrator shall ensure
that a Participant who makes a nondeductible voluntary contribution has
previously received or receives a copy of the then current prospectus relating
to the Shares. Delivery of such a nondeductible voluntary contribution,
pursuant to the provisions of the Plan by the Plan Administrator to the Trustee
shall entitle the Trustee to assume that the Participant has received such a
prospectus.
ARTICLE II
RECEIPT OF CONTRIBUTIONS
The Trustee shall accept and hold in the Trust contributions made by
the Employer and Participants under the Plan. The Administrator shall give
written instructions to the Trustee specifying the Participants' Accounts to
which contributions are to be credited, the amount of each such credit which is
attributable to Employer Contributions, and the amount, if any, which is
attributable to the Participant's nondeductible voluntary contributions. If
written instructions are not received by the Trustee, or if such instructions
are received but are deemed by the Trustee to be unclear, upon notice to the
Employer, the Trustee may elect to hold all or part of any such contribution in
cash, without liability for rising security prices or distributions made,
pending receipt by it from the Plan Administrator of written instructions or
other clarification, or the Trustee may return the contribution to the Employer.
If any contributions or earnings are less than any minimum which the then
current prospectus for the Shares requires, the Trustee may hold the specified
portion of contributions or earnings in cash, without interest, until such time
as the proper amount has been contributed or earned so that the investment in
the Shares required under the Plan may be made. All payments to the Trust shall
be remitted in U.S. currency or other property to the Trustee at the address
specified by it. Any payments not in U.S. currency may, in the sole discretion
of the Trustee, be refused.
ARTICLE III
INVESTMENT POWERS OF THE TRUSTEE
3.1 Investment of Account Assets. The Trustee shall invest the
amount of each contribution made hereunder and all earnings on the Trust in full
and fractional Shares in accordance with the current prospectus for such Shares,
in such amounts and proportions as shall from time to time be designated by the
Plan Administrator on forms provided by the Sponsor, and shall credit such
Shares to the
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Accounts of each Participant on whose behalf or by whom the contributions are
made and any forfeitures are allocated. All dividends and capital gain
distributions received on the Shares held by the Trustee in each Account, shall,
if received in cash, be reinvested in such Shares in accordance with the current
prospectus for such Shares and shall in any event be credited to such Account.
If any distribution on Shares may be received at the election of the shareholder
in additional Shares, the Trustee shall so elect. The Trustee shall deliver, or
cause to be executed and delivered, to the Plan Administrator, all notices,
prospectuses, financial statements, proxies, and proxy soliciting materials
relating to Shares held hereunder. The Trustee shall not vote any of the Shares
held hereunder, except in accordance with the written instructions of the Plan
Administrator. If no such written instructions are received, such Shares shall
not be voted. The obligations of the Trustee hereunder may be delegated by it as
provided in sections 9.1 and 9.2.
The Trustee shall sell Shares and purchase Shares to accomplish any
change in investments desired by the Employer as indicated on any amended
Adoption Agreement or other instructions in accordance with the terms of the
Plan.
Notwithstanding the above, if periodic payments are being made to a
Participant pursuant to ARTICLE IV hereof, any dividends received on Shares held
in such Participant's Account, which dividends are invested at an offering price
which includes a sales charge, need not be invested in additional Shares but may
be held for distribution to the Participant in periodic payments. In such
instances, the Trustee may make any election necessary to receive any such
dividends in cash.
3.2 Directed Investments. When so instructed by the Plan
Administrator, the Trustee shall invest all or any portion of the individual
Account of any Participant in accordance with the direction of the Employer or
such Participant in lieu of participation in the general assets of the Trust.
Such directed investments shall be accounted for separately for each
Participant. Except as otherwise provided herein, the Trustee shall not have any
discretion, and is specifically prohibited from exercising any control or
discretion, with respect to such directed investments. Each Participant who
directs the investment of his Account shall be solely and absolutely responsible
for the investment or reinvestment of all directed investment assets held on his
behalf in Trust, and, except as otherwise provided herein, the Trustee shall not
question any such direction, review any securities or other such assets, or make
suggestions with respect to the investment, retention or disposition of any such
assets; provided that:
(a) If any contributions are transmitted to or otherwise received
or held as directed investment assets without investment directions
from the Participant, the Trustee may retain such amounts in a
noninterest-bearing savings account in a federally insured institution
for the benefit of the Participant.
(b) The Trustee may establish such reasonable rules and
regulations, applied on a uniform basis to all Participants, with
respect to the requirements for, and the form and manner of,
effectuating any transaction with respect to directed investment
assets including, without limitation, minimum amounts, rules
applicable to conversion of directed investments into general assets
of the Trust, and appropriate adjustments (based on fair market
values) to Accounts to reflect any such conversion, as the Trustee
shall determine to be consistent with the purposes of the Plan. Any
such rules and regulations shall be binding upon all persons
interested in the Trust.
(c) The Trustee may establish a procedure for the periodic review
of directed investment assets to determine, in light of the facts and
circumstances reasonably known to it, whether any actual or proposed
investment of such assets constitutes or would constitute a prohibited
transaction as that term is defined in sections 406-408 of ERISA and
the corresponding provisions of the Code. If the Trustee determines
that any investment constitutes or would constitute a prohibited
transaction, the Trustee shall promptly communicate this determination
to the Plan Administrator, and shall recommend that the investment be
prevented or disposed of, as the case may be, and may recommend any
other action authorized or required by law, to prevent or remedy the
transaction.
(d) In accordance with and pursuant to uniform and
nondiscriminatory rules established under and in accordance with the
Plan, the Trustee may deny the Plan Administrator's application to
allow a directed investment proposed by a Participant.
(e) Notwithstanding anything herein to the contrary, in no event
shall the Trustee engage in any transaction that would be prohibited
under ERISA.
3.3 General Investment Powers. Subject to any investment limitations
or minimum requirements for investments in Shares imposed by the Sponsor, and
subject to investment instructions given by the Employer, the Trustee shall be
authorized and empowered to invest and reinvest all or any part of the Trust in
any property, real or personal or mixed, including, but not being limited to,
capital or common stock (whether voting or nonvoting or whether or not currently
paying a dividend), preferred or preference stock (whether voting or nonvoting
or whether or not currently paying a dividend), Shares of regulated investment
companies, convertible securities, corporate and governmental obligations,
leaseholds, ground rents, mortgages, and other interests in realty, trust, and
participation certificates, oil, mineral or gas properties, royalty interests or
rights, including equipment pertaining thereto, notes and other evidences of
indebtedness or ownership, secured or unsecured, contracts, choses in action,
and warrants, and other instruments entitling the owner thereof to subscribe to
or purchase any of the aforesaid. Subject to any investment limitations or
requirements imposed by the Sponsor relating to the type of permissible
investments in the Trust or the minimum percentage of Trust assets to be
invested in Shares, and subject to the provisions of ARTICLE VIII hereof, in
making and retaining such investments and reinvestments pursuant hereto, the
Trustee shall not be bound as to the character of any investments by any
statute, rule of court, or custom governing the investment of Trust funds.
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3.4 Investment in Combined Funds. If the Trustee is a banking
institution, subject to any investment limitations or minimum requirements for
investment in Shares imposed by the Sponsor, and subject to investment
instructions given by the Employer, it may, subject to the election of the
Sponsor or the Employer, cause funds of this Trust to be invested in its
commingled funds for qualified employee benefit plan trusts and such commingled
funds are hereby adopted and made a part of the Plan of which this Trust is a
part, and any funds of this Trust invested in any such commingled funds shall be
subject to all the provisions thereof, as the same may be amended from time to
time.
3.5 Other Powers of the Trustee. The Trustee is authorized and
empowered with respect to the Trust:
(a) Subject to any investment limitations or minimum requirements
for investment in Shares imposed by the Sponsor, and subject to
investment instructions given by the Employer, to sell, exchange,
convey, transfer, or otherwise dispose of, either at public or private
sale, any property, real or personal or mixed, at any time held by it,
for such consideration and on such terms and conditions as to credit
or otherwise as the Trustee may deem best.
(b) Subject to the provisions of section 3.1, to vote in person or
by proxy any stocks, bonds, or other securities held by it; to
exercise any options appurtenant to any stocks, bonds, or other
securities, or to exercise any rights to subscribe for additional
stocks, bonds, or other securities, and to make any and all necessary
payments therefor, to join in, or to dissent from, and to oppose, the
reorganizations, consolidation, liquidation, sale, or merger of
corporations, or properties in which it may be interested as Trustee,
upon such terms and conditions as it may deem wise.
(c) To make, execute, acknowledge, and deliver any and all
documents of transfer and conveyance and any and all other instruments
that may be necessary or appropriate to carry out the powers herein
granted.
(d) To register any investment held in the Trust in the name of
the Trust or in the name of a nominee, and to hold any investment in
bearer form, but the books and records of the Trustee shall at all
times show that all such investments are part of the Trust.
(e) To employ suitable agents and counsel (who may also be agents
and/or counsel for the Employer or the Sponsor) and to pay their
reasonable expenses and compensation.
(f) To borrow or raise monies for the purpose of the Trust from
any source and, for any sum so borrowed to issue its promissory note
as Trustee and to secure the repayment thereof by pledging all or any
part of the Trust fund, but nothing herein contained shall obligate
the Trustee to render itself liable individually for the amount of any
such borrowing; and no person loaning money to the Trustee shall be
bound to see to the application of money loaned or to inquire into the
validity or propriety of any such borrowing.
Each and all of the foregoing powers may be exercised without a court
order or approval. No one dealing with the Trustee need inquire concerning the
validity or propriety of anything that is done or need see to the application of
any money paid or property transferred to or upon the order of the Trustee.
3.6 General Powers. The Trustee shall have all of the powers
necessary or desirable to do all acts, take all such proceedings, and exercise
all such rights and privileges, whether or not expressly authorized herein,
which it may deem necessary or proper for the administration and protection of
the property of the Trust and to accomplish any action provided for in the Plan.
3.7 Valuation of Trust. The Trustee, as of the Valuation Date, and
at such other time or times as it determines, shall determine the net worth of
the assets of the Trust. In determining such net worth, the assets of the Trust
shall be evaluated at their fair market value and all expenses shall be
deducted. The Trustee may adopt such methods of valuation as it deems
advisable.
3.8 Bonding. Except to the extent otherwise required by law, the
Trustee shall not be required to obtain any bonds in connection with its duties
hereunder. The cost of any bond obtained may be charged as an expense of the
Trust, but if not so charged, shall be paid by the Employer.
3.9 Duties not Assigned. The duties of the Trustee with respect to
the Plan are limited to those assumed by the Trustee by the terms of this Trust.
The Trustee shall not be deemed, by virtue hereof, to be the administrator or
sponsor of the Plan, and shall not be responsible for filing reports, returns or
disclosures with any government agency except as may otherwise be required by
its duties as Trustee under applicable law.
ARTICLE IV
DISTRIBUTIONS FROM A PARTICIPANT'S ACCOUNT
Distributions from the Trust shall be made by the Trustee in
accordance with proper written directions of the Plan Administrator in
accordance with the provisions of section 15.2 of the Plan, and the Plan
Administrator shall have the sole responsibility for determining that the
directions given conform to provisions of the Plan and applicable law, including
(without limitation) responsibility for calculating the vested interests of the
Participant, for calculating the amounts payable to a Participant pursuant to
ARTICLE 11 of the Plan, and for
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determining the proper person to whom benefits are payable under the Plan.
Except to the extent otherwise provided in the Plan, the interest of
Participants and Beneficiaries in the Trust and in the net earnings and profits
thereof may not be assigned or used by a Participant or Beneficiary as
collateral for a loan and shall not be subject to garnishment, attachment, levy
or execution of any kind for the debts or defaults of the Trustee or of any
person, natural or legal, having interest in the Trust.
