Registration Nos. 2-68348
811-2819
- - - - - - - - - - - - - - -
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
- - - - - - - - - - - - - - -
FORM N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 [ X ]
Pre-Effective Amendment No. ____ [ ]
Post-Effective Amendment No. 31 [ X ]
---
and
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY [ X ]
ACT OF 1940
Amendment No. 31 [ X ]
(Check appropriate box or boxes)
- - - - - - - - - - - - - - -
NEW ENGLAND CASH MANAGEMENT TRUST
(Exact Name of Registrant as Specified in Charter)
399 Boylston Street, Boston, Massachusetts 02116
(Address of Principal Executive Offices, including Zip Code)
(617) 578-1388
(Registrant's Telephone Number, including Area Code)
- - - - - - - - - - - - - - -
Robert P. Connolly, Esq.
New England Funds, L.P.
399 Boylston Street
Boston, Massachusetts 02116
(Name and address of agent for service)
Copy to:
Edward A. Benjamin, Esq.
Ropes & Gray
One International Place
Boston, Massachusetts 02110
- - - - - - - - - - - - - - -
It is proposed that this filing will become effective (check appropriate box)
[ ] immediately upon filing pursuant to paragraph (b) of Rule 485
[ X ] on August 29, 1996 pursuant to paragraph (b) of Rule 485
[ ] 60 days after filing pursuant to paragraph (a)(1) of Rule 485
[ ] on (date) pursuant to paragraph (a)(1) of Rule 485
[ ] 75 days after filing pursuant to paragraph (a)(2) of Rule 485
[ ] on (date) pursuant to paragraph (a)(2) of Rule 485.
If appropriate, check the following box:
[ ] this post-effective amendment designates a new effective date for a
previously filed post-effective amendment.
Registrant has registered an indefinite number of securities under the
Securities Act of 1933 in accordance with Rule 24f-2 under the Investment
Company Act of 1940, as amended. Registrant filed on August 13, 1996 the Rule
24f-2 Notice for the Registrant's fiscal year ended June 30, 1996.
<PAGE>
CALCULATION OF REGISTRATION FEE
UNDER THE SECURITIES ACT OF 1933
- -------------------------------------------------------------------------------
Title of Amount being Proposed Proposed Amount of
securities being registered maximum maximum registration
offered offering price aggregate fee
per unit offering price*
- -------------------------------------------------------------------------------
Shares of 110,078,279 $1.00 $110,078,279 $100.00
beneficial shares
interest
- --------------------------------------------------------------------------------
* The calculation of the maximum aggregate offering price is made pursuant to
Rule 24e-2 under the Investment Company Act of 1940. The following
information is furnished pursuant to the requirements of paragraph (b)
thereof:
Total amount of securities redeemed
or repurchased during the previous
year: $1,174,010,515
Total amount of redeemed or repurchased securities used for reductions
pursuant to paragraph (a) of Rule 24e-2 or pursuant to paragraph (c) of Rule
24f-2 in all previous filings during the
current year: $1,064,222,236
Amount of redeemed or repurchased
securities being used for such
reduction in this amendment: $109,788,279
Amount being registered hereby in excess of amount of redeemed or
repurchased securities being used for reduction in this
amendment: $ 290,000
-----------
Total amount being registered: $110,078,279
<PAGE>
NEW ENGLAND CASH MANAGEMENT TRUST
(Prospectus and Statement of Additional Information)
CROSS REFERENCE SHEET
Items required by Form N-1A
Item No. of
Form N-1A Caption in Prospectus
----------- ---------------------
1 . . . . . . . . . Cover page
2 . . . . . . . . . Schedule of Fees
3 . . . . . . . . . Financial Highlights; Fund Yields;
Additional Facts about the Funds
4 . . . . . . . . . Investment Objectives; How the Funds Pursue
Their Objectives; Fund Investments;
Investment Risks; Additional Facts about the
Funds
5 . . . . . . . . . Fund Management; Back Cover Page
6 . . . . . . . . . Cover Page; Minimum Investment; 6 Ways to
Buy Fund Shares; Fund Dividend Payments;
Income Tax Considerations; Additional Facts
about the Funds
7 . . . . . . . . . Cover page; 6 Ways to Buy Fund Shares;
Exchanging Among New England Funds; Back
Cover Page
8 . . . . . . . . . 5 Ways to Sell Fund Shares
9 . . . . . . . . . None
<PAGE>
Item No. of Caption in Statement of
Form N-1A Additional Information
----------- ------------------------
10 . . . . . . . . . Cover page
11 . . . . . . . . . Table of Contents
12 . . . . . . . . . Not Applicable
13 . . . . . . . . . Investment Objectives and Policies;
Investment Restrictions
14 . . . . . . . . . Management of the Funds
15 . . . . . . . . . Description of the Funds and Ownership of
Shares
16 . . . . . . . . . Investment Advisory, Distribution and Other
Services
17 . . . . . . . . . Portfolio Transactions
18 . . . . . . . . . Description of the Funds and Ownership of
Shares
19 . . . . . . . . . Purchase of Shares; Shareholder Services;
Redemptions; Net Income, Dividends and
Valuation; Taxes
20 . . . . . . . . . Net Income, Dividends and Valuation; Taxes
21 . . . . . . . . . Investment Advisory and Other Services
22 . . . . . . . . . Net Income, Dividends and Valuation; Taxes
23 . . . . . . . . . Financial Statements and Report of
Independent Accountants
<PAGE>
[LOGO]
NEW ENGLAND FUNDS
Where The Best Minds MeetTM
NEW ENGLAND CASH MANAGEMENT TRUST
MONEY MARKET SERIES
U.S. GOVERNMENT SERIES
NEW ENGLAND TAX EXEMPT MONEY MARKET TRUST (The "Funds," and each a "Fund")
Prospectus and Application
August 29, 1996
For general information on the Funds or any of their services and for assistance
in opening an account, contact your investment dealer or call the Distributor
toll free at 1-800-225-5478.
This prospectus concisely provides information that you should know about each
of the Funds before investing. Please read it carefully and keep it for future
reference.
Investments in the Funds are neither insured nor guaranteed by the U.S.
Government. There can be no assurance that the Funds will be able to maintain
a stable net asset value of $1.00 per share.
The Funds offer two classes of shares to the general public. Class A and Class B
shares are both offered at net asset value; however, under conditions described
below, a contingent deferred sales charge (a "CDSC") may be imposed upon
redemption of Fund shares originally acquired by exchange of shares from any of
the New England Stock or Bond Funds (the "Stock or Bond Funds"). See "Owning
Fund Shares -- Exchanging Among New England Funds" and "Selling Fund Shares --
Contingent Deferred Sales Charges."
You can find more detailed information about the Funds in the Statement of
Additional Information (the "Statement") dated August 29, 1996 which has been
filed with the Securities and Exchange Commission (the "SEC") and is available
free of charge. Write to New England Funds, L.P. (the "Distributor"), SAI
Fulfillment Desk, 399 Boylston Street, Boston, MA 02116 or call toll free at
1-800-225-5478. The Statement contains more detailed information about the Funds
and is incorporated into this prospectus by reference.
SHARES OF THE FUNDS ARE NOT DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED OR
ENDORSED BY, ANY BANK OR OTHER FINANCIAL INSTITUTION, ARE NOT FEDERALLY INSURED
BY THE FEDERAL DEPOSIT INSURANCE CORPORATION, THE FEDERAL RESERVE BOARD OR ANY
OTHER AGENCY AND INVOLVE RISK, INCLUDING THE POSSIBLE LOSS OF PRINCIPAL.
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.
<PAGE>
Table of Contents
<TABLE>
<CAPTION>
<S> <C> <C>
Page FUND EXPENSES AND FINANCIAL INFORMATION
1 Schedule of Fees Sales charges, yearly operating expenses.
3 Financial Highlights Historical information on the Funds' performance.
---------------------------------------------------------------------------------------------------------------
INVESTMENT STRATEGY
6 Investment Objectives The investment goal for each Fund.
6 New England Investment The Funds' adviser and subadviser are affiliates of NEIC.
Companies and the Funds' Adviser and
Subadviser
6 How the Funds Pursue Their
Objectives
6 Fund Investments Descriptions of the types of securities in which each
Fund invests.
---------------------------------------------------------------------------------------------------------------
9 INVESTMENT RISKS Each Fund expects to maintain the net asset value of its
shares at $1.00, but it is important to understand the
risks inherent in a Fund before you invest.
---------------------------------------------------------------------------------------------------------------
9 FUND MANAGEMENT Information about the Funds' adviser and subadviser.
---------------------------------------------------------------------------------------------------------------
BUYING FUND SHARES
11 Minimum Investment Everything you need to know to open and add to
11 6 Ways to Buy Fund Shares a New England Funds account.
[ ] Through your investment dealer
[ ] By mail
[ ] By wire transfer
[ ] By Investment Builder
[ ] By electronic purchase through ACH
[ ] By exchange from another New
England Fund
---------------------------------------------------------------------------------------------------------------
OWNING FUND SHARES
13 Exchanging Among New England Funds New England Funds offer three convenient ways to
14 Fund Dividend Payments exchange Fund shares.
---------------------------------------------------------------------------------------------------------------
SELLING FUND SHARES
15 5 Ways to Sell Fund Shares How to withdraw money or close your account.
[ ] Through your investment dealer
[ ] By telephone
[ ] By mail
[ ] By check
[ ] By Systematic Withdrawal Plan
17 Contingent Deferred Sales Charges Class A and Class B shareholders who have exchanged from
the Stock or Bond Funds may be subject to a CDSC upon
redemption.
---------------------------------------------------------------------------------------------------------------
FUND DETAILS Additional information you may find important.
18 Fund Yields
18 Income Tax Considerations
19 Additional Facts About the Funds
</TABLE>
<PAGE>
Fund Expenses and Financial Information
Schedule of Fees
Expenses are one of several factors to consider when you invest in the Funds.
The following table summarizes your maximum transaction costs from investing in
the Funds and estimated annual expenses for each class of the Funds' shares. The
Example on the following page shows the cumulative expenses attributable to a
hypothetical $1,000 investment in each class of shares of the Funds for the
periods specified.
Shareholder transaction expenses
<TABLE>
<CAPTION>
New England
New England Cash Management
Cash Management Trust -- New England
Trust -- U.S. Government Tax Exempt
Money Market Series Series Money Market Trust
-------------------- -------------------- ----------------------
Class A Class B Class A Class B Class A Class B
-------- -------- -------- -------- -------- ----------
<S> <C> <C> <C> <C> <C> <C>
Maximum Initial Sales Charge
Imposed on a Purchase None None None None None None
Maximum Contingent Deferred Sales
Charge None* None* None* None* None* None*
</TABLE>
*Shares of each Class are sold without any sales charge. However, Class A and
Class B shares may be subject to a contingent deferred sales charge if the
shares were purchased by exchange from a Stock or Bond Fund. See "Selling
Fund Shares--Contingent Deferred Sales Charges."
Annual Fund operating expenses
(as a percentage of average net assets)
New England
Cash Management Trust
--
Money Market Series
----------------------
Class A Class B
-------- ----------
Management Fees 0.42% 0.42%
12b-1 Fees None None
Other Expenses 0.48% 0.48%
Total Fund Operating Expenses 0.90% 0.90%
New England
Cash Management Trust --
U.S. Government Series
------------------------
Class A Class B
--------- -----------
Management Fees 0.43% 0.43%
12b-1 Fees None None
Other Expenses (after voluntary fee waiver) 0.50%(1) 0.50%(1)
Total Fund Operating Expenses (after voluntary
fee waiver) 0.93%(1) 0.93%(1)
New England
Tax Exempt
Money Market Trust
------------------------
Class A Class B
--------- -----------
Management Fees (after voluntary fee waiver) 0.07%(2) 0.07%(2)
12b-1 Fees None None
Other Expenses 0.49% 0.49%
Total Fund Operating Expenses (after voluntary
fee waiver) 0.56%(2) 0.56%(2)
(1) Without a voluntary waiver of accounting and administrative fees by the
Distributor, Other Expenses would be 0.53% and Total Fund Operating Expenses
would be 0.96% for both Class A and Class B shares. These voluntary
limitations can be terminated by the Distributor at any time.
See "Fund Management."
(2) Without the voluntary fee waiver by the Fund's adviser and subadviser,
Management Fees would be 0.40% and Total Fund Operating Expenses would be
0.90% for both Class A and Class B shares. These voluntary limitations
can be terminated by the Fund's adviser or subadviser at any time. See
"Fund Management."
1
<PAGE>
Example
A $1,000 investment would incur the following expenses, assuming a 5% annual
return and redemption at the end of each time period. The 5% return and expenses
in the Example should not be considered indicative of actual or expected Fund
performance or expenses, both of which may be more or less than shown.
New England New England
Cash Management Trust Cash Management Trust New England
-- -- Tax Exempt
Money Market Series U.S. Government Series Money Market Trust
--------------------- ---------------------- -------------------
Class A Class B Class A Class B Class A Class B
(1) (1) (1)
- -------------------------------------------------------------------------------
1 year $ 9 $ 9 $ 9 $ 9 $ 6 $ 6
- -------------------------------------------------------------------------------
3 years $ 29 $ 29 $ 30 $ 30 $18 $18
- -------------------------------------------------------------------------------
5 years $ 50 $ 50 $ 51 $ 51 $31 $31
- -------------------------------------------------------------------------------
10 years $111 $111 $114 $114 $70 $70
- -------------------------------------------------------------------------------
(1) Assumes CDSC does not apply to the redemption.
The purpose of this fee schedule is to help you understand the various expenses
that you will bear directly or indirectly if you invest in one or more of the
Funds. For additional information about the Funds' fees and other expenses, see
"Fund Management."
A wire fee (currently $5.00) will be deducted from your proceeds if you elect
to transfer redemption proceeds by wire.
2
<PAGE>
Financial Highlights
(For a Class A and B share of each Fund outstanding throughout the indicated
periods.)
The Financial Highlights presented on pages 3 through 5 have been included in
financial statements for the Funds. The financial statements have been examined
by Price Waterhouse LLP, independent accountants, whose reports thereon were
unqualified. The Financial Highlights should be read in conjunction with the
financial statements and the notes thereto incorporated by reference in the
Statement. Each Fund's annual report contains additional performance information
and is available upon request and without charge.
NEW ENGLAND CASH MANAGEMENT TRUST -- MONEY MARKET SERIES
Year Ended June 30,
--------------------------------------------
1987 1988 1989 1990
- ------------------------------------------------------------------------
Net asset value,
beginning of period $1.00 $1.00 $1.00 $1.00
-----------------------------------------------------------------------
Income from investment
operations
-----------------------------------------------------------------------
Net investment income 0.0554 0.0643 0.0816 0.0801
Net gains or losses on
securities (both
realized and
unrealized) 0.0000 0.0000 0.0000 0.0000
-----------------------------------------------------------------------
Total income from
investment operations 0.0554 0.0643 0.0816 0.0801
-----------------------------------------------------------------------
Less distributions
-----------------------------------------------------------------------
Dividends (from net
investment income) (1) (0.0554) (0.0643) (0.0816) (0.0801)
Distributions (from net
realized capital
gains) 0.0000 0.0000 0.0000 0.0000
-----------------------------------------------------------------------
Total distributions (0.0554) (0.0643) (0.0816) (0.0801)
-----------------------------------------------------------------------
Net asset value,
end of period $1.00 $1.00 $1.00 $1.00
=======================================================================
Total return (%) 5.68 6.60 8.45 8.29
-----------------------------------------------------------------------
Ratios/Supplemental data
-----------------------------------------------------------------------
Net assets, end of
period (000) $685,026 $823,742 $984,246 $1,140,852
Ratio of expenses to
average net assets (%) 0.81 0.74 0.72 0.67
Ratio of net income to
average net assets (%) 5.54 6.44 8.21 8.00
(1) Including net realized gain on investments.
<TABLE>
<CAPTION>
Year Ended June 30,
------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
1991 1992 1993 1994 1995 1996
---------------------------------------------------------------------------------------------
Net asset value,
beginning of period $1.00 $1.00 $1.00 $1.00 $1.00 $1.00
---------------------------------------------------------------------------------------------
Income from investment
operations
---------------------------------------------------------------------------------------------
Net investment income 0.0693 0.0450 0.0275 0.0264 0.0469 0.0482
Net gains or losses on
securities (both
realized and
unrealized) 0.0000 0.0000 0.0000 0.0000 0.0000 0.0002
---------------------------------------------------------------------------------------------
Total income from
investment operations 0.0693 0.0450 0.0275 0.0264 0.0469 0.0484
---------------------------------------------------------------------------------------------
Less distributions
---------------------------------------------------------------------------------------------
Dividends (from net
investment income) (1) (0.0693) (0.0450) (0.0275) (0.0264) (0.0469) (0.0484)
Distributions (from net
realized capital
gains) 0.0000 0.0000 0.0000 0.0000 0.0000 0.0000
---------------------------------------------------------------------------------------------
Total distributions (0.0693) (0.0450) (0.0275) (0.0264) (0.0469) (0.0484)
---------------------------------------------------------------------------------------------
Net asset value,
end of period $1.00 $1.00 $1.00 $1.00 $1.00 $1.00
=============================================================================================
Total return (%) 7.15 4.58 2.84 2.68 4.79 4.95
---------------------------------------------------------------------------------------------
Ratios/Supplemental data
---------------------------------------------------------------------------------------------
Net assets, end of
period (000) $1,150,963 $925,077 $775,914 $699,369 $649,808 $663,621
Ratio of expenses to
average net assets (%) 0.68 0.73 0.79 0.84 0.88 0.90
Ratio of net income to
average net assets (%) 6.92 4.56 2.78 2.65 4.67 4.85
(1) Including net realized gain on investments.