ARTICLE V
REPORTS OF THE TRUSTEE AND THE PLAN ADMINISTRATOR
The Trustee shall keep accurate and detailed records of all receipts,
investments, disbursements, and other transactions required to be performed
hereunder with respect to the Trust. The Trustee shall file with the Plan
Administrator a written report or reports reflecting the receipts,
disbursements, and other transactions effected by it with respect to the Trust
during such Plan Year and the assets and liabilities of the Trust at the close
of the Plan Year. Such report or reports shall be open to inspection by any
Participant for a period of one hundred eighty (180) days immediately following
the date on which it is filed with the Plan Administrator. Except as otherwise
prescribed by ERISA, upon the expiration of such one hundred eighty (180) day
period, the Trustee shall be forever released and discharged from all liability
and accountability to anyone with respect to its acts, transactions, duties,
obligations, or responsibilities as shown in or reflected by such report, except
with respect to any such acts or transactions as to which the Plan Administrator
shall have filed written objections with the Trustee within such one hundred
eighty (180) day period, and except for willful misconduct or lack of good faith
on the part of the Trustee.
ARTICLE VI
TRUSTEE'S FEES AND EXPENSES OF THE TRUST
The Trustee's fees for performing its duties hereunder shall be such
reasonable amounts as shall be respectively established by it from time to time.
The Trustee shall furnish the Employer with its current schedule of fees and
shall give written notice to the Employer whenever its fees are changed or
revised. Such fees, any taxes of any kind whatsoever which may be levied or
assessed upon or in respect of the Trust, to the extent incurred by the Trustee
and any and all expenses incurred by the Trustee in the performance of its
duties, including fees for legal services rendered to the Trustee, shall, unless
paid by the Employer, be paid from the Trust in the manner provided in the Plan.
Unless paid by the Employer, all fees of the Trustee and taxes and
other expenses charged to a Participant's Account may be collected by the
Trustee from the amount of any contribution to be credited or distribution to be
charged to such Account or may be paid by redeeming or selling assets credited
to such Account.
ARTICLE VII
DUTIES OF THE EMPLOYER AND THE PLAN ADMINISTRATOR
7.1 Information and Data to be Furnished the Trustee. In addition to
making the contributions called for in ARTICLE II hereof, the Employer, through
the Plan Administrator, agrees to furnish the Trustee with such information and
data relative to the Plan as is necessary for the proper administration of the
Trust established hereunder.
7.2 Limitation of Duties. Neither the Employer nor any of its
officers, directors, or partners, nor the Plan Administrator shall have any
duties or obligations with respect to this Trust Agreement, except those
expressly set forth herein and in the Plan.
ARTICLE VII
LIABILITY OF THE TRUST
8.1 Trustee's Liability.
(a) The Employer shall indemnify and save the Trustee (including
its affiliates, representatives and agents) harmless from and against
any liability, cost or other expense, including, but not limited to,
the payment of attorneys' fees that the Trustee may incur in
connection with this Trust Agreement or the Plan unless such
liability, cost or other expense (whether direct or indirect) arises
from the Trustee's own willful misconduct or gross negligence. The
Employer recognizes that a burden of litigation may be imposed upon
the Trustee as a result of some act or transaction for which it has no
responsibility or over which it has no control under this Trust
Agreement. Therefore, the Employer agrees to indemnify and hold
harmless and, if requested, defend the Trustee (including its
affiliates, representatives and agents) from any expenses (including
counsel fees, liabilities, claims, damages, actions, suits or other
charges) incurred by the Trustee in prosecuting or defending against
any such litigation.
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<PAGE>
(b) The Trustee shall not be liable for, and the Employer will
indemnify and hold harmless the Trustee (including its affiliates,
representatives and agents) from and against all liability or expense
(including counsel fees) because of (i) any investment action taken or
omitted by the Trustee in accordance with any direction of the
Employer or a Participant, or investment inaction in the absence of
directions from the Employer or a Participant or (ii) any investment
action taken by the Trustee pursuant to an order to purchase or sell
securities placed by the Employer or a Participant directly with a
broker, dealer or issuer. It is understood that although, when the
Trustee is subject to the direction of the Employer or a Participant
the Trustee will perform certain ministerial duties with respect to
the portion of the Fund subject to such direction (the "Directed
Fund"), such duties do not involve the exercise of any discretionary
authority or other authority to manage and control assets of the
Directed Fund and will be performed in the normal course of business
by officers and employees of the Trustee or its affiliates,
representatives or agents who may be unfamiliar with investment
management. It is agreed that the Trustee is not undertaking any duty
or obligation, express or implied, to review, and will not be deemed
to have any knowledge of or responsibility with respect to, any
transaction involving the investment of the Directed Fund as a result
of the performance of its ministerial duties. Therefore, in the event
that "knowledge" of the Trustee shall be a prerequisite to imposing a
duty upon or determining liability of the Trustee under the Plan or
this Trust or any law or regulation regulating the conduct of the
Trustee with respect to the Directed Fund, as a result of any act or
omission of the Employer or any Participant, or as a result of any
transaction engaged in by any of them, then the receipt and processing
of investment orders and other documents relating to Plan assets by an
officer or other employee of the Trustee or its affiliates,
representatives or agents engaged in the performance of purely
ministerial functions shall not constitutes "knowledge" of the
Trustee.
(c) Notwithstanding the foregoing provisions of this Trust
Agreement, the Trustee shall discharge its duties hereunder with the
care, skill, prudence and diligence under the circumstances then
prevailing that a prudent man acting in a like capacity and familiar
with such matters would use in the conduct of an enterprise of a like
character and with like aims. Any investments selected by the Trustee
without specific direction from the Employer shall be selected to
diversify the investments of the Trust fund so as to minimize the risk
of large losses, unless in the circumstances it is clearly prudent not
to do so. The Trustee shall perform its duties in accordance with this
Trust Agreement insofar as this Trust Agreement is consistent with the
provisions of ERISA. To the extent not prohibited by ERISA, the
Trustee shall not be responsible in any way for any action or omission
of the Employer or the Plan Administrator with respect to the
performance of their duties and obligations set forth in the Plan. To
the extent not prohibited by ERISA, the Trustee shall not be
responsible for any action or omission of any of its agents, or with
respect to reliance upon advice of its counsel (whether or not such
counsel is also counsel to the Employer or to the Plan Administrator),
provided that such agents or counsel were prudently chosen by the
Trustee and that the Trustee relied in good faith upon the action of
such agent or the advice of such counsel. The Trustee shall be
indemnified and held harmless by the Employer against liability or
losses occurring by reason of any act or omission of the Trustee under
this Trust Agreement, unless such act or omission is due to its own
willful nonfeasance, malfeasance, or misfeasance or other breach of
duty under ERISA, to the extent that such indemnification does not
violate ERISA or any other federal or state laws.
ARTICLE IX
DELEGATION OF POWERS
9.1 Delegation by the Trustee. With respect to Shares held by the
Plan, the Trustee hereby delegates to the custodian or other agent designated by
the Sponsor the functions designated in (a) through (d) hereunder, other than
the investment, management or control of the Trust assets. With respect to
assets other than Shares, the Trustee may delegate in writing pursuant to a
procedure permitted and established by the Sponsor, to a person (individual,
corporate, or other entity) designated by the Sponsor as an agent or custodian,
any of the powers or functions of the Trustee hereunder other than the
investment, management or control of the Trust assets, including (without
limitation):
(a) custodianship of all or any part of the assets of the Trust;
(b) maintaining and accounting for the Trust and for Participants
and other Accounts as a part thereof;
(c) distribution of benefits as directed by the Plan
Administrator; and
(d) Preparation of the annual report on the status of the Trust.
The agent or custodian so appointed may act as agent for the Trustee,
without investment responsibility, for fees to be mutually agreed upon by the
Employer and the agent or custodian and paid in the same manner as Trustee's
fees. The Trustee shall not be responsible for any act or omission of the agent
or custodian arising from any such delegation, except to the extent provided in
section 8.1.
9.2 Delegation with Employer Approval. The Trustee (whether or not a
bank or trust company) and the Employer may, by mutual agreement, arrange for
the delegation by the Trustee to the Plan Administrator or any agent of the
Employer of any powers or functions of the Trustee hereunder other than the
investment and custody of the Trust assets. The Trustee shall not be responsible
for any act or omission of such person or persons arising from any such
delegation, except to the extent provided in ARTICLE VIII.
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<PAGE>
ARTICLE X
AMENDMENT
As provided in section 16.1 of the Plan, and subject to the
limitations set forth therein, the prototype Adoption Agreement, Plan and Trust
Agreement may be amended at any time, in whole or in part, by the Sponsor. The
Trustee hereby delegates authority to the Sponsor, and to any successor Sponsor,
to so amend the prototype Adoption Agreement, Plan and Trust Agreement and the
Trustee hereby agrees that it shall be deemed to have consented to any amendment
so made which does not increase the duties of the Trustee without its consent.
ARTICLE XI
RESIGNATION OR REMOVAL OF TRUSTEE
The Trustee may resign at any time upon thirty (30) days notice in
writing to the Employer, and may be removed by the Sponsor or Employer at any
time upon thirty (30) days notice in writing to the Trustee. Upon such
resignation or removal, the Sponsor or Employer shall appoint a successor
Trustee or Trustees. Upon receipt by the Trustee of written acceptance of such
appointment by the successor Trustee, the Trustee shall transfer and pay over to
such successor the assets of the Trust and all records pertaining thereto,
provided that any successor Trustee shall agree not to dispose of any such
records without the Trustee's consent. The successor Trustee shall be entitled
to rely on all accounts, records, and other documents received by it from the
Trustee, and shall not incur any liability whatsoever for such reliance. The
Trustee is authorized, however, to reserve such sum of money or property as it
may deem advisable for payment of all its fees, compensation, costs, and
expenses, or for payment of any other liabilities constituting a charge on or
against the assets of the Trust or on or against the Trustee, with any balance
of such reserve remaining after the payment of all such items to be paid over to
the successor Trustee. Upon the assignment, transfer, and payment over of the
assets of the Trust, and obtaining a receipt thereof from the successor Trustee,
the Trustee shall be released and discharged from any and all claims, demands,
duties, and obligations arising out of the Trust and its management thereof,
excepting only claims based upon the Trustee's willful misconduct or lack of
good faith. The successor Trustee shall hold the assets paid over to it under
terms similar to those of this Trust Agreement under a trust that will qualify
under section 401 of the Code. If within thirty (30) days after the Trustee's
resignation or removal, the Employer or Sponsor has not appointed a successor
Trustee which has accepted such appointment, the Trustee shall, unless it elects
to terminate the Trust pursuant to ARTICLE XII, appoint such successor itself.
ARTICLE XII
TERMINATION OF THE TRUST
12.1 Term of the Trust. This Trust shall continue as to the Employer
so long as the Plan is in full force and effect. If the Plan ceases to be in
full force and effect, this Trust shall thereupon terminate unless expressly
extended by the Employer.
12.2 Termination by the Trustee. The Trustee may elect to terminate
the Trust if within thirty (30) days after its resignation or removal pursuant
to ARTICLE XI the Employer or Sponsor has not appointed a successor Trustee
which has accepted such appointment. Termination of the Trust shall be effected
by distributing all assets thereof to the Participants or other persons entitled
thereto pursuant to the directions of the Plan Administrator (or, in the absence
of such direction, as determined by the Trustee) as provided in section 16.3 of
the Plan, subject to the Trustee's right to reserve funds as provided in ARTICLE
XI hereof. Upon the completion of such distribution, the Trustee shall be
relieved from all further liability with respect to all amounts so paid, other
than any liability arising out of the Trustee's willful misconduct.
ARTICLE XIII
MISCELLANEOUS
13.1 No Diversion of Assets. At no time shall it be possible for any
part of the assets of the Trust to be used for or diverted to purposes other
than for the exclusive benefit of Participants and their Beneficiaries or revert
to the Employer, except as specifically provided in the Plan or this Trust
Agreement.
13.2 Notices. Any notice from the Trustee to the Employer or from
the Employer to the Trustee provided for in the Plan and Trust shall be
effective if sent by first class mail to their respective last address of
record.
13.3 Multiple Trustees. In the event that there shall be two (2) or
more Trustees serving hereunder, any action taken or decision made by any such
Trustee may be taken or made by a majority of them with the same effect as if
all had joined therein, if there be more than two (2), or unanimously if there
be two (2).
13.4 Conflict With Plan. In the event of any conflict between the
provisions of the Plan and those of this Trust Agreement, the Plan shall
prevail.