</TABLE>
3
<PAGE>
NEW ENGLAND CASH MANAGEMENT TRUST -- U.S. GOVERNMENT SERIES
Year Ended June 30,
------------------------------------------
1987 1988 1989 1990
---------------------------------------------------------------------
Net asset value,
beginning of period $1.00 $1.00 $1.00 $1.00
---------------------------------------------------------------------
Income from investment
operations
---------------------------------------------------------------------
Net investment income 0.0539 0.0585 0.0772 0.0762
Net gains or losses on
securities (both
realized and
unrealized) 0.0001 0.0001 0.0001 0.0001
---------------------------------------------------------------------
Total income from
investment operations 0.0540 0.0586 0.0773 0.0763
---------------------------------------------------------------------
Less distributions
---------------------------------------------------------------------
Dividends (from net
investment income) (1) (0.0540) (0.0586) (0.0773) (0.0763)
Distributions (from net
realized capital
gains) 0.0000 0.0000 0.0000 0.0000
---------------------------------------------------------------------
Total distributions (0.0540) (0.0586) (0.0773) (0.0763)
---------------------------------------------------------------------
Net asset value,
end of period $1.00 $1.00 $1.00 $1.00
=====================================================================
Total return (%) 5.53 6.00 7.99 7.88
---------------------------------------------------------------------
Ratios/Supplemental data
---------------------------------------------------------------------
Net assets, end of
period (000) $46,585 $57,183 $57,697 $61,746
Ratio of expenses to
average net assets (%) 0.84 0.83 0.81 0.79
Ratio of net income to
average net assets (%) 5.44 5.87 7.74 7.62
<TABLE>
<CAPTION>
Year Ended June 30,
----------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
1991 1992 1993 1994 1995 1996
-------------------------------------------------------------------------------------------
Net asset value,
beginning of period $1.00 $1.00 $1.00 $1.00 $1.00 $1.00
-------------------------------------------------------------------------------------------
Income from investment
operations
-------------------------------------------------------------------------------------------
Net investment income 0.0660 0.0449 0.0271 0.0257 0.0454 0.0465
Net gains or losses on
securities (both
realized and
unrealized) 0.0001 0.0000 0.0000 0.0000 0.0000 0.0010
-------------------------------------------------------------------------------------------
Total income from
investment operations 0.0661 0.0449 0.0271 0.0257 0.0454 0.0475
-------------------------------------------------------------------------------------------
Less distributions
-------------------------------------------------------------------------------------------
Dividends (from net
investment income) (1) (0.0661) (0.0449) (0.0271) (0.0257) (0.0454) (0.0475)
Distributions (from net
realized capital
gains) 0.0000 0.0000 0.0000 0.0000 0.0000 0.0000
-------------------------------------------------------------------------------------------
Total distributions (0.0661) (0.0449) (0.0271) (0.0257) (0.0454) (0.0475)
-------------------------------------------------------------------------------------------
Net asset value,
end of period $1.00 $1.00 $1.00 $1.00 $1.00 $1.00
===========================================================================================
Total return (%) 6.80 4.57 2.80 2.60 4.64 4.86
-------------------------------------------------------------------------------------------
Ratios/Supplemental data
-------------------------------------------------------------------------------------------
Net assets, end of
period (000) $87,380 $79,218 $64,595 $58,963 $59,742 $52,547
Ratio of expenses to
average net assets (%) 0.74 0.73 0.78 0.84 0.92 0.93(2)
Ratio of net income to
average net assets (%) 6.50 4.50 2.73 2.54 4.53 4.80
</TABLE>
(1) Including net realized gain on investments.
(2) The ratio of expenses to average net assets without giving effect to the
voluntary fee waiver described in Note 3 to the Financial Statements
contained in the Statement would have been 0.96% for the year ended June 30,
1996.
4
<PAGE>
NEW ENGLAND TAX EXEMPT MONEY MARKET TRUST
Year Ended June 30,
------------------------------------------
1987 1988 1989 1990
---------------------------------------------------------------------
Net asset value,
beginning of period $1.00 $1.00 $1.00 $1.00
---------------------------------------------------------------------
Income from investment
operations
---------------------------------------------------------------------
Net investment income 0.0382 0.0427 0.0541 0.0544
---------------------------------------------------------------------
Net gains or losses on
securities (both
realized and
unrealized) 0.0000 0.0000 0.0000 0.0000
---------------------------------------------------------------------
Total income from
investment operations 0.0382 0.0427 0.0541 0.0544
---------------------------------------------------------------------
Less distributions
---------------------------------------------------------------------
Dividends (from net
investment income) (0.0382) (0.0427) (0.0541) (0.0544)
Distributions (from net
realized capital
gains) 0.0000 0.0000 0.0000 0.0000
---------------------------------------------------------------------
Total distributions (0.0382) (0.0427) (0.0541) (0.0544)
---------------------------------------------------------------------
Net asset value,
end of period $1.00 $1.00 $1.00 $1.00
=====================================================================
Total return (%) 3.89 4.34 5.53 5.56
---------------------------------------------------------------------
Ratios/Supplemental data
---------------------------------------------------------------------
Net assets, end of
period (000) $56,874 $65,721 $65,433 $68,287
Ratio of expenses to
average net assets (%)
(1) 0.56 0.56 0.56 0.56
Ratio of net income to
average net assets (%) 3.81 4.27 5.41 5.42
<TABLE>
<CAPTION>
Year Ended June 30,
----------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
1991 1992 1993 1994 1995 1996
-------------------------------------------------------------------------------------------
Net asset value,
beginning of period $1.00 $1.00 $1.00 $1.00 $1.00 $1.00
-------------------------------------------------------------------------------------------
Income from investment
operations
-------------------------------------------------------------------------------------------
Net investment income 0.0483 0.0337 0.0214 0.0208 0.0314 0.0327
-------------------------------------------------------------------------------------------
Net gains or losses on
securities (both
realized and
unrealized) 0.0000 0.0000 0.0000 0.0000 0.0000 0.0000
-------------------------------------------------------------------------------------------
Total income from
investment operations 0.0483 0.0337 0.0214 0.0208 0.0314 0.0327
-------------------------------------------------------------------------------------------
Less distributions
-------------------------------------------------------------------------------------------
Dividends (from net
investment income) (0.0483) (0.0337) (0.0214) (0.0208) (0.0314) (0.0327)
Distributions (from net
realized capital
gains) 0.0000 0.0000 0.0000 0.0000 0.0000 0.0000
-------------------------------------------------------------------------------------------
Total distributions (0.0483) (0.0337) (0.0214) (0.0208) (0.0314) (0.0327)
-------------------------------------------------------------------------------------------
Net asset value,
end of period $1.00 $1.00 $1.00 $1.00 $1.00 $1.00
===========================================================================================
Total return (%) 4.93 3.41 2.20 2.10 3.18 3.32
-------------------------------------------------------------------------------------------
Ratios/Supplemental data
-------------------------------------------------------------------------------------------
Net assets, end of
period (000) $72,634 $65,753 $56,555 $66,620 $67,797 $64,897
Ratio of expenses to
average net assets (%)
(1) 0.56 0.56 0.56 0.56 0.56 0.56
Ratio of net income to
average net assets (%) 4.81 3.38 2.14 2.08 3.15 3.29
</TABLE>
(1) The ratio of expenses to average net assets without giving effect to the
expense limitation described in Note 3 to the Financial Statements contained
in the Statement would have been 0.76%, 0.75%, 0.74%, 0.76%, 0.76%, 0.76%,
0.83%, 0.89%, 0.85% and 0.90% for the years ended June 30, 1987, 1988, 1989,
1990, 1991, 1992, 1993, 1994, 1995 and 1996, respectively.
5
<PAGE>
Investment Strategy
Investment Objectives
NEW ENGLAND CASH MANAGEMENT TRUST -- MONEY MARKET SERIES
(the "Money Market Fund")
The Money Market Fund is a separate series of New England Cash Management Trust
that seeks maximum current income consistent with preservation of capital and
liquidity. The Money Market Fund invests in a variety of high quality money
market instruments.
NEW ENGLAND CASH MANAGEMENT TRUST -- U.S. GOVERNMENT SERIES
(the "Government Fund")
The Government Fund is a separate series of New England Cash Management Trust
that seeks the highest current income consistent with maximum safety of capital
and liquidity. The Government Fund invests only in obligations backed by the
full faith and credit of the U.S. Government and in related repurchase
agreements.
NEW ENGLAND TAX EXEMPT MONEY MARKET TRUST
(the "Tax Exempt Fund")
The Tax Exempt Fund is a separate trust that seeks current income exempt from
federal income taxes consistent with preservation of capital and liquidity. The
Tax Exempt Fund invests primarily in a diversified portfolio of high quality
short-term fixed, variable and floating rate municipal obligations.
New England Cash Management Trust and New England Tax Exempt Money Market
Trust are referred to in this prospectus as the "Trusts."
New England Investment Companies and the Funds' Adviser and Subadviser
The investment adviser and subadviser of each of the Funds are independently
operated subsidiaries of New England Investment Companies, L.P. ("NEIC"), the
5th-largest publicly traded investment management firm in the United States.
NEIC is listed on the New York Stock Exchange and through its subsidiaries or an
affiliate manages over $87 billion in assets for individuals and institutions.
The adviser and subadviser operate independently and are staffed by experienced
investment professionals. The adviser and subadviser apply specialized knowledge
and careful analysis to the pursuit of each Fund's objectives.
New England Funds Management, L.P. ("NEFM") is investment adviser of each of
the Funds, as well as most of the other New England Funds.
Back Bay Advisors(R), L.P. ("Back Bay Advisors(R)"), subadviser of each of
the Funds, manages over $6 billion in assets, primarily mutual fund and
institutional fixed-income portfolios.
How the Funds Pursue Their Objectives
Investments in each Fund will be pooled with money from other investors in that
Fund to invest in a managed portfolio consisting of securities appropriate to
the Fund's investment objective and policies, as described below. There can be
no assurance that any Fund will achieve its objective.
Fund Investments
[ ] Money Market Fund
The Money Market Fund invests in certificates of deposit, bankers' acceptances
and other dollar-denominated obligations of banks whose net assets exceed $100
million. Up to 100% of the Fund's assets may be invested in these kinds of
obligations. These obligations may be issued by U.S. banks or their foreign
branches, or foreign banks (including their U.S. or London branches), subject to
the conditions set forth in the Statement.
The Fund may invest in commercial paper and other corporate debt obligations
that satisfy the Fund's quality and maturity standards.
The Fund may invest in "U.S. Government Securities," which term, as used in
this prospectus, includes all securities issued or guaranteed by the U.S.
Government or its agencies, authorities or instrumentalities. Some U.S.
Government Securities are backed by the full faith and credit of the United
States, some are supported by the discretionary authority of the U.S. Government
to purchase the issuer's obligations (e.g.,
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obligations of the Federal National Mortgage Association), some by the right of
the issuer to borrow from the U.S. Government (e.g., obligations of Federal Home
Loan Banks), while still others are supported only by the credit of the issuer
itself (e.g., obligations of the Student Loan Marketing Association).
The Fund may also invest in repurchase agreements of domestic banks or
broker-dealers relating to any of the above. In repurchase agreements, the Fund
buys a security from a seller, usually a bank or brokerage firm, with the
understanding that the seller will repurchase the security from the Fund at a
higher price at a later date.
All of the Fund's investments at the time of purchase (other than U.S.