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<PAGE>
13.5 Applicable Law. Except to the extent otherwise required by
ERISA, as amended, this Trust Agreement shall be construed in accordance with
the laws of the state where the Trustee has its principal place of business.
13.6 Returned Contributions.
(a) A contribution made by the Employer by a mistake of fact
shall, if the Administrator so directs, be returned to the Employer
within one (1) year after its payment. The Administrator shall, in its
sole discretion, determine whether the contribution was made by
mistake of fact based upon such evidence as it deems appropriate.
(b) A contribution made by the Employer that is conditioned on
deductibility under section 404 of the Code shall, to the extent such
deduction is disallowed, be returned to the Employer within one (1)
year after the disallowance, if the Administrator so directs.
13.7 General Undertaking. All parties to this Trust and all persons
claiming any interest whatsoever hereunder agree to perform any and all acts and
execute any and all documents and papers which may be necessary or desirable for
the carrying out of the Trust or any of its provisions.
13.8 Invalidity of Certain Provisions. If any provision of this
Trust shall be held invalid or unenforceable, such invalidity or
unenforceability shall not affect any other provisions hereof and the Trust
shall be construed and enforced as if such provisions had not been included.
13.9 Counterpart Originals. This Trust may be executed in one or
more counterpart originals.
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<PAGE>
IN WITNESS WHEREOF, the Employer and the Trustee(s) have signed this
Trust effective as of the date specified in the Adoption Agreement.
Attest:
____________________________________
[NAME OF EMPLOYER]
____________________________________ By: _______________________________
Secretary President
TRUSTEE(S)
____________________________________
____________________________________
____________________________________
____________________________________
)
) ss
)
I, ____________________________________________________, a notary
public in and for the jurisdiction above named, do hereby certify that
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
did personally appear before me and do acknowledge that they executed the
foregoing Trust as their free act and deed.
Subscribed and sworn to before me this ___________ day of
__________________________, 19_____.
____________________________________
Notary Public
My Commission
Expires: ___________________________
40
<PAGE>
PROVISION-BY-PROVISION EXPLANATION AND
INSTRUCTIONS FOR COMPLETING
THE ADOPTION AGREEMENT
41
<PAGE>
PROVISION-BY-PROVISION EXPLANATION AND
INSTRUCTIONS FOR COMPLETING
THE ADOPTION AGREEMENT
As indicated in the introductory material to the Adoption Agreement, the
Employer should consult with a tax advisor or attorney before completing an
Adoption Agreement. The consultation is advised because adopting a retirement
plan has substantial financial and legal consequences. Establishing a plan
imposes contribution obligations on the Employer and subjects the Employer to
additional tax laws. In addition, the Employer assumes new administrative
responsibilities and fiduciary obligations. These consequences should be known
and carefully assessed with professional tax or legal assistance before deciding
to adopt any retirement plan.
EMPLOYER DATA
Name of Employer. The name and employer identification number (EIN) of the
Employer should include the names and EINs of all Affiliated Employers. If there
are a number of Affiliated Employers, their names and EINs can be listed on an
attachment to the Adoption Agreement and all the Affiliated Employers should
execute the Adoption Agreement. Failure to list all Affiliated Employers can
jeopardize the tax-qualified status of the plan. Examples of an Affiliated
Employer are:
1. A corporation or unincorporated business that owns 80 percent or more
of the Employer.
2. A corporation or unincorporated business that is 80 percent or more
owned by the Employer.
3. Certain businesses that perform services for or with the Employer and
that are owned in part by the Employer.
4. Certain businesses that are owned in part by the Employer and for which
the Employer provides services.
Amendment to Existing Plan. The sponsor may impose reasonable investment
limitations on the Employer regarding the type of investments selected for the
trust or the minimum percentage of trust assets that must be invested in mutual
funds. If the adoption of a prototype plan constitutes an amendment to an
existing plan, it may be necessary to change the existing investments to conform
to these limitations.
ELIGIBILITY
The eligibility provisions of a plan govern which employees participate in a
plan and the date on which an employee begins to participate in the plan. An
employee can be required to complete both age and service requirements before
participation begins.
The eligibility provisions interact with the vesting provisions. If the
Employer chooses to require only one Year of Service for eligibility, then
participants may gradually vest over a period of years, according to one of the
vesting schedules in Section VIII of the Adoption Agreement. If, however, the
Employer chooses to require more than one Year of Service for eligibility, the
participants must be fully and immediately vested when participation in the
plan(s) commences.
Years of Service. The Employer may require an employee to complete one or
more, up to two, Years of Service with the Employer (including Affiliated
Employers). Alternatively, the Employer may permit immediate participation
without any service requirement. A Year of Service is a 12-month period of
employment during which an employee must complete at least 1,000 Hours of
Service, unless the Employer chooses a lesser number of hours. If the Employer
does not maintain records that make it possible to determine an employee's Hours
of Service, the Employer must use an Equivalency Method that will credit an
employee with a specified number of Hours of Service based upon designated
periods of service. See CREDITED SERVICE herein.
Age. The Employer may require an employee to reach a specified age, up to 21
years of age, to be eligible to participate in the plan. However, the Employer
may permit immediate participation upon employment or upon completion of stated
service requirements without any age requirement.
Coverage. All employees of the Employer and of Affiliated Employers must be
eligible to participate. The only employees that may be excluded are union
employees who have bargained in good faith with the Employer for retirement
benefits, and nonresident alien employees.
CREDITED SERVICE
Hours of Service. Under the plan(s), a Year of Service requires 1,000 Hours
of Service, unless the Employer designates otherwise. The Employer is permitted
to reduce the number of required hours. The Employer is not permitted, however,
to change the method of counting Hours of Service. Under the plan(s), one Hour
of Service is counted for each hour for which an employee is paid or entitled to
be paid for work, vacation, holiday, illness, incapacity, maternity or paternity
leave, layoff, jury duty, military duty, or leave of absence. However, no more
than 501 Hours of Service will be credited on account of any period during which
no duties are performed by the employee.
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<PAGE>
Equivalency Methods. The Employer must designate how Hours of Service will be
determined. If the Employer has records of actual hours for which an employee is
paid or entitled to payment, the Employer can use actual hours to determine
Hours of Service. If the Employer does not wish to use this method, or does not
have the necessary records, the Employer should choose an alternate method based
on days, weeks, semi-monthly payroll periods, or months worked. If no
Equivalency Method is indicated, the Employer will be deemed to use actual hours
and must keep appropriate records.
Note: If the plans are an amendment to a prior plan that used the elapsed
time method of calculating service, the plans provide special rules for
converting elapsed time service to Years of Service and Hours of Service. These
rules count Hours of Service for partial periods on the basis of the weekly
method, under which employees are credited with 45 Hours of Service for each
week in which they perform one Hour of Service.
Service with Predecessor Employer. Generally, the Employer has the discretion
as to whether to count hours worked for a predecessor employer. For example, if
a business is sold, the new employer may count hours worked by employees for the
old business under the prototype plan. If, however, the adoption of a prototype
plan is a continuation of a Predecessor Plan or a successor plan to a
Predecessor Plan, then hours counted under the Predecessor Plan must be counted
under the prototype plan. For example, if a partnership maintained a Keogh plan
before it incorporated, and adopts a prototype plan after it incorporates, the
hours counted under the Keogh plan must be counted under the corporate plan.
COMPENSATION
Definition of Compensation. Generally, Compensation under the plan means all
of the employee's W-2 earnings. The Employer may elect, however, in the Adoption
Agreements, to expand the definition to include amounts contributed pursuant to
a salary reduction agreement, such as contributions to a cafeteria plan under
section 125 of the Code or a tax-deferred annuity under section 403(b) of the
Code.
CONTRIBUTIONS AND ALLOCATIONS
The contribution formulas to be chosen by the Employer are different in the
Adoption Agreement for the profit sharing plan from those in the Adoption
Agreement for the money purchase pension plan. The difference is due in part to
the fact that contributions are required to be a fixed percentage under the
money purchase pension plan whereas contributions may be discretionary under the
profit sharing plan. The difference is also attributable to the effect of
Social Security Integration on the contribution formulas. If only one of the
prototype plans is adopted, the Employer can choose whether or not to use Social
Security Integration. If both of the prototype plans are adopted, however, the
Employer can use Social Security Integration with only one plan. The Employer
may choose to use Social Security Integration with either plan.
When Social Security Integration is used, the Employer's contributions are
adjusted to take into account the Employer's Social Security contribution for
old age and disability benefits for an employee. Employers considering
integration of their plans should consult with a tax advisor.
Profit Sharing Plan Formulas: Employer Contributions. Employer contributions
can be completely or partially discretionary. That is, the amount can be
determined on an ad hoc basis by the Employer each year. If the Employer wants
a completely discretionary contribution formula, the Employer should check item
A.1. or designate zero percent. If the Employer wants to make a regular
contribution, the Employer should specify the percentage of compensation to be
contributed (up to 15 percent) on item A.2. or insert the percentage of
compensation in item A.1. under Section VI. The Employer can then make
additional contributions (up to 15 percent total) at its discretion. If the
profit sharing plan is to be integrated with Social Security, the integration
formula will be designated in Allocations.
Profit Sharing Allocation Formula. If the plan does not use Social Security
Integration, check item A.1. Check item A.2. if the plan uses Social Security
Integration. The plan's integration level may be set at the Social Security
taxable wage base, at a dollar amount below the Social Security taxable wage
base or at a specified percentage of the Social Security taxable wage base. If
the Employer allows the integration level to vary with changes in the Social
Security Act, the level of compensation required in order to receive plan
contributions will generally increase.
Money Purchase Plan Formulas: Employer Contributions. If the money purchase
contribution formula is not integrated with Social Security, check item A.1.
and specify a contribution percentage between one percent and 25 percent.
If the money purchase contribution formula uses Social Security Integration,
item A.2. should be checked. The plan's integration level may be set at the
Social Security taxable wage base, at a dollar amount below the Social Security
taxable wage base, or at a specified percentage of the Social Security taxable
wage base.
If the Employer allows the integration level to vary with changes in the
Social Security Act, the level of compensation required in order to receive plan
contributions will generally increase.
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<PAGE>
Self-Employed Individuals. The manner in which contributions are determined
is somewhat different if the plan covers self-employed individuals. Under the
law, deductible contributions to the plan on behalf of a self-employed
individual will reduce that self-employed individual's earned income. Therefore,
in determining the plan contribution on behalf of a self-employed individual,
the contribution must be converted from a percent of earned income before
deductible plan contributions to a percent of earned income after deductible
plan contributions. This conversion is shown below:
<TABLE>
<CAPTION>
Contributions as Contributions as
a Percentage of a Percentage of
Earned Income Earned Income
Before Deductible After Deductible
Contributions Contributions
----------------- ----------------
<S> <C>
20.00% 25.00%
19.35% 24.00%
18.70% 23.00%
18.03% 22.00%
17.36% 21.00%
16.67% 20.00%
15.97% 19.00%
15.25% 18.00%
14.53% 17.00%
13.79% 16.00%
13.04% 15.00%
12.28% 14.00%
11.50% 13.00%
10.71% 12.00%
9.91% 11.00%
9.09% 10.00%
8.26% 9.00%
7.41% 8.00%
6.54% 7.00%
5.66% 6.00%
4.76% 5.00%
3.85% 4.00%
2.91% 3.00%
1.96% 2.00%
0.99% 1.00%
</TABLE>
For example, if the plan provides for a 10 percent contribution on behalf of
a self-employed individual, only 9.09 percent of the self-employed individual's
earned income before the deductible plan contribution will be required to meet
the contribution obligation.
This conversion also must be applied in determining the maximum deductible
contribution that may be made to a plan. Thus, in the case of a profit sharing
plan covering only self-employed individuals, the 15 percent limit on deductible
plan contributions translates into a limit of 13.04 percent of unreduced earned
income (i.e., earned income before deductible plan contributions). Similarly,
in the case of a money purchase pension plan, or a combination of a money
purchase pension plan and a profit sharing plan, the 25 percent limit on
deductible plan contributions translates into a limit of 20 percent of unreduced
earned income.
Contribution Eligibility. This provision concerns the contribution for the
year in which an employee terminates employment with the Employer with not more
than 500 Hours of Service and is not an employee on the last day of the plan
year. Although the Employer has the discretion as to whether an employee is
allocated a contribution in such a year, not permitting the employee to receive
an allocation may result in discrimination in the operation of the plan in favor
of Key Employees. Such discrimination could cause the plan to lose its qualified
status notwithstanding the plan's favorable opinion letter.
DISTRIBUTIONS
Normal Retirement Age. Generally, normal retirement age is 65 years of age.
However, the Employer may choose a different age (item A.1.), or may choose a
combination of age and Years of Service (item A.2.), provided the age does not
exceed 65 and is not less than 55, and no more than 5 Years of Service is
required.
Early Retirement Date. The Employer has the discretion to allow benefits to
be paid upon a designated early retirement date. The early retirement age must
be at least 55, and no more than 15 years of service can be required.
44
<PAGE>
OPTIONAL FEATURES
The optional features permitted under the profit sharing plan differ from
those under the money purchase pension plan. Both plans allow withdrawals of
voluntary employee contributions, loans and purchases of insurance. However,
hardship withdrawals are only permitted under the profit sharing plan. If the
participant is married, spousal consent is required for all distributions,
including hardship withdrawals and withdrawals of nondeductible voluntary
employee contributions.
Hardship Withdrawals. The Employer may allow hardship withdrawals of amounts
contributed by the Employer under the profit sharing plan if the plan is not
integrated with Social Security benefits. This feature is not available if
Section V.II.A.2. is selected.
Loans. The Employer may choose to allow loans to participants to be made from
plan assets, provided the loans meet the requirements specified in the plan(s),
including a reasonable interest rate, adequate security, and a fixed repayment
term. If the loans do not meet these requirements, they may result in plan
disqualification. If loans are permitted, the plan administrator assumes the
additional administrative responsibility of seeing that the loans are repaid in
a timely fashion.
A participant loan will be treated as a distribution to the extent that the
sum of all a participant's loans under all the Employer's qualified plans
(taking into account the highest principal balance of any loan outstanding at
any time during the preceding 12 months) exceeds the lesser of $50,000 or 50
percent of the participant's vested account balance, unless it is less than
$10,000. It will also be treated as a distribution if it is not repaid within
five years.
The plan does not permit loans to Owner-Employees or to Shareholder-
Employees in subchapter S corporations.
Life Insurance Contracts. The Employer may permit a participant to use a
portion of the plan assets allocated to him to purchase life insurance
contracts. The maximum amount that may be used to purchase whole life policies
is 50 percent of the participant's account balance. Also, the maximum amount
that may be used to purchase term life insurance is 25 percent of the
participant's account balance.
VESTING
Vesting is the rate at which an employee earns a nonforfeitable right to the
Employer contributions allocated to his account. As indicated above with
respect to Year of Service requirements, vesting requirements interact with the
Year of Service options. If an eligibility service requirement in excess of one
Year of Service is selected, you must choose item B. If item D is chosen and
the vesting schedule exceeds three Years of Service, applicable percentages must
be at least as rapid at all points as the schedule in item A.
INVESTMENT CHOICES
Subject to limitations imposed by the sponsor, the Employer may limit the
investment of plan assets to investment options offered by the sponsor or permit
a designated percentage of plan assets to be invested in other investment
options.
INVESTMENT AUTHORITY
The Employer may choose whether plan assets are to be invested according to
the instructions of the Employer, the plan administrator, the participants, or
some combination of the above. If participants are to be permitted to direct the
investment of voluntary employee contributions or Employer contributions, items
C.1. or C.2. should be checked.
ALLOCATION LIMITATIONS
This section is applicable only if the Employer maintains or ever maintained
other qualified plans in addition to this prototype plan. If not, section 6.1
of the plan will automatically apply.
ADMINISTRATION
Plan Administrator. The Employer must designate the plan administrator,
unless the Employer is going to be the plan administrator. The plan
administrator is generally responsible for implementing and interpreting the
plan; deciding all questions concerning eligibility, distribution of benefits
and loan provisions; employing investment, legal, or accounting professionals;
keeping all records and filing all administrative reports; furnishing
instructions to the plan trustees; adopting rules and procedures for employee
elections and benefit claims; and collecting all forms and applications from
employees.
Named Fiduciaries. The plan administrator is the named fiduciary under the
plan. Additional named fiduciaries also may be designated in the Adoption
Agreement. If any powers or duties under the plan are allocated between the
named fiduciaries or to third parties, they should be specified in item C.
45
<PAGE>
THE TRUSTEE
Unless the sponsor has designated a trustee, the Employer must designate
individuals or institutions with trust powers to serve as trustees of the plan.
If the Employer wishes to have individuals as trustees, more than one individual
should be chosen. The designated parties must be informed of their fiduciary
obligations regarding the plan and must expressly accept those obligations in
writing.
EMPLOYER SIGNATURE
The Employer must execute the Adoption Agreement on the last page. If the
Employer is a corporation, the individual executing the agreement must be a
corporate officer who is duly authorized, pursuant to a corporate resolution, to
act on behalf of the corporation. Any Affiliated Employers also should execute
the Adoption Agreement.
The FOLLOWING DOCUMENTS ARE TO BE
COMPLETED, REMOVED AND SUBMITTED TO THE FUND
46
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PROFIT SHARING ADOPTION AGREEMENT
FOR PROTOTYPE PAIRED DEFINED CONTRIBUTION PLAN
Adoption Agreement #001
47
<PAGE>
This is the Adoption Agreement for paired defined contribution plan #001 of
basic plan document #01, which is a combined prototype profit sharing/money
purchase pension plan. This Adoption Agreement may be adopted either singly or
in combination with paired defined contribution plan #002, a prototype money
purchase pension plan.
NOTE: Before executing this Adoption Agreement, the Employer should consult with
a tax advisor or attorney. Failure to properly complete this Adoption Agreement
may result in Plan disqualification.
The Employer hereby establishes a profit sharing plan and a trust upon the
respective terms and conditions contained in the prototype paired defined
contribution plan (the "Plan") and the Trust Agreement annexed hereto and
appoints as Trustee of such trust the person(s) who have executed this Adoption
Agreement evidencing their acceptance of such appointment. The Plan, the Trust
Agreement, and the Custody Agreement, if applicable, shall be supplemented and
modified by the terms and conditions contained in this Adoption Agreement and
shall be effective on the Effective Date.
The Sponsor will inform the Employer of any amendments made to the Plan or the
discontinuance or abandonment of the Plan.
SPONSOR A._________________________________________________________
DATA Stratton Management Co.
Stratton Funds
B. Plymouth Mtg. Exec. Campus ________________
610 West Germantown Pike, Ste 361
Plymouth Meeting, PA 194621050
C._________________________________________________________
Address
_________________________________________________________
D. 1 800-634-5726
_________________________________________________________
Telephone Number
48
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EMPLOYER A. _____________________________________________________________________________________________________
DATA Name of Employer and Employer Identification Number
B. _____________________________________________________________________________________________________
Address
C. ( )
_____________________________________________________________________________________________________
Telephone Number
D. _____________________________________________________________________________________________________
Employer's Taxable Year End
E. _____________________________________________________________________________________________________
Plan Year End
F. The Employer is: [ ] A corporate entity
[ ] A noncorporate entity
[ ] A corporation electing to be taxed under Subchapter S
G. _____________________________________________________________________________________________________
Effective Date (should be first day of a Plan Year)
H. _____________________________________________________________________________________________________
If this is an amendment of an existing plan, complete the following:
_____________________________________________________________________________________________________
Effective Date of Amendment (should be first day of a Plan Year)
_____________________________________________________________________________________________________
Name of Prior Plan
_____________________________________________________________________________________________________
Effective Date of Prior Plan
I. _____________________________________________________________________________________________________
Limitation Year, if different from E., above
ELIGIBILITY A. Employees shall be eligible to participate in the Plan upon completion of the eligibility require-
ments (complete 1 and 2) (Plan section 3.1):
1. Years of Service. The Employee must complete (check one box):
[ ] One Year of Service.
[ ]____ Years of Service. (You can require less than or more than one Year of Service,
but not more than two (2). If you select more than one Year of Service, the Employee
must be 100% vested once he becomes eligible, and you must select vesting schedule B
in section X of this Adoption Agreement. If the Year of Service is or includes a fractional
year, an Employee will not be required to complete any specified number of Hours of Service
(section IV, A of this Adoption Agreement) to receive credit for such fractional year.
2. Age. The Employee must attain age____(not greater than age 21).
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B. The following Employees will not be eligible to participate in the Plan (Plan section 3.1):
[ ] Union Employees. Employees included in a unit of employees covered by a collective
bargaining agreement between the Employer and Employee representatives (as defined in
section 3.1(b)(i) of the Plan), if retirement benefits were the subject of good faith
bargaining.
[ ] Nonresident Aliens. Employees who are nonresident aliens and who receive no earned
income from the Employer which constitutes income from sources within the United States.
For purposes of this section III, the term "Employee" includes all employees of this
Employer or any employer aggregated with this Employer under sections 414(b), (c) or
(m) or (o) of the Code and individuals who are Leased Employees required to be
considered Employees of any such employer under section 414(n) or (o) of the Code.
CREDITED A. The Plan provides that a Year of Service requires at least 1,000 hours during any Plan Year.
SERVICE If a lower number of hours is desired, state the number here: _______ (Plan section 2.42).
B. The Plan permits Hours of Service to be determined by the use of service equivalencies under
one of the methods selected below (choose one method) (Plan section 2.19):
1. [ ] On the basis of actual hours for which an Employee is paid or entitled to payment.
2. [ ] On the basis of days worked. An Employee will be credited with ten (10) Hours of Service
if under section 2.19 of the Plan such Employee would be credited with at least one (1) Hour of
Service during the day.
3. [ ] On the basis of weeks worked. An Employee will be credited with forty-five (45) Hours of
Service if under section 2.19 of the Plan such Employee would be credited with at least one (1) Hour
of Service during the week.
4. [ ] On the basis of semimonthly payroll periods. An Employee will be credited with ninety-five (95)
Hours of Service if under section 2.19 of the Plan such Employee would be credited with at least one
(1) Hour of Service during the semimonthly payroll period.
- or -
5. [ ] On the basis of months worked. An Employee will be credited with one hundred ninety (190) Hours
of Service if under section 2.19 of the Plan such Employee would be credited with at least one
(1) Hour of Service during the month.
C. Service with a predecessor employer (choose 1 or 2) (Plan sections 3.3 and 8.5):
1. [ ] No credit will be given for service with a predecessor employer.
- or -
2. [ ] Credit will be given for service with the following predecessor employer(s):
NOTE: The Plan provides that if this is a continuation of a predecessor plan, service under the
predecessor plan must be counted.
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COMPENSATION A. Compensation (choose 1 or 2) (Plan section 2.7):
1. [ ] shall include
- or -
2. [ ] shall not include
Employer Contributions made pursuant to a salary reduction agreement which are not includable in the
gross income of the Employee under sections 125, 402(a)(8), 402(h) or 403(b) of the Code.
B. The effective date of the election in A. above shall be ______________ (but not earlier than the first day
of the first Plan Year beginning after 1986).
CONTRIBUTIONS A. Profit sharing plan formulas (choose 1 or 2) (Plan section 4.1(b)):
1. [ ] Discretionary pursuant to Employer resolution. If no resolution is adopted, then ___ % of
Participants' compensation.
- or -
2. [ ] ___ % of Participants' Compensation, plus discretionary amount, if any, by Employer resolution.
NOTE: Each of these formulas is subject to maximum limitations on contributions as provided in the Plan
and the Internal Revenue Code. In no event may the Employer Contribution exceed 15% of the aggregate
compensation of all Participants for the year, plus up to 10% credit carryover in certain circumstances.
Additional limitations are included in the Plan where the Employer also has another qualified retirement
plan. An individual Participant's limit on contributions and forfeitures, per year is generally the lesser
of 25% of compensation or $30,000.
ALLOCATION A. Formula -- Choose 1 or 2 (Plan section 5.3(b)).
OF
EMPLOYER NOTE: If you provide for hardship withdrawals you must use Formula 1.
CONTRIBUTIONS
1. [ ] Nonintegrated Plan -- Employer contributions shall be allocated to the accounts of all eligible
Participants prorated upon compensation.