Government Securities and repurchase agreements relating thereto) will be rated
in the highest rating category by a major rating agency or, if unrated, will be
of comparable quality as determined by the Fund's subadviser under guidelines
approved by the Trust's trustees.
[ ] Government Fund
The Government Fund invests in U.S. Government Securities, limited, however,
to obligations backed by the full faith and credit of the U.S. Government.
The Government Fund may also invest in repurchase agreements related to the
foregoing.
[ ] Tax Exempt Fund
The Tax Exempt Fund invests in notes, commercial paper and bonds which pay
interest that, in the opinion of the issuer's counsel, is exempt from federal
income tax ("Municipal Securities"). Municipal Securities are generally issued
by states and local governments and their agencies. The Fund will only invest in
Municipal Securities which are:
(bullet) short-term notes rated MIG-2 or better by Moody's Investors
Service, Inc. ("Moody's") or SP-2 or better by Standard & Poor's
Ratings Group ("S&P");
(bullet) municipal bonds rated Aa or better by Moody's or AA or better by S&P
with a remaining maturity of 397 days or less whose issuer has
comparable short-term obligations that are rated in the top rating
category by Moody's or S&P; or
(bullet) other types of Municipal Securities, including commercial paper,
rated P-2 by Moody's or A-2 by S&P or unrated Municipal Securities
determined to be of comparable quality by the Fund's subadviser
under guidelines approved by the Trust's trustees, subject to any
limitations imposed by Rule 2a-7 under the Investment Company Act
of 1940.
Some of these may be variable or floating rate Municipal Securities, which
pay a rate of interest adjusted on a periodic basis and determined by reference
to a prescribed formula. Such obligations may be subject to prepayment without
penalty, at the option of either the Fund or the issuer.
The interest on certain types of Municipal Securities, known as "private
activity" bonds, is an item of tax preference, subject to the federal
alternative minimum tax with a maximum rate of 28%. The Tax Exempt Fund has
instituted procedures to avoid investment in "private activity" Municipal
Securities in order to reduce the possibility that Fund dividends will
constitute an item of tax preference. However, there can be no assurance that
these procedures will be totally effective. The Tax Exempt Fund intends to
continue these procedures so long as it deems them necessary and prudent.
Shareholders should be aware that, while these procedures are in effect, the Tax
Exempt Fund will not be able to invest in the full range of issues available in
the Municipal Securities market. The Tax Exempt Fund's investments in Municipal
Securities that are subject to the federal alternative minimum tax, together
with other investments the interest on which is subject to the alternative
minimum tax, will not normally exceed 20% of Fund investments.
The interest on Municipal Securities issued after August 15, 1986 is
retroactively taxable from the date of issuance if the issuer does not comply
with certain requirements concerning the use of bond proceeds and the
application of earnings on bond proceeds.
The Tax Exempt Fund may also invest some of its assets in cash or taxable,
high-quality money market securities eligible for purchase by the Money
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Market Fund. However, unless it has adopted a temporary defensive position,
it is a fundamental policy of the Fund to invest at least 80% of its net
assets in Municipal Securities.
The Fund may buy Municipal Securities on a when-issued basis, and may buy
Municipal Securities from a broker-dealer with the right to sell them back at a
certain time and price (puts). These practices, as well as repurchase
agreements, may present risks in addition to those associated with Municipal
Securities.
The issuer of a Municipal Security may make payments from money raised
through a variety of sources, such as (1) the issuer's general taxing power, (2)
a specific type of tax such as a property tax or (3) a particular facility or
project such as a highway. The ability of an issuer to make these payments could
be affected by litigation, legislation or other political events or the
bankruptcy of the issuer.
[ ] All Funds
All investments of the Funds mature in 397 days or less, and the average
maturity of the investments of each Fund is 90 days or less. The maturity of
repurchase agreements is calculated by reference to the repurchase date, not by
reference to the maturity of the underlying security. All investments of each
Fund will be in U.S. dollars and will be determined to present minimal credit
risks by the subadviser under guidelines established by the Trust's trustees.
It is a fundamental policy of each Fund that no more than 10% of the net
assets of the Fund are to be invested in illiquid securities, including
repurchase agreements with maturities of more than seven days.
Note: Except for each Fund's investment objective and each Fund's policies
that are explicitly described as fundamental in this prospectus or in the
Statement, the investment policies of the Funds may be changed without
shareholder approval or prior notice.
The Funds will make all of their investments in a manner which complies with
Rule 2a-7 under the Investment Company Act of 1940.
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Investment Risks
It is important to understand the following risks inherent in investing in the
Funds before you invest.
By investing only in high-quality, short-term securities, each Fund seeks to
minimize risk. Although changes in interest rates can change the market value of
a security, the Funds expect those changes to be minimal and that each Fund will
be able to maintain the net asset value of its shares at $1.00, although this
value cannot be guaranteed. The price stability and liquidity of the Tax Exempt
Fund may not be equal to that of a taxable money market fund, because the market
for Municipal Securities is not as broad as the market for taxable money market
instruments and because the average portfolio maturity is likely to be greater
for the Fund than for a taxable money market fund.
All repurchase agreements entered into by the Funds provide that the seller's
obligations must be fully collateralized at all times. A Fund may, however, face
various delays and risks of loss if the seller defaults.
The Money Market Fund's holdings of obligations of foreign banks or of foreign
branches or subsidiaries of U.S. banks may be subject to different risks than
obligations of domestic banks, such as foreign economic, political and legal
developments and the fact that different regulatory requirements apply.
Fund Management
NEFM, 399 Boylston Street, Boston, Massachusetts 02116, serves as the adviser to
each of the Funds. NEFM oversees, evaluates and monitors the subadvisory
services provided to each Fund and furnishes general business management and
administration to each Fund. NEFM does not determine what investments will be
purchased by the Funds.
Back Bay Advisors(R), 399 Boylston Street, Boston, Massachusetts 02116, is the
subadviser of the Funds. Back Bay Advisors provides discretionary investment
management services to mutual funds and other institutional investors. Formed in
1986, Back Bay Advisors now manages 14 mutual fund portfolios and a total of
over $6 billion of assets.
The general partners of Back Bay Advisors, NEFM, and the Distributor are special
purpose corporations that are indirect, wholly-owned subsidiaries of NEIC.
NEIC's sole general partner, New England Investment Companies, Inc. is a
wholly-owned subsidiary of New England Mutual Life Insurance Company ("The New
England"), and is expected to become a wholly-owned subsidiary of Metropolitan
Life Insurance Company ("MetLife"), following the merger of The New England with
and into MetLife, which merger is expected to occur on or after August 30, 1996,
subject to the satisfaction of certain conditions.
Subject to the supervision of NEFM, Back Bay Advisors manages each Fund in
accordance with the Fund's investment objective and policies, makes investment
decisions for the Fund, places orders to purchase securities for the Fund and
employs professional advisers and securities analysts who provide research
services relating to the Fund.
In addition to overseeing the management of the Funds as conducted by Back Bay
Advisors, NEFM provides executive and other personnel for the management of the
Trusts. Each Trust's Board of Trustees supervises the affairs of that Trust as
conducted by NEFM and Back Bay Advisors.
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Each of the Funds pay NEFM a management fee at the annual rate set forth in
the following table:
Management fee payable by the Fund to NEFM
Fund (as a percentage of average daily net assets of the Fund)
- ------------------------------------------------------------------------------
Money Market Fund .425% of the first $500 million
.400% of the next $500 million
.350% of the next $500 million
.300% of the next $500 million
.250% of amounts in excess of $2 billion
Government Fund .425% of the first $500 million
.400% of the next $500 million
.350% of the next $500 million
.300% of the next $500 million
.250% of amounts in excess of $2 billion
Tax Exempt Fund .40% of the first $100 million
.30% of amounts in excess of $100 million
NEFM pays Back Bay Advisors a subadvisory fee at the annual rate set forth in
the following table:
Subadvisory fee payable by NEFM to Back Bay Advisors
Fund (as a percentage of average daily net assets of the Fund)
-----------------------------------------------------------------------------
Money Market Fund .205% of the first $500 million
.180% of the next $500 million
.160% of the next $500 million
.140% of the next $500 million
.120% of amounts in excess of $2 billion
Government Fund .2125% of the first $500 million
.2000% of the next $500 million
.1750% of the next $500 million
.1500% of the next $500 million
.1250% of amounts in excess of $2 billion
Tax Exempt Fund .20% of the first $100 million
.15% of amounts in excess of $100 million
The Funds pay no direct fees to Back Bay Advisors.
Prior to January 2, 1996, Back Bay Advisors served as adviser to each Fund.
In addition to management fees, each Fund pays the Distributor for providing
certain accounting and administrative services. The amount of the payments is
based on the allocated costs that the Distributor incurs in providing these
services.
Until further notice to the Tax Exempt Fund, NEFM and Back Bay Advisors have
agreed to reduce their fees and, if necessary, to bear certain expenses
associated with operating the Fund (not including fees payable to the trustees
who are not "interested persons" of the Trust) to the extent necessary in order
to limit those fees and expenses for Class A and B shares to an annual rate of
0.5625% of the Fund's average daily net assets. NEFM and Back Bay Advisors may
terminate these voluntary limitations at any time. In such event, the Fund would
supplement its prospectus. In addition, until further notice, the Distributor
has agreed to waive accounting and administrative fees for the Government Fund.
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Buying Fund Shares
Minimum Investment
$1,000 is the minimum for an initial investment in a Fund and $50 is the minimum
for each subsequent investment. There are special initial investment minimums
for the following plans:
[ ] $25 (for initial and subsequent investments) for payroll deduction
investment programs for 401(k), SARSEP, 403(b)(7) retirement plans and
certain other retirement plans.
[ ] $50 for automatic investing through the Investment Builder program.
[ ] $250 for retirement plans with tax benefits such as corporate pension and
profit sharing plans, IRAs and Keogh plans.
6 Ways to Buy Fund Shares
The Funds offer two classes of shares, Class A and Class B, in order to enable
investors in either class of the Stock or Bond Funds to invest in money market
shares. The Stock Funds are: New England Growth Fund, New England International
Equity Fund, New England Star Advisers Fund, New England Star Worldwide Fund,
Growth Fund of Israel, New England Capital Growth Fund, New England Value Fund,
New England Growth Opportunities Fund and New England Balanced Fund. The Bond
Funds are: New England High Income Fund, New England Strategic Income Fund, New
England Government Securities Fund, New England Bond Income Fund, New England
Limited Term U.S. Government Fund, New England Adjustable Rate U.S. Government
Fund, New England Municipal Income Fund, New England Massachusetts Tax Free
Income Fund, New England Intermediate Term Tax Free Fund of California and New
England Intermediate Term Tax Free Fund of New York.
To determine which class of shares is appropriate for you, see "Owning Fund
Shares--Exchanging Among New England Funds." You may purchase shares in the
following ways:
[Icon of Investment Dealer] Through your investment dealer:
Many investment dealers have a sales agreement with the Distributor and would be
pleased to accept your order.
[Icon of window envelope] By mail:
For an initial investment, simply complete an application and return it, with
a check payable to New England Funds, P.O. Box 8551, Boston, MA 02266-8551.
Using Tele#Facts 1-800-346-5984
Tele#Facts, New England Funds' automated service system, gives you 24-hour
access to your account. Through your touch-tone telephone, you can receive your
current account balance, your last five transactions, Fund prices and recent
performance information. You can also purchase, sell or exchange Class A shares
of any New England Fund. For a free brochure about Tele#Facts including a
convenient wallet card, call us at 1-800-225-5478.
For subsequent investments, please mail your check to New England Funds,
P.O. Box 8551, Boston, MA 02266-8551 along with a letter of instruction
(including your account number) or an additional deposit slip from your
statements. To make investing even easier, you can also order personalized
investment slips by calling 1-800-225-5478.
All purchases made by check should be in U.S. dollars and made payable to New
England Funds, or, in the case of a retirement account, the custodian or
trustee. Third party checks will generally not be accepted except under certain
circumstances approved by the Distributor. When purchases are made by check or
periodic account investment, redemptions may not be allowed until the investment
being redeemed has been in the account for 10 calendar days.
[Icon of wire] By wire transfer of Federal Funds:
For an initial investment, call us at 1-800-225-5478 between 8:00 a.m. and
7:00 p.m. (Eastern time) on a day when the Fund is open for business to
obtain an account number and wire transfer instructions.
For subsequent investments, direct your bank to transfer funds to State
Street Bank and Trust Company, ABA #011000028, DDA #99011538, Credit Fund (Fund
name and Class of shares), Shareholder Name, Shareholder Account Number. Funds
may be transferred between 9:00 a.m. and 4:00 p.m. (Eastern time) on a day when
the Fund is open for business. Your bank may charge a fee
for this service.
[Icon of building blocks] By Investment Builder:
Investment Builder is New England Funds' automatic investment plan. You may
authorize automatic monthly transfers of $50 or more from your bank checking or
savings account to purchase shares of one or more New England Funds.
For an initial investment, please indicate that you would like to begin an
automatic investment plan
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through Investment Builder. Indicate the amount of the monthly investment on
the enclosed application and enclose a check marked "Void" or a deposit slip
from your bank account.
To add Investment Builder to an existing account, please call us at
1-800-225-5478 for a Service Options Form.
[Icon of wire plug] By electronic purchase through ACH:
You may purchase additional shares electronically through the Automated Clearing
House ("ACH") system as long as your bank or credit union is a member of the ACH
system and you have a completed, approved ACH application on file with the Fund.
To make investing even easier, you can also order personalized investment
slips by calling 1-800-225-5478.
To purchase through ACH, call 1-800-225-5478 between 8:00 a.m. and 7:00 p.m.
(Eastern time) on a day when the Fund is open for business. You may also
purchase shares through ACH by calling Tele#Facts at 1-800-346-5984 twenty-four
hours a day. Under normal circumstances, the New York Stock Exchange (the
"Exchange") closes at 4:00 p.m. (Eastern time). Purchase orders through ACH or
Tele#Facts will be complete only upon receipt by New England Funds of funds from
your bank and, on the day that funds are received, will be processed at the net
asset value next determined at the close of regular trading on the Exchange on
days that the Exchange is open. Proceeds of redemptions of Fund shares purchased
through ACH may not be available for up to ten days after the purchase date.
[Icon of East-West arrows] By exchange from another New England Fund:
You may also purchase shares of a Fund by exchanging shares from another Fund
or a Stock or Bond Fund. Please see "Owning Fund Shares-- Exchanging Among
New England Funds" for complete details.
General
All purchase orders are subject to acceptance by the Funds and will be effected
at the net asset value next determined after the order is received in proper
form by State Street Bank and Trust Company ("State Street Bank"). However,
orders received by your investment dealer before the close of trading on the
Exchange and transmitted to the Distributor by 5:00 p.m. (Eastern time) on the
same day will be effected at the net asset value determined on that day.
Although the Funds do not anticipate doing so, they reserve the right to suspend
or change the terms of sale of shares.
Class B shares and certain special services may not be available to persons
whose shares are held in street name accounts.
You will not receive any certificates for your Class A shares unless you
request them in writing from New England Funds, L.P. (the "Servicing Agent").
The Funds' "open account" system for recording your investment eliminates the
problems of handling and safekeeping certificates. Certificates will not be
issued for Class B shares. If you wish transactions in your account to be
effected by another person under a power of attorney from you, special rules
apply. Please contact your investment dealer or the Distributor for details.
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<PAGE>
Owning Fund Shares
Exchanging Among
New England Funds
Class A Shares
You or your investment dealer can exchange some or all of your Class A shares of
a Fund for Class A shares of any other Fund described in this prospectus with no
sales charge and exchange some or all of your Class A shares of a Fund which
have not previously been subject to a sales charge for Class B shares of any
other Fund described in this prospectus with no sales charge. Class A or Class B
shares of a Fund acquired by exchange from either another Fund or a Stock or
Bond Fund will be subject to a CDSC if, and to the same extent as, the shares
exchanged were subject to a CDSC.
Class A Fund shares on which no sales charge was previously paid may be
exchanged (i) for Class A shares of any of the Stock or Bond Funds except New
England Growth Fund, which is subject to special eligibility requirements, on
the basis of relative net asset value plus the sales charge applicable to
initial purchases of Class A shares of the Fund into which you are exchanging,
(ii) for Class B shares of any of the Stock or Bond Funds on the basis of
relative net asset value, subject to the CDSC schedule of the Stock or Bond Fund
into which you are exchanging, or (iii) for Class C shares of any of the Stock
or Bond Funds on the basis of relative net asset value.
Class A Fund shares which have previously been subject to a sales charge may
be exchanged on the basis of relative net asset value, without the payment of a
sales charge, for Class A shares of any of the Stock or Bond Funds except New
England Growth Fund, which is subject to special eligibility requirements, and
except as described in the remainder of this paragraph, but may not be exchanged
for Class B or Class C shares of the Stock or Bond Funds. The absence of sales
charges on exchanges described in the previous sentence is subject to two
exceptions: (i) Class A shares of a Fund acquired through exchange from Class A
shares of New England Intermediate Term Tax Free Fund of California or New
England Intermediate Term Tax Free Fund of New York (the "California and New
York Funds") may be exchanged for Class A shares of another Stock or Bond Fund
at net asset value only if you held the California or New York Fund shares for
at least six months; otherwise, sales charges apply to the exchange; and (ii) if
Class A shares of a Fund acquired through exchange from Class A shares of New
England Adjustable Rate U.S. Government Fund (the "Adjustable Rate Fund") are
exchanged for shares of another Stock or Bond Fund that has a higher sales
charge, you will pay the difference between any sales charge you have already
paid on your Adjustable Rate Fund shares and the higher sales charge of the
Stock or Bond Fund into which you are exchanging.
Automatic Exchange Plan
The Funds have an Automatic Exchange Plan under which shares of a Fund are
automatically exchanged each month for shares of the same Class of any other
Fund or Stock or Bond Fund (other than New England Growth Fund, which is
available only to certain investors) subject to the appropriate sales charge or
CDSC. The minimum monthly exchange amount under the plan is $50. There is no fee
for exchanges made pursuant to this program.
Class B Shares
You can exchange some or all of your Class B shares of a Fund for Class B shares
of any other Fund described in this prospectus with no sales charge. Class B
shares of a Fund may be exchanged for Class B shares of any of the Stock or Bond
Funds on the basis of relative net asset value, subject to the CDSC schedule of
the Stock or Bond Fund acquired. For purposes of computing the CDSC payable upon
redemption of shares acquired by such exchange, and the conversion of such
shares to Class A shares, the holding period of any Class B Stock or Bond Fund
shares that were exchanged for Class B shares of a Fund is included, but the
holding period of the Class B shares of a Fund is not included. See "Selling
Fund Shares--Contingent Deferred Sales Charges."
To make an exchange, please call 1-800-225-5478 between 8:00 a.m. and 7:00
p.m. (Eastern time) on a day when the Fund is open for business, write to New
England Funds or call Tele#Facts at 1-800-346-5984 twenty-four hours a day. The
exchange must be for a minimum of $500 (or the total net asset value of your
account, whichever is less), except that, under the Automatic Exchange Plan, the
minimum is $50. All exchanges are subject to the eligibility requirements of the
Fund or Stock or Bond Fund into which you are exchanging. Also, see "Selling
Fund Shares--Contingent Deferred Sales Charges." In connection with any
exchange, you must receive a current prospectus of the Stock or Bond Fund into
which you are exchanging. The exchange privilege may be exercised only in those
states where shares of such Stock or Bond Fund may be legally sold.