- or -
2. [ ] Integrated Plan -- Employer contributions and forfeitures shall be integrated with Social
Security and allocated in accordance with the provisions of Plan section 5.3(b). The Plan's
Integration Level shall be (choose (a), (b) or (c)):
(a) [ ] Taxable Wage Base. (The maximum amount considered as wages for such year under section
3121(a)(1) of the Internal Revenue Code (the Social Security taxable wage base) as of the
beginning of the Plan Year).
- or -
(b) [ ] $_____ (a dollar amount not to exceed the Taxable Wage Base).
- or -
(c) [ ] ____% of the Taxable Wage Base (not to exceed 100%).
NOTE: If you maintain any other plan in addition to this Plan, only one plan may be
integrated with Social Security.
B. Contribution Eligibility (Plan section 4.1(c)):
The Plan provides that all Participants will share in Employer Contributions for the Plan Year, except
the following (if elected):
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[ ] Participants who terminate employment during the Plan Year with not more than 500 Hours of Service
and who are not Employees as of the last day of the Plan Year (other than Participants who die, retire
or become Totally and Permanently Disabled).
If a fewer number of hours than 500 is desired, state the number here: _____.
DISTRIBUTIONS A. Normal Retirement Age is (choose 1 or 2) (Plan section 2.26):
1. [ ] The date a Participant reaches age _____ (not more than 65 or less than 55). If no age is
indicated, normal retirement age shall be 65.
- or -
2. [ ] The later of age ___ (not more than 65) or the ___ (not more than 5th) anniversary of the day
the Participant commenced participation in the Plan. The participation commencement date is the
first day of the first Plan Year in which the Participant commenced participation in the Plan.
B. Early Retirement (choose 1 or 2) (Plan section 2.10):
1. [ ] Early Retirement Date is the first day of the month coincident with or next following the date
upon which a Participant reaches age ___ (not less than 55) and completes ___ years of service
(not more than 15).
- or -
2. [ ] Early Retirement will not be permitted under the Plan.
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52
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VESTING Employer Contributions will become vested if the Participant terminates employment for any reasons other than
retirement, death, or disability pursuant to the following schedule (choose A, B, C or D) (Plan section 8.3):
A. [ ] Years of
Service Vested Percentage
------- -----------------
1 year 0%
2 years 20%
3 years 40%
4 years 60%
5 years 80%
6 or more years 100%
B. [ ] 100% vesting immediately after satisfaction of the eligibility requirements.
NOTE: If a service requirement greater than one year is chosen for eligibility as stated in the
"Eligibility" section of this Adoption Agreement, vesting schedule B must be chosen.
C. [ ] 100% vesting after ____ years of service (not to exceed three).
- or -
D. [ ] Years of
Service Vested Percentage
------- -----------------
1 year __%
2 years __% (not less than 20)
3 years __% (not less than 40)
4 years __% (not less than 60)
5 years __% (not less than 80)
6 years __% (not less than 100)
INVESTMENT A. [X] Investment of Trust assets may be selected only from Shares or other investments offered by
CHOICES the Sponsor.
INVESTMENT Contributions to the Plan shall be invested by the Trustee in accordance with instructions of the Employer or
AUTHORITY Plan Administrator except that (choose A, B or C) (Plan section 7.2):
A. [ ] No exceptions; the Employer or Plan Administrator shall make all investment selections.
B. [ ] The Employer delegates all investment responsibility to the Trustee. (MUST NOT be selected if
Sponsor's designated trustee is appointed as Trustee).
- or -
C. [ ] Each Participant [ ] may, [ ] shall direct that:
</TABLE>
53
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<S> <C>
1. [ ] Amounts voluntarily contributed by such Participant pursuant to section 4.3 of the Plan, rollover
contributions pursuant to section 4.4 of the Plan and direct transfers pursuant to section 4.5 of the
Plan, if any,
- and/or -
2. [ ] Employer Contributions on the Participant's behalf shall be invested in specified investments offered
by the Sponsor. Participants may make or change such directions by giving written notice to the Plan
Administrator. Reasonable restrictions may be imposed on this privilege by the Plan Administrator or the
Sponsor for purposes of administrative convenience.
TOP-HEAVY Participants who are eligible to receive the minimum allocation provided by section 5.2 of the Plan shall
PROVISIONS receive a minimum allocation of contributions and forfeitures under this Plan equal to 3% of Compensation, or
if lesser, the largest percentage of Compensation allocated on behalf of any Key Employee for the Plan Year.
NOTE: If the Participant also participates in paired defined contribution plan #002 (the money purchase pension
plan), the required minimum allocation must be made under paired defined contribution plan #002 (the money
purchase pension plan).
ALLOCATION COMPLETE THIS SECTION ONLY IF YOU MAINTAIN OR EVER MAINTAINED ANOTHER QUALIFIED PLAN (OTHER THAN PAIRED PLAN
LIMITATIONS #002) IN WHICH ANY PARTICIPANT IN THIS PLAN IS (OR WAS) A PARTICIPANT OR COULD BECOME A PARTICIPANT. THIS
SECTION MUST ALSO BE COMPLETED IF THE EMPLOYER MAINTAINS A WELFARE BENEFIT FUND, AS DEFINED IN SECTION 419(e)
OF THE CODE, OR AN INDIVIDUAL MEDICAL ACCOUNT, AS DEFINED IN SECTION 415(l)(2) OF THE CODE, UNDER WHICH AMOUNTS
ARE TREATED AS ANNUAL ADDITIONS WITH RESPECT TO ANY PARTICIPANT IN THIS PLAN.
A. If the Participant is covered under another qualified defined contribution plan maintained by the Employer,
other than a master or prototype plan (choose either 1 or 2) (Plan section 6.3):
1. [ ] The provisions of section 6.2 will apply as if the other plan were a master or prototype plan.
- or -
2. [ ] (On an attachment, provide the method under which the plans will limit total annual additions to
the maximum permissible amount, and will properly reduce any excess amounts, in a manner that
precludes Employer discretion).
B. If the Participant is or has ever been a participant in a defined benefit plan maintained by the Employer
attach an explanation of the method under which the plan involved will satisfy the 1.0 limitation in a
manner that precludes Employer discretion.
ADMINISTRATION A. The Plan Administrator of the Plan will be (choose 1, 2, 3 or 4) (Plan sections 2.30 and 15.4):
1. [ ] The Trustee
NOTE: If the Trustee designated in the "Investment Authority" section of this Adoption Agreement is the
Sponsor's designated Trustee, it may not be appointed as Plan Administrator.
- or -
2. [ ] The Employer
- or -
3. [ ] An individual Plan Administrator designated by the Employer
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54
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__________________________________________________________________________
Name
__________________________________________________________________________
Address
__________________________________________________________________________
- or -
4. [ ] A committee of two or more Employees designated by the Employer:
__________________________________________________________________________
Name & Title
__________________________________________________________________________
Signature
__________________________________________________________________________
Name & Title
__________________________________________________________________________
Signature
__________________________________________________________________________
Name & Title
__________________________________________________________________________
Signature
NOTE: IF NO PLAN ADMINISTRATOR HAS BEEN DESIGNATED OR SERVING AT ANY
TIME, THE EMPLOYER WILL BE DEEMED THE PLAN ADMINISTRATOR (PLAN SECTION
15.4).
B. The Plan Administrator (including all members of a committee, if a committee
is named) is a named fiduciary for the Plan. If other persons are also to be
named fiduciaries, their names and addresses are:
______________________________________________________________________________
Name:
______________________________________________________________________________
Address:
______________________________________________________________________________
______________________________________________________________________________
Name:
______________________________________________________________________________
Address:
______________________________________________________________________________
______________________________________________________________________________
Name:
______________________________________________________________________________
Address:
______________________________________________________________________________
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55
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C. The named fiduciaries have all of the powers set forth in the Plan. If any powers or duties are to be allocated
among them, or delegated to third parties, indicate below what the powers or duties are and to whom they are to
be delegated (Plan section 15.3):
_______________________________________________________________________________________________________________
_______________________________________________________________________________________________________________
_______________________________________________________________________________________________________________
_______________________________________________________________________________________________________________
THE TRUSTEE A. The Employer hereby appoints the following to serve as Trustee (Plan section 2.39):
_______________________________________________________________________________________________________________
Name
_______________________________________________________________________________________________________________
Address
_______________________________________________________________________________________________________________
_______________________________________________________________________________________________________________
Dated Signature of Trustee
_______________________________________________________________________________________________________________
Name
_______________________________________________________________________________________________________________
Address
_______________________________________________________________________________________________________________
_______________________________________________________________________________________________________________
Dated Signature of Trustee
B. The Employer hereby appoints the Sponsor's designated trustee(s) to serve as Trustee(s):
___________________________________________________________________________________________
Semper Trust Company _______________________________
610 West Germantown Pike
Suite 361 _______________________________
Plymouth Meeting, PA 194621050
_______________________________
Dated Signature of Trustee
_______________________________________________________________________________________________________________
Name
_______________________________________________________________________________________________________________
Address
_______________________________________________________________________________________________________________
_______________________________________________________________________________________________________________
Dated Signature of Trustee
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56
<PAGE>
EMPLOYER The Employer acknowledges receipt of the current prospectus of
SIGNATURE the investment companies designated by the Employer for its
initial investments under the Plan and represents that it has
delivered a copy thereof to each Participant in the Plan, and
that it will deliver to each Participant making contributions
and each new Participant, a copy of the then current prospectus
of such investment companies. The Employer further represents
that the information in this Adoption Agreement shall become
effective only when approved and countersigned by the Trustee.
The right to reject this Adoption Agreement for any reason is
reserved.
This Adoption Agreement must be used only in conjunction with
basic plan document #01.
NOTE: An Employer who has ever maintained or who later
adopts any plan (including, after December 31, 1985, a
welfare benefit fund, as defined in section 419(e) of the
Code, which provides post-retirement medical benefits
allocated to separate accounts for Key Employees, as
defined in section 419A(d)(3) of the Code, or an
individual medical account, as defined in section
415(l)(2) of the Code), in addition to this Plan (other
than paired defined contribution plan #002), may not rely
on the opinion letter issued by the National Office of the
Internal Revenue Service as evidence that this Plan is
qualified under section 401 of the Internal Revenue Code.
If the Employer who adopts or maintains multiple plans
wishes to obtain reliance that the plans are qualified,
application for a determination letter should be made to
the appropriate Key District Director of Internal Revenue.
This Adoption Agreement consists of pages.
IN WITNESS WHEREOF, the Employer has caused this Adoption
Agreement to be executed by its duly authorized officers
this _____ day of __________________________.
__________________________________________________
Name of Employer
By:_______________________________________________
Name & Title
Date:_________________________
57
<PAGE>
MONEY PURCHASE PENSION
ADOPTION AGREEMENT
FOR PROTOTYPE PAIRED DEFINED CONTRIBUTION PLAN
Adoption Agreement #002
58
<PAGE>
This is the Adoption Agreement for paired defined contribution plan #002 of
basic plan document #01, which is a combined prototype profit sharing/money
purchase pension defined contribution plan. This adoption agreement may be
adopted either singly or in combination with paired defined contribution plan
#001, a prototype profit sharing plan.
NOTE: Before executing this Adoption Agreement, the Employer should consult with
a tax advisor or attorney. Failure to properly complete this Adoption Agreement
may result in Plan disqualification.
The Employer hereby establishes a money purchase pension plan and a trust upon
the respective terms and conditions contained in the prototype paired defined
contribution plan (the "Plan") and the Trust Agreement annexed hereto and
appoints as Trustee of such trust the person(s) who have executed this Adoption
Agreement evidencing their acceptance of such appointment. The Plan, the Trust
Agreement, and the Custody Agreement, if applicable, shall be supplemented and
modified by the terms and conditions contained in this Adoption Agreement and
shall be effective on the Effective Date.
The Sponsor will inform the Employer of any amendments made to the Plan or the
discontinuance or abandonment of the Plan.
SPONSOR DATA A. ______________________________________________________________
Stratton Management Co.
Stratton Funds
B. Plymouth Mtg. Exec. Campus ______________________
610 West Germantown Pike, Ste 361
Plymouth Meeting, PA 194621050
C. ______________________________________________________________
Address
______________________________________________________________
1-800-634-5726
D. ______________________________________________________________
Telephone Number
59
<PAGE>
EMPLOYER A. ______________________________________________________________
DATA Name of Employer and Employer Identification Number
B. ______________________________________________________________
Address
______________________________________________________________
C. ( )________________________________________________________
Telephone Number
D. ______________________________________________________________
Employer's Taxable Year End
E. ______________________________________________________________
Plan Year End
F. The Employer is: [ ] A corporate entity
[ ] A noncorporate entity
[ ] A corporation electing to be taxed under
Subchapter S
G. ______________________________________________________________
Effective Date (should be first day of a Plan Year)
H. If this is an amendment of an existing plan, complete the
following:
______________________________________________________________
Effective Date of Amendment (should be first day of a Plan
Year)
______________________________________________________________
Name of Prior Plan
______________________________________________________________
Effective Date of Prior Plan
I. ______________________________________________________________
Limitation Year, if different from E., above
ELIGIBILITY A. Employees shall be eligible to participate in the Plan upon
completion of the eligibility requirements (complete 1 and 2)
(Plan section 3.1):
1. Years of Service. The Employee must complete (check one
box):
[ ] One Year of Service.
[ ] __ Years of Service. (You can require less than or
more than one Year of Service, but not more than two
(2). If you select more than one Year of Service, the
Employee must be 100% vested once he becomes eligible,
and you must select vesting schedule A as stated in the
"Vesting Section" of this Adoption Agreement. If the
Year of Service is or includes a fractional year, an
Employee will not be required to complete any specified
number of Hours of Service (as stated in the "Credited
Service" section of this Adoption Agreement) to receive
credit for such fractional year.
2. Age. The Employee must attain age __ (not greater than age
21).
60
<PAGE>
B. The following Employees will not be eligible to participate in
the Plan (Plan section 3.1):
[ ] Union Employees. Employees included in a unit of
employees covered by a collective bargaining agreement
between the Employer and Employee representatives (as
defined in section 3.1(b)(i) of the Plan), if
retirement benefits were the subject of good faith
bargaining.
[ ] Nonresident Aliens. Employees who are nonresident
aliens and who receive no earned income from the
Employer which constitutes income from sources within
the United States.
For purposes of this section III, the term "Employee"
includes all employees of this Employer or any
employer aggregated with this Employer under sections
414(b), (c), (m) or (o) of the Code and individuals
who are Leased Employees required to be considered
Employees of any such employer under section 414(n) or
(o) of the Code.
CREDITED A. The Plan provides that a Year of Service requires at least
SERVICE 1,000 hours during any Plan Year. If a lower number of hours
is desired, state the number here: __ (Plan section 2.42).
B. The Plan permits Hours of Service to be determined by the use
of service equivalencies under one of the methods selected
below (choose one method) (Plan section 2.19):
1. [ ] On the basis of actual hours for which an Employee is
paid or entitled to payment.
2. [ ] On the basis of days worked. An Employee will be
credited with ten (10) Hours of Service if under section
2.19 of the Plan such Employee would be credited with at
least one (1) Hour of Service during the day.
3. [ ] On the basis of weeks worked. An Employee will be
credited with forty-five (45) Hours of Service if under
section 2.19 of the Plan such Employee would be credited
with at least one (1) Hour of Service during the week.
4. [ ] On the basis of semimonthly payroll periods. An
Employee will be credited with ninety-five (95) Hours of
Service if under section 2.19 of the Plan such Employee
would be credited with at least one (1) Hour of Service
during the semimonthly payroll period.
- or -
5. [ ] On the basis of months worked. An Employee will be
credited with one hundred ninety (190) Hours of Service if
under section 2.19 of the Plan such Employee would be
credited with at least one (1) Hour of Service during the
month.
C. Service with a predecessor employer (choose 1 or 2) (Plan
sections 3.3 and 8.5):
1. [ ] No credit will be given for service with a predecessor
employer.
- or -
2. [ ] Credit will be given for service with the following
predecessor employer(s):
NOTE: The Plan provides that if this is a continuation of
a predecessor plan, service under the predecessor plan
must be counted.
COMPENSATION A. Compensation (choose 1 or 2) (Plan section 2.7):
1. [ ] shall include
- or -
2. [ ] shall not include
Employer Contributions made pursuant to a salary reduction
agreement which are not includable in the gross income of
the Employee under sections 125, 402(a)(8), 402(h) or
403(b) of the Code.
B. The effective date of the election in A. above shall be
__________ (but not earlier than the first day of the first
Plan Year beginning after 1986).
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<PAGE>
CONTRIBUTIONS A. Formulas (choose 1 or 2) (Plan section 4.1(a)):
1. [ ] Plan not integrated with Social Security
The Employer will contribute ___% of compensation for each
Participant (not less than 3% if the profit sharing
Adoption Agreement is also adopted and, in any event, not
more than 25%).
2. [ ] Integrated Plan -- The Employer will contribute an
amount equal to ___% (base contribution percentage, not
less than 3) of each Participant's Compensation (as
defined in section 2.7 of the Plan) for the Plan Year, up
to the Integration Level plus ___% (not less than 3% and
not to exceed the base contribution percentage by more
than the lesser of: (1) the base contribution percentage,
or (2) the Maximum Disparity Rate of such Participant's
Compensation in excess of the Integration Level.
a. [ ] Taxable Wage Base. (The maximum amount considered
as wages for such year under section 3121(a)(1) of the
Internal Revenue Code (the Social Security taxable wage
base) as of the beginning of the Plan Year).
- or -
b. [ ] $_______ (a dollar amount not to exceed the Taxable
Wage Base).
- or -
c. [ ] __% of the Taxable Wage Base (not to exceed 100%).
NOTE: If you maintain any other plan in addition to
this Plan, only one plan may be integrated with Social
Security.
B. Forfeitures for a given Plan Year (choose 1 or 2) (Plan
section 5.3(a)):
1. [ ] Shall be applied to reduce the Employer Contribution
in that year, or if in excess of the Employer Contribution
for such Plan Year, the excess amounts shall be used to
reduce the Employer Contribution in the next succeeding
Plan Year or Years.
- or -
2. [ ] Shall be added to the Employer Contribution and
allocated accordingly.
C. Contribution Eligibility (Plan section 4.1(c)):
The Plan provides that all Participants will share in Employer
Contributions for the Plan Year, except the following (if
elected):
[ ] Participants who terminate employment during the Plan
Year with not more than 500 Hours of Service and who
are not Employees as of the last day of the Plan Year
(other than Participants who die, retire or become
Totally and Permanently Disabled).
If a fewer number of hours than 500 is desired, state the
number here: _____.
DISTRIBUTIONS A. Normal Retirement Age is (choose 1 or 2) (Plan section
2.26):
1. [ ] The date a Participant reaches age ___ (not more
than 65 or less than 55). If no age is indicated, normal
retirement age shall be 65.
- or -
2. [ ] The later of age __ (not more than 65) or the (not
more than 5th) anniversary of the day the Participant
commenced participation in the Plan. The participation
commencement date is the first day of the first Plan
Year in which the Participant commenced participation in
the Plan.
B. Early Retirement (choose 1 or 2) (Plan section 2.10):
1. [ ] Early Retirement Date is the first day of the month
coincident with or next following the date upon which a
Participant reaches age __ (not less than 55) and
completes __ years of service (not more than 15).
- or -
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<PAGE>
2. [ ] Early Retirement will not be permitted under the
Plan.
OPTIONAL
FEATURES
VESTING Employer Contributions will become vested if the Participant
terminates employment for any reasons other than retirement,
death, or disability pursuant to the following schedule (choose
A, B, C or D) Plan section 8.3:
A. [ ] Years of
Service Vested Percentage
------- -----------------
1 year 0%
2 years 20%
3 years 40%
4 years 60%
5 years 80%
6 or more years 100%
B. [ ] 100% vesting immediately after satisfaction of the
eligibility requirements.
NOTE: If a service requirement greater than one year is
chosen for eligibility as stated in the "Eligibility
Section" of this Adoption Agreement, vesting schedule B
must be chosen.
C. [ ] 100% vesting after __ years of service (not to exceed
three).
- or -
D. [ ] Years of
Service Vested Percentage
------- -----------------
1 year __%
2 years __% (not less than 20)
3 years __% (not less than 40)
4 years __% (not less than 60)
5 years __% (not less than 80)
6 years __% (not less than 100)
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<PAGE>
INVESTMENT A. [X] Investment of Trust assets may be selected only from
CHOICES Shares or other investments offered by the Sponsor.
INVESTMENT Contributions to the Plan shall be invested by the Trustee in
AUTHORITY accordance with instructions of the Employer or Plan
Administrator except that (choose A, B or C) (Plan section 7.2):
A. [ ] No exceptions; the Employer or Plan Administrator shall
make all investment selections.
B. [ ] The Employer delegates all investment responsibility to
the Trustee. (MUST NOT be selected if Sponsor's designated
trustee is appointed as Trustee).
- or -
C. [ ] Each Participant [ ] may, [ ] shall direct that:
1. [ ] Amounts voluntarily contributed by such Participant
pursuant to section 4.3 of the Plan, rollover
contributions pursuant to section 4.4 of the Plan, and
direct transfers pursuant to section 4.5 of the Plan, if
any,
- and/or -
2. [ ] Employer Contributions on the Participant's behalf
shall be invested in specified investments offered by the
Sponsor. Participants may make or change such directions
by giving written notice to the Plan Administrator.
Reasonable restrictions may be imposed on this privilege
by the Plan Administrator or the Sponsor for purposes of
administrative convenience.
TOP-HEAVY Participants who are eligible to receive the minimum allocation
PROVISIONS provided by section 5.2 of the Plan shall receive a minimum
contribution under this Plan equal to 3% of Compensation, or if
lesser, the largest percentage of Compensation allocated on
behalf of any Key Employee for the Plan Year under this Plan and
paired defined contribution plan #001.
NOTE: If the Participant also participates in paired defined
contribution plan #001 (the profit sharing plan), the required
minimum contribution must be made under this Plan, even if the
integrated plan combination formula is selected.
ALLOCATION COMPLETE THIS SECTION ONLY IF YOU MAINTAIN OR EVER MAINTAINED
LIMITATIONS ANOTHER QUALIFIED PLAN (OTHER THAN PAIRED PLAN #001) IN WHICH ANY
PARTICIPANT IN THIS PLAN IS (OR WAS) A PARTICIPANT OR COULD
BECOME A PARTICIPANT. THIS SECTION MUST ALSO BE COMPLETED IF THE
EMPLOYER MAINTAINS A WELFARE BENEFIT FUND, AS DEFINED IN SECTION
419(e) OF THE CODE, OR AN INDIVIDUAL MEDICAL ACCOUNT, AS DEFINED
IN SECTION 415(l)(2) OF THE CODE, UNDER WHICH AMOUNTS ARE TREATED
AS ANNUAL ADDITIONS WITH RESPECT TO ANY PARTICIPANT IN THIS PLAN.
A. If the Participant is covered under another qualified defined
contribution plan maintained by the Employer, other than a
master or prototype plan (choose either 1 or 2) (Plan section
6.3):
1. [ ] The provisions of section 6.2 will apply as if the
other plan were a master or prototype plan.
64
<PAGE>
- or -
2. [ ] (On an attachment, provide the method under which the
plans will limit total annual additions to the maximum
permissible amount, and will properly reduce any excess
amounts, in a manner that precludes Employer discretion).
B. If the Participant is or has ever been a participant in a
defined benefit plan maintained by the Employer attach an
explanation of the method under which the plan involved will
satisfy the 1.0 limitation in a manner that precludes
Employer discretion.
ADMINISTRATION A. The Plan Administrator of the Plan will be (choose 1, 2,
3 or 4) (Plan sections 2.30 and 15.4):
1. [ ] The Trustee
NOTE: If the Trustee designated as stated in the
"Investment Authority" section of this Adoption Agreement
is the Sponsor's designated Trustee, it may not be
appointed as Plan Administrator.