You have the automatic privilege to exchange your Fund shares by telephone.
The Servicing Agent will employ reasonable procedures to confirm that your
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<PAGE>
telephone instructions are genuine, and, if it does not, it may be liable for
losses due to unauthorized or fraudulent instructions. The Servicing Agent will
require a form of personal identification prior to acting upon your telephone
instructions, will provide you with written confirmations of such transactions
and will tape record your instructions.
Except as otherwise permitted by SEC rule, shareholders will receive at least
60 days' advance notice of any material change to the exchange privilege.
Fund Dividend Payments
Each Fund pays out as dividends substantially all of the net investment income
from interest it receives from its investments. The dividends of each Fund are
declared daily and paid to you monthly. If all of your shares of a Fund are
redeemed at any time during a month, all dividends accrued to date will be paid
together with the redemption proceeds. Dividends are automatically reinvested in
more shares. If you prefer, you may receive them in cash by selecting that
option on your account application. You may change your distribution option by
notifying New England Funds in writing or by calling 1-800-225-5478. If you
elect to receive your dividends in cash and the dividend checks sent to you are
returned "undeliverable" to the Fund or remain uncashed for six months, your
cash election will be automatically changed and your future dividends will be
reinvested.
DIVIDEND DIVERSIFICATION
PROGRAM
You may also establish a dividend diversification program, that allows you to
have all dividends and any other distributions from either class of the Funds
automatically invested in shares of the same class of a Stock or Bond Fund.
Class A shareholders may also have dividends and distributions automatically
invested in Class C shares of a Stock or Bond Fund. For Class A shareholders,
investments will be made at the appropriate public offering price, which may
include a sales charge. For Class B shareholders, shares acquired through this
program will be subject to a CDSC if they are redeemed from the account. For
both classes, this program is subject to the investor eligibility requirements
of the Stock or Bond Fund and to state securities law requirements. Dividends
will be invested in the selected Stock or Bond Fund's shares on the dividend
payable date. A dividend diversification account must be in the same
registration (shareholder name) as the distributing Fund account and, if a new
account in a Stock or Bond Fund is being established, the minimum investment
requirements of that fund must be met. Before establishing a dividend
diversification program into any Stock or Bond Fund, you must obtain and
carefully read a copy of that Stock or Bond Fund's prospectus.
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<PAGE>
Selling Fund Shares
5 Ways to Sell Fund Shares
[Icon of Investment Dealer] Through your investment dealer:
Call your authorized investment dealer for information.
[Icon of Telephone Receiver] By Telephone:
You or your investment dealer may redeem (sell) shares by telephone using any
of the three methods described below:
Wired to Your Bank Account -- If you have previously selected the telephone
redemption privilege on your account, you may redeem either class of shares by
calling 1-800-225-5478 between 8:00 a.m. and 7:00 p.m. (Eastern time) on a day
when the Fund is open for business. Class A shares only may also be redeemed by
calling Tele#Facts at 1-800-346-5984 twenty-four hours a day.
Redemption requests accepted after the Exchange has closed (4:00 p.m.
[Eastern time]) will be processed at the next determined net asset value. The
proceeds (less any applicable CDSC) generally will be wired on the next business
day to the bank account previously chosen by you on your application. A wire fee
(currently $5.00) will be deducted from the proceeds.
You may elect this service on your initial application or you may add it
later or change bank information by completing the Service Options Form (with a
signature guarantee), available through your investment dealer or by calling
1-800-225-5478. Your bank must be a member of the Federal Reserve System or
have a correspondent bank that is a member. If your account is with a savings
bank, it must have only one correspondent bank that is a member of the Federal
Reserve System.
Mailed to Your Address of Record -- Both classes of shares may be redeemed by
calling 1-800-225-5478 between 8:00 a.m. and 7:00 p.m. (Eastern time) on a day
when the Fund is open for business and requesting that a check for the proceeds
(less any applicable CDSC) be mailed to the address on your account, provided
that the address has not changed during the previous month and that the proceeds
are for $100,000 or less. Generally, the check will be mailed to your address of
record on the business day after your redemption request is received.
Through ACH -- Shares may be redeemed electronically through the ACH system,
provided that you have an approved ACH application on file with the Fund. To
redeem through ACH, call 1-800-225-5478 between 8:00 a.m. and 7:00 p.m. (Eastern
time) on a day when the Fund is open for business. The proceeds (less any
applicable CDSC) generally will arrive at your bank within three business days;
their availability will depend on your bank's particular rule. Class A
shareholders may also redeem shares by calling Tele#Facts at 1-800-346-5984
twenty-four hours a day.
Redemptions will be processed the day your telephone call is made if it is
made prior to 4:00 p.m. (Eastern time). Orders submitted through Tele#Facts or
ACH after 4:00 p.m. (Eastern time), or after the Exchange closes, if it closes
earlier than 4:00 p.m., will be accepted and processed the next business day.
[Icon of window envelope] By mail:
You may redeem your shares at their net asset value (less any applicable CDSC)
next determined after receipt of your request in good order by sending a written
request (including any necessary special documentation) to New England Funds,
P.O. Box 8551, Boston, MA 02266-8551.
The request must include the name of the Fund, your account number, the exact
name(s) in which your shares are registered, the number of shares or the dollar
amount to be redeemed and whether you wish the proceeds mailed to your address
of record, wired to your bank or transmitted through ACH. All owners of the
shares must sign the request in the exact names in which the shares are
registered (this appears on the confirmation statement) and indicate any special
capacity in which they are signing (such as trustee, custodian or under power of
attorney or on behalf of a partnership, corporation or other entity).
If you are redeeming shares worth less than $100,000 and the proceeds check
is made payable to the registered owner(s) and mailed to the record address, no
signature guarantee is required. Otherwise, you generally must have your
signature guaranteed by an eligible guarantor institution in accordance with
procedures established by the Servicing Agent. See the Statement. Signature
guarantees by notaries public are not acceptable.
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<PAGE>
Additional written information may be required for redemptions by certain
benefit plans and IRAs. Contact the Distributor or your investment dealer for
details.
If you hold certificates for your Class A shares, you must enclose them with
your redemption request or your request will not be honored. The Funds recommend
that certificates be sent by registered mail.
[Icon of pen writing] By check:
For Class A shares only, you may select the checkwriting option on your
application and complete the attached signature card. You may add checkwriting
to an existing account by completing the Service Options Form (with a signature
guarantee) available through your investment dealer or by calling
1-800-225-5478. The Fund will send you checks drawn on State Street Bank. You
will continue to earn dividends on shares redeemed by check until the check
clears. Each check must be written for $250 or more, except that qualified
corporate retirement plans and certain other corporate accounts may write checks
for any amount.
If you use withdrawal checks, you will be subject to State Street Bank's
rules governing checking accounts. The Funds and the Distributor are in no way
responsible for any checkwriting account established with State Street Bank.
You may not close your Fund account by withdrawal check, because the exact
balance of your account will not be known until after the check is received by
State Street Bank.
[Icon of calendar] By Systematic Withdrawal Plan:
You may establish a Systematic Withdrawal Plan (the "Plan") that allows you to
redeem shares and receive payments on a regular schedule. In the case of shares
subject to a CDSC, the amount or percentage you specify may not exceed, on an
annualized basis, 10% of the value of your Fund account (based on the day you
establish your Plan). Redemptions of shares pursuant to the Plan will not be
subject to a CDSC. For information, contact the Distributor or your investment
dealer.
General. Redemption requests will be effected at the net asset value next
determined after your redemption request is received in proper form by State
Street Bank or your investment dealer (except that orders received by your
investment dealer before the close of regular trading on the Exchange and
transmitted to the Distributor by 5:00 p.m. Eastern time on the same day will
receive that day's net asset value). In certain cases where shares were acquired
by exchanging shares of a Stock or Bond Fund, however, redemption proceeds will
be reduced by the amount of any applicable CDSC that would have been imposed on
a redemption of shares of the Stock or Bond Fund. See "Contingent Deferred Sales
Charges" below. Redemption proceeds will normally be mailed to you within seven
days after State Street Bank or the Distributor receives your request in good
order. However, in those cases where you have recently purchased your shares by
check or an electronic funds transfer through the ACH system and you make a
redemption request within 10 days after such purchase or transfer, a Fund may
withhold redemption proceeds until the Fund knows that the check or funds have
cleared.
During periods of substantial economic or market change, telephone
redemptions may be difficult to implement. If you are unable to contact the
Distributor by telephone, shares may be redeemed by delivering the redemption
request in person to the Distributor or by mail as described above. Requests are
processed at the net asset value next determined after the request is received.
Special rules apply to redemptions under powers of attorney. Please call the
Distributor or your investment dealer for more information.
Telephone redemptions are not available for tax qualified retirement plans or
for Fund shares in certificate form. If certificates have been issued for your
investment, you must send them to New England Funds along with your request
before a redemption request can be honored. See the instructions for redemption
by mail above.
The Funds may suspend the right of redemption and may postpone payment for
more than seven days when the Exchange is closed for other than weekends or
holidays, or if permitted by the rules of the SEC, when trading on the Exchange
is restricted or during an emergency which makes it impracticable for the Funds
to dispose of their securities or to determine fairly the value of their
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net assets, or during any other period permitted by the SEC for the
protection of investors.
Contingent Deferred Sales Charges
Shares of the Funds are sold without any sales charge at the time of purchase.
Class A -- Class A shares of a Fund acquired through exchange of Class A shares
of a Stock or Bond Fund that were subject to a CDSC of 1% at the time of the
exchange will be subject to a CDSC of 1% upon redemption. If such shares are
exchanged for Class A shares of a Stock or Bond Fund rather than redeemed, then
the Class A Stock or Bond Fund shares will be subject to a 1% CDSC if redeemed
within one year after the original purchase of the Stock and Bond Fund shares
exchanged for the Class A shares of a Fund; the time that Class A Fund shares
are held is not included in the holding period used to determine the
applicability of a Stock or Bond Fund's Class A CDSC. Class B -- Class B shares
of a Fund will be subject to a CDSC upon redemption if the shares were acquired
by exchange of Class B shares of a Stock or Bond Fund which were subject to a
CDSC at the time of the exchange, at the rate applicable to redemptions of the
Stock or Bond Fund at such time. The time that Class B shares of a Fund are held
is not included in the holding period used to determine the CDSC (and conversion
to Class A shares). The CDSC is calculated at the following rates, measured in
each case from the time the shares in the Stock or Bond Fund were purchased, and
without regard to the period during which Class B shares of the Fund were held:
4% during the first year, 3% in each of the second and third years, 2% in the
fourth year, 1% in the fifth year and 0% the sixth year and thereafter.
Investors are referred to the prospectus of the relevant Stock or Bond Fund for
a description of the applicable CDSC.
Shareholders may obtain copies of prospectuses of the New England Funds by
telephoning 1-800-255-5478 or by writing to:
New England Funds, L.P.
P.O. Box 8551
Boston, Massachusetts 02266-8551
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Fund Details
Fund Yields
The yield is different for each Fund because each invests in different types of
securities. For current yield information, shareholders or their investment
representatives may call Tele#Facts 24 hours a day at 1-800-346-5984.
Income Tax Considerations
As long as a Fund distributes substantially all its net investment income and
net short-term capital gains, if any, to its shareholders, it will not pay
federal income tax on the amounts distributed.
The Funds usually do not realize a substantial amount of long-term capital
gains. If a Fund does, it will distribute them annually and they will be taxable
to you as long-term capital gains, whether received in cash or additional shares
and regardless of how long you have held your shares. No distribution from any
Fund is expected to be eligible for the dividends-received deduction for
corporations.
To avoid certain excise taxes, each Fund must distribute by December 31 each
year virtually all of its ordinary income realized in that year, and all of any
previously undistributed capital gains it realized in the twelve months ended on
October 31 of that year. Certain dividends declared by a Fund in December, but
not actually received by you until January, will be treated for federal tax
purposes as though you had received them on December 31.
The Distributor will send you and the Internal Revenue Service an annual
statement detailing federal tax information, including information about
dividends and distributions paid to you during the preceding year. Be sure to
keep this statement as a permanent record. A fee may be charged for any
duplicate information requested.
The Money Market Fund and the Government Fund are each required to withhold 31%
of all income dividends and capital gain distributions it pays to you if you do
not provide a correct, certified taxpayer identification number, if the Fund is
notified that you have underreported income in the past, or if you fail to
certify to the Fund that you are not subject to such federal back-up
withholding. In addition, each such Fund is required to withhold 31% of the
gross proceeds of Fund shares you redeem if you have not provided a correct,
certified taxpayer identification number. Similar withholding requirements apply
to the Tax Exempt Fund, but not to dividends from the Fund if at least 95% of
the Fund's dividends for any year are "exempt-interest dividends" (dividends
derived from interest on Municipal Securities).
[ ] Money Market Fund and Government Fund
Dividends and distributions of short-term capital gains, if any, are taxable to
you as ordinary income, whether paid in cash or in additional shares.
Dividends derived from interest on U.S. Government Securities may be exempt from
state and local taxes. Each Fund intends to advise shareholders of the
proportion of its dividends derived from such interest. Before investing in
either Fund, you should check the consequences of your local and state tax laws,
and of any retirement plan offering tax benefits.
[ ] Tax Exempt Fund
You may exclude from your gross income on your federal tax return any
"exempt-interest dividends" received from the Fund. However, if you receive
social security benefits, you may be taxed on a portion of those benefits as a
result of receiving tax exempt income. Also, if the Fund invests in private
activity Municipal Securities, a portion of the Fund's dividends may constitute
a tax preference item subject to the alternative minimum tax. In addition, all
exempt-interest dividends will constitute an item of "adjusted current earnings"
(although not taxable income) to corporate shareholders, which may in certain
circumstances give rise to alternative minimum tax liability.
Other dividends and short-term capital gains, if any, are taxable to you as
ordinary income, whether paid in cash or additional shares.
The federal exemption for "exempt-interest dividends" does not necessarily
result in an exemption from state and local taxes. Distributions of
"exempt-interest dividends" may be exempt from state and local taxation to the
extent they are derived from the state or locality in which you reside. The Fund
will report annually on a state-by-state basis the source of income the Fund
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receives on Municipal Securities which was paid out as dividends during the
preceding year.
Note: The information above is only a summary of applicable tax law. You
should consult your own tax adviser for more information about the tax
consequences of an investment in the Funds.
Additional Facts About
the Funds
[ ] If the balance in your account with a Fund is less than a minimum dollar
amount set by the trustees of the Trusts (currently $500 for all accounts,
except for those indicated below and for Individual Retirement Accounts, which
have a $25 minimum), the Fund may close your account and send the proceeds to
you. Shareholders who are affected by this policy will be notified of a Fund's
intention to close the account and will have 60 days immediately following the
notice in which to bring the account up to the minimum. The minimum does not
apply to Keogh, pension and profit sharing plans, or accounts established in
conjunction with New England Securities Brokerage Services.
[ ] The Distributor pays a service fee to investment dealers for services
provided and expenses incurred when establishing or servicing shareholder
accounts in any of the Funds. The fee is not a direct or indirect expense of the
Funds or their shareholders and does not affect a Fund's yield.
[ ] Each Trust offers only its own shares for sale. In some circumstances, a
Trust might be held liable to shareholders of the other for misstatements, if
any, contained in this combined prospectus. The trustees of each Trust have
considered this possible liability and have approved the use of a combined
prospectus.
[ ] Assets of each Fund normally are valued at amortized cost on each day that
the Exchange is open for trading. Net asset value per share is determined by
dividing each Fund's net assets by the total number of Fund shares outstanding.
Each Fund's net assets are equal to the value of its investments and its other
assets minus its liabilities.
[ ] Shares of each Fund are freely transferable and are entitled to be voted at
shareholder meetings. Each Fund holds shareholder meetings only when required
rather than on an annual basis.
[ ] The Money Market Fund and the Government Fund are separate series of New
England Cash Management Trust, a Massachusetts business trust organized on June
5, 1980. The Tax Exempt Fund is a Massachusetts business trust organized on
January 18, 1983. Each Fund is registered as a diversified open-end management
investment company under the Investment Company Act of 1940 and is authorized to
issue an unlimited number of full and fractional shares.
[ ] Each Fund may include its yield in advertisements or other written sales
material. Yield may be either the yield for a particular seven-day period
(stated on an annualized basis), or an "effective yield" calculated by assuming
that an investor reinvests all Fund dividends throughout a one-year period and
that the Fund earns net income for the entire year at the same rate as net
income is earned during a particular seven-day period. The Tax Exempt Fund may
also advertise its taxable-equivalent yield, which is the taxable yield an
investor would have to earn to receive the equivalent of the Fund's yield after
payment of federal income tax (assuming a particular federal income tax rate).
Each Fund may also show illustrations of how the value of an account with the
Fund would have grown over past time periods, assuming that all dividends paid
to that account were immediately reinvested in shares of the Fund.
[ ] New England Funds, L.P., 399 Boylston Street, Boston, MA 02116 is the
transfer and dividend paying agent for each Fund. It has subcontracted certain
of its obligations as such to State Street Bank, 225 Franklin Street, Boston, MA
02110.
[ ] Each Fund's annual report contains additional performance information and is
available upon request and without charge. Each Fund will send a single copy of
its annual and semi-annual reports to an address at which more than one
shareholder of record with the same last name has indicated that mail is to be
delivered. Shareholders may request additional copies of any annual or
semi-annual report in writing or by telephone.
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[ ] The Class A and Class B structure could be terminated should certain IRS
rulings be rescinded.
[ ] Each Trust's trustees have the authority without shareholder approval to
issue other classes of shares of each Fund that represent interests in the
Funds' portfolios but that have different sales load and fee arrangements.
[ ] Back Bay Advisors(R) is a registered trademark of Back Bay Advisors, L.P.
20
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<PAGE>
XM51-0896
<PAGE>
[New England Funds Logo]
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NEW ENGLAND MONEY MARKET FUNDS
NEW ENGLAND CASH MANAGEMENT TRUST - MONEY MARKET SERIES
NEW ENGLAND CASH MANAGEMENT TRUST - U.S. GOVERNMENT SERIES
NEW ENGLAND TAX EXEMPT MONEY MARKET TRUST
Statement of Additional Information -- August 29, 1996
This Statement of Additional Information (the "Statement") is not a prospectus.
This Statement relates to the prospectus of New England Cash Management Trust
and New England Tax Exempt Money Market Trust dated August 29, 1996 (the
"Prospectus"), and should be read in conjunction therewith. A copy of the
Prospectus may be obtained from New England Funds, L.P. (the "Distributor"), 399
Boylston Street, Boston, Massachusetts 02116.