- or -
2. [ ] The Employer
- or -
3. [ ] An individual Plan Administrator designated by the
Employer
_________________________________________________________
Name
_________________________________________________________
Address
_________________________________________________________
- or -
4. [ ] A committee of two or more Employees designated by
the Employer:
_________________________________________________________
Name & Title
_________________________________________________________
Signature
_________________________________________________________
Name & Title
_________________________________________________________
Signature
_________________________________________________________
Name & Title
_________________________________________________________
Signature
NOTE: IF NO PLAN ADMINISTRATOR HAS BEEN DESIGNATED OR
SERVING AT ANY TIME, THE EMPLOYER WILL BE DEEMED THE PLAN
ADMINISTRATOR (PLAN SECTION 15.4).
65
<PAGE>
B. The Plan Administrator (including all members of a
committee, if a committee is named) is a named fiduciary for
the Plan. If other persons are also to be named fiduciaries,
their names and addresses are:
_____________________________________________________________
Name
_____________________________________________________________
Address
_____________________________________________________________
_____________________________________________________________
Name
_____________________________________________________________
Address
_____________________________________________________________
C. The named fiduciaries have all of the powers set forth in the
Plan. If any powers or duties are to be allocated among them,
or delegated to third parties, indicate below what the powers
or duties are and to whom they are to be delegated (Plan
section 15.3):
_____________________________________________________________
_____________________________________________________________
_____________________________________________________________
_____________________________________________________________
THE TRUSTEE A. The Employer hereby appoints the following to serve as
Trustee (Plan section 2.39):
_____________________________________________________________
Name
_____________________________________________________________
Address
_____________________________________________________________
_____________________________________________________________
Dated Signature of Trustee
_____________________________________________________________
Name
_____________________________________________________________
Address
_____________________________________________________________
_____________________________________________________________
Dated Signature of Trustee
66
<PAGE>
B. The Employer hereby appoints the Sponsor's designated
trustee(s) to serve as Trustee(s):
_____________________________________________________________
Semper Trust Company
610 West Germantown Pike ________________
Suite 361
Plymouth Meeting, PA 194621050 ________________
_____________________________________________________________
Dated Signature of Trustee
_____________________________________________________________
Name
_____________________________________________________________
Address
_____________________________________________________________
_____________________________________________________________
Dated Signature of Trustee
EMPLOYER The Employer acknowledges receipt of the current prospectus of
SIGNATURE the investment companies designated by the Employer for its
initial investments under the Plan and represents that it has
delivered a copy thereof to each Participant in the Plan, and
that it will deliver to each Participant making contributions and
each new Participant, a copy of the then current prospectus of
such investment companies. The Employer further represents that
the information in this Adoption Agreement shall become effective
only when approved and countersigned by the Trustee. The right to
reject this Adoption Agreement for any reason is reserved.
This Adoption Agreement must be used only in conjunction with
basic plan document #01.
NOTE: An Employer who has ever maintained or who later adopts
any plan (including a welfare benefit fund, as defined in
section 419(e) of the Code, which provides post-retirement
medical benefits allocated to separate accounts for Key
Employees, as defined in section 419A(d)(3) of the Code, or
an individual medical account as defined in section 415(l)(2)
of the Code), in addition to this Plan (other than paired
plan #001), may not rely on the opinion letter issued by the
National Office of the Internal Revenue Service as evidence
that this Plan is qualified under section 401 of the Internal
Revenue Code. If the Employer who adopts or maintains
multiple plans wishes to obtain reliance that the plans are
qualified, application for a determination letter should be
made to the appropriate Key District Director of Internal
Revenue.
This Adoption Agreement consists of __ pages.
IN WITNESS WHEREOF, the Employer has caused this Adoption
Agreement to be executed by its duly authorized officers this ___
day of ____________.
__________________________________
Name of Employer
By:_______________________________
Name & Title
Date:____________________________
67
<PAGE>
Beneficiary Designation
68
<PAGE>
BENEFICIARY DESIGNATION
- ----------------------------------------- -----------------------------------
Employee's Name (last, first, middle) Social Security Number
Birth Date:
------------------------------
Marital
Status: Married Single Divorced Widowed
--- --- --- ---
Beneficiary Designation
I. PRIMARY
% (Paid
Equally
Unless
Otherwise
Last Name First Name Middle Relationship Noted
- --------- ---------- ------ ------------ -----
- ----------------------------------- ------------------ ---------------
- ----------------------------------- ------------------ ---------------
- ----------------------------------- ------------------ ---------------
- ----------------------------------- ------------------ ---------------
II. CONTINGENT
If all of the above beneficiaries are not living, then pay:
% (Paid
Equally
Unless
Otherwise
Last Name First Name Middle Relationship Noted
- --------- ---------- ------ ------------ -----
- ----------------------------------- ------------------ ---------------
- ----------------------------------- ------------------ ---------------
- ----------------------------------- ------------------ ---------------
Note: If more than one primary beneficiary is named and a primary beneficiary
dies before payment is made, the amounts designated for the deceased
primary beneficiary will be reallocated to the other primary
beneficiaries (in accordance with the indicated proportions). Similar
rules apply for contingent beneficiaries.
The foregoing designation is effective upon receipt by the Plan
Administrator and revokes any and all previous designations made by the
employee. The Plan Administrator is authorized to act under this Beneficiary
Designation unless it is revoked or changed by the employee in writing.
- ----------------------------------- --------------------------------------
Witness Employee
In the event the employee designates someone other than his or her spouse, the
following Consent of Spouse must be completed by the employee's spouse.
69
<PAGE>
Consent of Spouse
I, __________________________, spouse of __________________________, in
accordance with section 417 of the Internal Revenue Code, do hereby consent to
this Beneficiary Designation.
The effect of the foregoing consent is to pay my spouse's vested benefits
under the Plan, which may be substantial, to persons other than myself.
---------------------------------
Signature of Spouse
The foregoing Beneficiary Designation and Consent of Spouse were signed in my
presence.
---------------------------------
Plan Administrator
Dated: _____________________________
If not so witnessed, the following notarization must be executed
)
) ss
)
I, ____________________________________, a notary public in and for the
jurisdiction above named, do hereby certify that ___________________________
did personally appear before me and did acknowledge that he/she executed the
foregoing Consent of Spouse as his/her free act and deed.
Subscribed and sworn to before me this ____ day of _____________, 19__.
---------------------------------
Notary Public
My Commission
Expires: ___________________________
Receipt of this Beneficiary Designation is hereby acknowledged.
---------------------------------
Plan Administrator
Dated: _____________________________
NOTICE OF PRE-RETIREMENT SURVIVOR ANNUITY
As a married participant in the ________________, if you die before
(NAME OF PLAN)
commencing distributions from your account, your entire account will be used to
purchase a qualified survivor annuity for your spouse, which will be distributed
in monthly installments over his or her lifetime.
You may elect to waive the requirement that your spouse receive a survivor
annuity during any Plan year in which you are at least age 35. However, your
spouse must consent in writing to this waiver before a Plan representative or
notary public.
You may also elect to waive the requirement that your spouse be your primary
beneficiary during any Plan year in which you are at least age 35. Again, your
spouse must consent to this waiver in writing before a Plan representative or
notary public. If you do elect to waive both the survivor annuity and the
designation of your spouse as beneficiary, and your spouse has consented in
writing, you may designate any beneficiary as the recipient of your account
balance.
You may revoke your waiver at any time before your death and make a new
election. Should you choose to make an election change, or should you have a
change in marital status, notify the Plan Administrator promptly.
70
<PAGE>
CORPORATE RESOLUTION
71
<PAGE>
SECRETARY'S CERTIFICATION
OF ADOPTION OF CORPORATE RESOLUTION
_________________________________
(Name of Corporation)
The undersigned hereby certifies that he/she is the Secretary of
___________________________, (the "Corporation"), a corporation organized and
(Name of Corporation)
existing under the laws of ___________________, and that the following
(Name of State)
resolutions were duly adopted by the Corporation's Board of Directors on
___________________________________________________; that such resolutions are
(Date of Meeting or Unanimous Consent Action)
in full force and effect as of the date of this certification; and that the
following is a true copy of the resolutions as adopted:
[CHECK IF THE ADOPTION OF THIS PROTOTYPE CONSTITUTES AN AMENDMENT AND
RESTATEMENT OF AN EXISTING PLAN]
1. RESOLVED, that the ________________ is hereby amended by the actions
(Name of Plan)
taken pursuant to the following resolutions; and
- or -
[CHECK IF THE ADOPTION OF THIS PROTOTYPE CONSTITUTES THE ESTABLISHMENT OF A NEW
PLAN]
1. RESOLVED. that the Corporation adopt the ______________________________
(Name of Sponsor's Prototype
Plan and Trust)
by executing and delivering the Adoption Agreement; and
2. RESOLVED, that the proper officers of the Corporation are hereby
authorized to take all steps necessary to notify the employees
concerning the Plan, properly execute said Adoption Agreement, and do
all things as they, in their discretion and with advice of counsel, deem
necessary or desirable to establish and maintain the Plan and Trust,
including, but not limited to, making contributions in accordance with
the terms of the Plan; and
3. RESOLVED, that the Trustee(s) and the Plan Administrator designated in
the Adoption Agreement be appointed to serve in accordance with the
terms of the Plan and Trust.
IN WITNESS WHEREOF, the undersigned has signed this Certificate and affixed
the seal of the Corporation this day of , 19
[Corporate Seal] _________________________________
Corporate Secretary
72
<PAGE>
AMENDMENT TO THE
INVESTMENT COMPANY INSTITUTE
PROTOTYPE MONEY PURCHASE PENSION AND PROFIT SHARING PLAN
BASIC DOCUMENT #01
FIRST
=====
The Plan is hereby amended by the word-for-word adoption of the model
language contained in Revenue Procedure 93-12, for distributions made on or
after January 1, 1993, as follows:
Notwithstanding any provision of the Plan to the contrary that would
otherwise limit a Distributee's election under this provision, 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.
Definitions
===========
(a) Eligible Rollover Distribution. An Eligible Rollover
-------------------------------
Distribution is any distribution of all or any portion of the balance to
the credit of the Distributee, except that an Eligible Rollover
Distribution does not include: 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 (10) years or
more; any distribution to the extent such distribution is required under
section 401(a)(9) of the Code; and the portion of any distribution that is
not includable in gross income (determined without regard to the exclusion
for net unrealized appreciation with respect to employer securities).
(b) Eligible Retirement Plan. 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.
(c) Distributee. A Distributee includes an Employee or former
------------
Employee. In addition, the Employee's or former Employee's surviving
spouse and the Employee's or former Employee's spouse or former spouse who
is the alternate payee under a qualified domestic relations order, as
defined in section 414(p) of the Code, are Distributees with regard to the
interest of the spouse or former spouse.
<PAGE>
(d) Direct Rollover. A Direct Rollover is a payment by the Plan
----------------
to the Eligible Retirement Plan specified by the Distributee.
SECOND
======
The Plan is hereby amended by the word-for-word adoption of the model
language contained in Revenue Procedure 94-13 as follows:
In addition to other applicable limitations set forth in the Plan, and
notwithstanding any other provision of the Plan to the contrary, for Plan
Years beginning on or after January 1, 1994, the annual Compensation of
each Employee taken into account under the Plan shall not exceed the OBRA
'93 Annual Compensation Limit. The OBRA '93 Annual Compensation Limit is
$150,000, as adjusted by the Commissioner for increases in the cost-of-
living in accordance with section 401(a)(17)(B) of the Internal Revenue
Code. The cost-of-living adjustment in effect for a calendar year applies
to any period, not exceeding 12 months, over which Compensation is
determined ("Determination Period") beginning in such calendar year. If a
Determination Period consists of fewer than 12 months, the OBRA '93 Annual
Compensation Limit will be multiplied by a fraction, the numerator of which
is the number of months in the Determination Period, and the denominator of
which is 12.
For Plan Years beginning on or after January 1, 1994, any reference in this
Plan to the limitation under section 401(a)(17) of the Code shall mean the
OBRA '93 Annual Compensation Limit set forth in this provision.