Table of Contents
Page
Investment Objectives and Policies 2
Investment Restrictions 5
Management of the Funds 8
Investment Advisory, Subadvisory, Distribution and Other Services 11
Portfolio Transactions 15
Performance 16
Description of the Funds and Ownership of Shares 19
Purchase of Shares 22
Shareholder Services 22
Open Accounts 22
Automatic Investment Plans 22
Retirement Plans Offering Tax Benefits 23
Systematic Withdrawal Plans 23
Exchange Privilege 24
Automatic Exchange Plan 24
Redemptions 26
Net Income, Dividends and Valuation 27
Tax-Free Investing 28
Taxes 29
Financial Statements 30
Appendix A - Description Certain New England Cash Management
Trust Investments A-1
Appendix B - Description of Certain New England Tax-Exempt Money B-1
Market Trust Investments
Appendix C - Ratings of Corporate and Municipal Bonds,
Commercial Paper and Short-Term Tax Exempt C-1
Obligations
Appendix D - Publications That May be Referred to in Fund
Advertisements or Sales Literature D-1
Appendix E - Certain Information That May Be Included in
Advertising and Promotional Literature E-1
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INVESTMENT OBJECTIVES AND POLICIES
- -------------------------------------------------------------------------------
GENERAL
The investment objectives and policies of New England Cash Management
Trust - Money Market Series (the "Money Market Fund"), New England Cash
Management Trust - U.S. Government Series (the "Government Fund") and New
England Tax Exempt Money Market Trust (the "Tax Exempt Fund") (the "Funds," and
each a "Fund") are summarized in the Prospectus under "Investment Strategy" and
"Investment Risks."
The investment policies and types of permitted investments of each Fund
set forth below and in the Prospectus may be changed without shareholder
approval except that the investment objective of each Fund, and any investment
policy expressly identified as fundamental, may not be changed without the
approval of a majority of the outstanding voting securities of that Fund.
The terms "shareholder approval" and "majority of the outstanding voting
securities" as used in the Prospectus and this Statement each refer to approval
by the lesser of (i) 67% or more of the shares of the applicable Fund
represented at a meeting at which more than 50% of the outstanding shares of
such Fund are represented or (ii) more than 50% of the outstanding shares of
such Fund.
New England Cash Management Trust and New England Tax Exempt Money
Market Trust are sometimes referred to hereinafter as the "Trusts," and each as
a "Trust."
MONEY MARKET FUND AND GOVERNMENT FUND
Each Fund will invest only in securities which the Funds' subadviser,
Back Bay Advisors(R), L.P. ("Back Bay Advisors(R)"), acting under guidelines
established by the relevant Trust's Board of Trustees, has determined are of
high quality and present minimal credit risk. For a description of certain of
the money market instruments in which each Fund may invest, and the related
descriptions of the ratings of Standard and Poor's Ratings Group ("S&P") and
Moody's Investors Service, Inc. ("Moody's"), see Appendices A and C to this
Statement. Money market instruments maturing in less than one year may yield
less than obligations of comparable quality having longer maturities.
Obligations in which the Government Fund invests generally yield less
than the obligations in which the Money Market Fund may invest. Therefore, the
Government Fund may generally be expected to have a lower yield than the Money
Market Fund.
As described in the Prospectus, the Money Market Fund's investments may
include certain U.S. dollar-denominated obligations of foreign banks or of
foreign branches and subsidiaries of U.S. banks, which may be subject to foreign
economic, political and legal risks. Such risks include foreign economic and
political developments, foreign governmental restrictions that may adversely
affect payment of principal and interest on the obligations, foreign withholding
and other taxes on interest income, difficulties in obtaining and enforcing a
judgment against a foreign obligor, exchange control regulations (including
currency blockage), and the expropriation or nationalization of assets or
deposits. Foreign branches of U.S. banks and foreign banks are not necessarily
subject to the same or similar regulatory requirements that apply to domestic
banks. For instance, such branches and banks may not be subject to the types of
requirements imposed on domestic banks with respect to mandatory reserves, loan
limitations, examinations, accounting, auditing, recordkeeping and the public
availability of information. Obligations of such branches or banks will be
purchased only when Back Bay Advisors(R) believes the risks are minimal.
The full faith and credit obligations of the U.S. Government in which
the Government Fund may invest include obligations issued by such government
agencies as the Government National Mortgage Association, the Farmer's Home
Administration and the Small Business Administration.
2
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Considerations of liquidity, safety and preservation of capital may
preclude the Funds from investing in money market instruments paying the highest
available yield at a particular time. Each Fund, consistent with its investment
objective, attempts to maximize yields by engaging in portfolio trading and by
buying and selling portfolio investments in anticipation of or in response to
changing economic and money market conditions and trends. Each Fund also invests
to take advantage of what are believed to be temporary disparities in the yields
of the different segments of the high quality money market or among particular
instruments within the same segment of the market. These policies, as well as
the relatively short maturity of obligations to be purchased by the Funds, may
result in frequent changes in the portfolio of each Fund. There are usually no
brokerage commissions as such paid by the Funds in connection with the purchase
of securities of the type in which they invest. See "Portfolio Transactions."
See also "Investment Restrictions" below.
TAX EXEMPT FUND
As described in the Prospectus, the Tax Exempt Fund seeks to achieve its
objective through investment in a diversified portfolio consisting primarily of
high quality short-term fixed, variable and floating rate debt securities the
interest on which is, in the opinion of bond counsel for the issuers of the
securities at the time of their issuance, exempt from federal income taxation
("Municipal Securities"). Municipal Securities are generally obligations issued
by or on behalf of states, territories and possessions of the United States and
the District of Columbia and their political subdivisions, agencies and
instrumentalities, or by or on behalf of multi-state agencies or authorities.
For a more complete description of various types of Municipal Securities and the
meanings of the Moody's and S&P ratings referred to in the Prospectus, see
Appendices B and C to this Statement. The Fund expects that at least 95% of all
dividends paid by the Fund in any given year will be exempt from federal income
tax. See "Taxes."
As described in the Prospectus, the Fund may elect on a temporary basis
to hold cash or to invest in obligations other than Municipal Securities when
such action is deemed advisable by Back Bay Advisors(R). For example, the Fund
might hold cash or make such temporary investments: (i) due to market
conditions; (ii) in the event of the scarcity of suitable Municipal Securities;
(iii) pending investment of proceeds from subscriptions for Fund shares or from
the sale of portfolio securities; or (iv) in anticipation of redemptions. The
Fund will limit its investments in obligations other than Municipal Securities
to "money market securities" such as (i) short-term obligations issued or
guaranteed by the United States Government or its agencies, authorities or
instrumentalities ("U.S. Government Securities"), (ii) high quality short-term
domestic certificates of deposit, commercial paper and domestic bankers'
acceptances and other high quality money market instruments, or (iii) repurchase
agreements with brokers, dealers and banks relating to Municipal or U.S.
Government Securities. The interest earned on money market securities is not
exempt from federal income tax and may be taxable to shareholders as ordinary
income. The ability of the Fund to invest in such taxable money market
securities is limited by a requirement of the Internal Revenue Code (the "Code")
that at least 50% of the Fund's total assets be invested in Municipal Securities
at the end of each quarter of the Fund's fiscal year (see "Taxes") and by a
fundamental policy of the Fund which requires that during periods of normal
market conditions the Fund will not purchase any security if, as a result, less
than 80% of the Fund's net assets would then be invested in Municipal
Securities.
As described in the Prospectus, the Fund may invest in variable or
floating rate Municipal Securities. These obligations pay a rate of interest
adjusted on a periodic basis and determined by reference to a prescribed
formula. Such obligations will be subject to prepayment without penalty, at the
option of either the Fund or the issuer, and may be backed by letters of credit
or similar arrangements where necessary to ensure that the obligations are of
appropriate investment quality. Back Bay Advisors(R) intends to evaluate the
credit of the issuers of these obligations and the providers of credit support
no less frequently than quarterly.
The price stability and liquidity of the Fund may not be equal to that
of a money market fund which invests exclusively in short-term taxable money
market securities, because the taxable money market is a broader and more liquid
market with a greater number of investors, issuers and market makers than the
short-term Municipal Securities market and because the average portfolio
maturity of a money market fund will generally be shorter than the average
portfolio maturity of a tax exempt money fund such as the Fund. Adverse
economic, business or political developments might affect all or a substantial
portion of the Fund's Municipal Securities in the same manner.
3
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When-Issued Securities
As described in the Prospectus, the Tax Exempt Fund may purchase
Municipal Securities on a when-issued basis, which means that delivery and
payment for the securities normally occurs 15 to 45 days after the date of the
commitment to purchase. The payment obligation and the interest rate that will
be received on the securities are each fixed at the time the buyer enters into
the commitment. Pending delivery of securities purchased on a when-issued basis,
the amount of the purchase price will be held in liquid assets such as cash or
high quality debt obligations. Such obligations and cash will be maintained in a
separate account with the Fund's custodian in an amount equal on a daily basis
to the amount of the Fund's when-issued commitments. By committing itself to
purchase Municipal Securities on a when-issued basis, the Fund subjects itself
to market and credit risks on such commitments as well as such risks otherwise
applicable to its portfolio securities. Therefore, to the extent the Fund
remains substantially fully invested at the same time that it has purchased
securities on a when-issued basis, there will be a greater possibility that the
market value of the Fund's assets will vary from $1.00 per share. (See "Net
Income, Dividends and Valuation.") The Fund will make commitments to purchase
such securities only with the intention of actually acquiring the securities.
However, the Fund may sell these securities before the settlement date if it is
deemed advisable as a matter of investment strategy. Such sales may result in
capital gains which are not exempt from federal income taxes. When the time
comes to pay for when-issued securities, the Fund will meet its obligations from
then available cash flow or the sale of securities, or, although it would not
normally expect to do so, from the sale of the when-issued securities themselves
(which may have a value greater or less than the Fund's payment obligation).
Purchase of Securities with Rights to Put Securities to Seller
The Fund has authority to purchase securities, including Municipal
Securities, at a price which would result in a yield to maturity lower than that
generally offered by the seller at the time of purchase if the Fund
simultaneously acquires the right to sell the securities back to the seller at
an agreed-upon price at any time during a stated period or on a certain date.
Such a right is generally called a "put." The purpose of engaging in
transactions involving puts is to maintain flexibility and liquidity and to
permit the Fund to meet redemptions while remaining as fully invested as
possible in Municipal Securities. The Fund will acquire puts only from
recognized securities dealers.
For the purposes of asset valuation, the Fund will never ascribe any
value to puts. The