If Compensation for any prior Determination Period is taken into account in
determining an Employee's benefits accruing in the current Plan Year, the
Compensation for that prior Determination Period is subject to 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-
<PAGE>
EXHIBIT 17
=================
POWER OF ATTORNEY
=================
KNOW ALL MEN BY THESE PRESENTS, that the undersigned constitutes and appoints
Joseph M. O'Donnell, Gerald J. Holland, and William J. Baltrus and each of them,
with full power to act without the other, as true and lawful attorney-in-fact
and agent, with full and several power of substitution, to sign any Post-
Effective Amendment to the Registration Statement of the Stratton Monthly
Dividend Shares, Inc. (the "Fund") to be filed with the Securities and Exchange
Commission under the Investment Company Act of 1940, as amended, and the
Securities Act of 1933, as amended, with all exhibits thereto, and other
documents in connection therewith, with the Securities and Exchange Commission;
granting to such attorneys-in-fact and agents, and each of them, full power and
authority to do and perform each and every act requisite and necessary to be
done in connection therewith, as fully as Lynne M. Cannon might or could do in
person, hereby ratifying and confirming all that such attorneys-in-fact and
agents or any of them, or their or his/her substitute or substitutes, may
lawfully do or cause to be done by virtue hereof.
IN WITNESS WHEREOF, the undersigned has executed this Power of Attorney on the
15 day of May, 1995.
/s/ Lynne M. Cannon
-------------------------------------
Lynne M. Cannon
Director
ACKNOWLEDGEMENT
---------------
State of Pennsylvania )
) ss:
County of Montgomery )
The foregoing instrument was acknowledged before me on this 15 day of May, 1995
by Lynne M. Cannon, Director of the Stratton Monthly Dividend Shares, Inc.
/s/ M. Antonia O'Donnell
----------------------------------
NOTARY PUBLIC
In and for the County of Montgomery
State of Pennsylvania
My Commission Expires: Feb 2, 1998
(NOTARIAL SEAL)
<PAGE>
=================
POWER OF ATTORNEY
=================
KNOW ALL MEN BY THESE PRESENTS, that the undersigned constitutes and appoints
Joseph M. O'Donnell, Gerald J. Holland, and William J. Baltrus and each of them,
with full power to act without the other, as true and lawful attorney-in-fact
and agent, with full and several power of substitution, to sign any Post-
Effective Amendment to the Registration Statement of the Stratton Monthly
Dividend Shares, Inc. (the "Fund") to be filed with the Securities and Exchange
Commission under the Investment Company Act of 1940, as amended, and the
Securities Act of 1933, as amended, with all exhibits thereto, and other
documents in connection therewith, with the Securities and Exchange Commission;
granting to such attorneys-in-fact and agents, and each of them, full power and
authority to do and perform each and every act requisite and necessary to be
done in connection therewith, as fully as John J. Lombard, Jr. might or could do
in person, hereby ratifying and confirming all that such attorneys-in-fact and
agents or any of them, or their or his/her substitute or substitutes, may
lawfully do or cause to be done by virtue hereof.
IN WITNESS WHEREOF, the undersigned has executed this Power of Attorney on the
7th day of March, 1995.
/s/ John J. Lombard, Jr.
-------------------------------------
John J. Lombard, Jr.
Director
ACKNOWLEDGEMENT
---------------
State of Pennsylvania )
) ss:
County of Montgomery )
The foregoing instrument was acknowledged before me on this 21 day of March,
1995 by John J. Lombard, Jr., Director of the Stratton Monthly Dividend Shares,
Inc.
/s/ Michelle A. Whalen
- -----------------------------------------------
NOTARY PUBLIC
In and for the County of Montgomery
State of Pennsylvania
My Commission Expires: 11/9/98
(NOTARIAL SEAL)
<PAGE>
=================
POWER OF ATTORNEY
=================
KNOW ALL MEN BY THESE PRESENTS, that the undersigned constitutes and appoints
Joseph M. O'Donnell, Gerald J. Holland, and William J. Baltrus and each of them,
with full power to act without the other, as true and lawful attorney-in-fact
and agent, with full and several power of substitution, to sign any Post-
Effective Amendment to the Registration Statement of the Stratton Monthly
Dividend Shares, Inc. (the "Fund") to be filed with the Securities and Exchange
Commission under the Investment Company Act of 1940, as amended, and the
Securities Act of 1933, as amended, with all exhibits thereto, and other
documents in connection therewith, with the Securities and Exchange Commission;
granting to such attorneys-in-fact and agents, and each of them, full power and
authority to do and perform each and every act requisite and necessary to be
done in connection therewith, as fully as Rose J. Randall might or could do in
person, hereby ratifying and confirming all that such attorneys-in-fact and
agents or any of them, or their or his/her substitute or substitutes, may
lawfully do or cause to be done by virtue hereof.
IN WITNESS WHEREOF, the undersigned has executed this Power of Attorney on the
7th day of March, 1995.
/s/ Rose J. Randall
-------------------------------------
Rose J. Randall
Director
ACKNOWLEDGEMENT
---------------
State of Pennsylvania )
) ss:
County of Montgomery )
The foregoing instrument was acknowledged before me on this 21 day of March,
1995 by Rose J. Randall, Director of the Stratton Monthly Dividend Shares,
Inc.
/s/ Michelle A. Whalen
- ----------------------------------------------
NOTARY PUBLIC
In and for the County of Montgomery
State of Pennsylvania
My Commission Expires: 11/09/98
(NOTARIAL SEAL)
<PAGE>
=================
POWER OF ATTORNEY
=================
KNOW ALL MEN BY THESE PRESENTS, that the undersigned constitutes and appoints
Joseph M. O'Donnell, Gerald J. Holland, and William J. Baltrus and each of them,
with full power to act without the other, as true and lawful attorney-in-fact
and agent, with full and several power of substitution, to sign any Post-
Effective Amendment to the Registration Statement of the Stratton Monthly
Dividend Shares, Inc. (the "Fund") to be filed with the Securities and Exchange
Commission under the Investment Company Act of 1940, as amended, and the
Securities Act of 1933, as amended, with all exhibits thereto, and other
documents in connection therewith, with the Securities and Exchange Commission;
granting to such attorneys-in-fact and agents, and each of them, full power and
authority to do and perform each and every act requisite and necessary to be
done in connection therewith, as fully as Henry A. Rentschler might or could do
in person, hereby ratifying and confirming all that such attorneys-in-fact and
agents or any of them, or their or his/her substitute or substitutes, may
lawfully do or cause to be done by virtue hereof.
IN WITNESS WHEREOF, the undersigned has executed this Power of Attorney on the
7th day of March, 1995.
/s/ Henry A. Rentschler
-------------------------------------
Henry A. Rentschler
Director
ACKNOWLEDGEMENT
---------------
State of Pennsylvania )
) ss:
County of Montgomery )
The foregoing instrument was acknowledged before me on this 21 day of March,
1995 by Henry A. Rentschler, Director of the Stratton Monthly Dividend Shares,
Inc.
/s/ Michelle A. Whalen
- ---------------------------------------
NOTARY PUBLIC
In and for the County of Montgomery
State of Pennsylvania
My Commission Expires: 11/09/98
(NOTARIAL SEAL)
<PAGE>
=================
POWER OF ATTORNEY
=================
KNOW ALL MEN BY THESE PRESENTS, that the undersigned constitutes and appoints
Joseph M. O'Donnell, Gerald J. Holland, and William J. Baltrus and each of them,
with full power to act without the other, as true and lawful attorney-in-fact
and agent, with full and several power of substitution, to sign any Post-
Effective Amendment to the Registration Statement of the Stratton Monthly
Dividend Shares, Inc. (the "Fund") to be filed with the Securities and Exchange
Commission under the Investment Company Act of 1940, as amended, and the
Securities Act of 1933, as amended, with all exhibits thereto, and other
documents in connection therewith, with the Securities and Exchange Commission;
granting to such attorneys-in-fact and agents, and each of them, full power and
authority to do and perform each and every act requisite and necessary to be
done in connection therewith, as fully as Merritt N. Rhoad, Jr. might or could
do in person, hereby ratifying and confirming all that such attorneys-in-fact
and agents or any of them, or their or his/her substitute or substitutes, may
lawfully do or cause to be done by virtue hereof.
IN WITNESS WHEREOF, the undersigned has executed this Power of Attorney on the
7th day of March, 1995.
/s/ Merritt N. Rhoad, Jr.
-------------------------------------
Merritt N. Rhoad, Jr.
Director
ACKNOWLEDGEMENT
---------------
State of Pennsylvania )
) ss:
County of Montgomery )
The foregoing instrument was acknowledged before me on this 21 day of March,
1995 by Merritt N. Rhoad, Jr., Director of the Stratton Monthly Dividend
Shares, Inc.
/s/ Michelle A. Whalen
- ----------------------------------------------
NOTARY PUBLIC
In and for the County of Montgomery
State of Pennsylvania
My Commission Expires: 11/9/98
(NOTARIAL SEAL)
<PAGE>
=================
POWER OF ATTORNEY
=================
KNOW ALL MEN BY THESE PRESENTS, that the undersigned constitutes and appoints
Joseph M. O'Donnell, Gerald J. Holland, and William J. Baltrus and each of them,
with full power to act without the other, as true and lawful attorney-in-fact
and agent, with full and several power of substitution, to sign any Post-
Effective Amendment to the Registration Statement of the Stratton Monthly
Dividend Shares, Inc. (the "Fund") to be filed with the Securities and Exchange
Commission under the Investment Company Act of 1940, as amended, and the
Securities Act of 1933, as amended, with all exhibits thereto, and other
documents in connection therewith, with the Securities and Exchange Commission;
granting to such attorneys-in-fact and agents, and each of them, full power and
authority to do and perform each and every act requisite and necessary to be
done in connection therewith, as fully as Alexander F. Smith might or could do
in person, hereby ratifying and confirming all that such attorneys-in-fact and
agents or any of them, or their or his/her substitute or substitutes, may
lawfully do or cause to be done by virtue hereof.
IN WITNESS WHEREOF, the undersigned has executed this Power of Attorney on the
16th day of March, 1995.
/s/ Alexander F. Smith
-------------------------------------
Alexander F. Smith
Director
ACKNOWLEDGEMENT
---------------
State of Pennsylvania )
) ss:
County of Montgomery )
The foregoing instrument was acknowledged before me on this 21 day of March,
1995 by Alexander F. Smith, Director of the Stratton Monthly Dividend Shares,
Inc.
/s/ Michelle A. Whalen
- ----------------------------------------------
NOTARY PUBLIC
In and for the County of Montgomery
State of Pennsylvania
My Commission Expires: 11/9/98
(NOTARIAL SEAL)
<PAGE>
=================
POWER OF ATTORNEY
=================
KNOW ALL MEN BY THESE PRESENTS, that the undersigned constitutes and appoints
Joseph M. O'Donnell, Gerald J. Holland, and William J. Baltrus and each of them,
with full power to act without the other, as true and lawful attorney-in-fact
and agent, with full and several power of substitution, to sign any Post-
Effective Amendment to the Registration Statement of the Stratton Monthly
Dividend Shares, Inc. (the "Fund") to be filed with the Securities and Exchange
Commission under the Investment Company Act of 1940, as amended, and the
Securities Act of 1933, as amended, with all exhibits thereto, and other
documents in connection therewith, with the Securities and Exchange Commission;
granting to such attorneys-in-fact and agents, and each of them, full power and
authority to do and perform each and every act requisite and necessary to be
done in connection therewith, as fully as Richard W. Stevens might or could do
in person, hereby ratifying and confirming all that such attorneys-in-fact and
agents or any of them, or their or his/her substitute or substitutes, may
lawfully do or cause to be done by virtue hereof.
IN WITNESS WHEREOF, the undersigned has executed this Power of Attorney on the
7th day of March, 1995.
/s/ Richard W. Stevens
-------------------------------------
Richard W. Stevens
Director
ACKNOWLEDGEMENT
---------------
State of Pennsylvania )
) ss:
County of Montgomery )
The foregoing instrument was acknowledged before me on this 21 day of March,
1995 by Richard W. Stevens, Director of the Stratton Monthly Dividend Shares,
Inc.
/s/ Michelle A. Whalen
- ----------------------------------------------
NOTARY PUBLIC
In and for the County of Montgomery
State of Pennsylvania
My Commission Expires: 11/9/98
(NOTARIAL SEAL)
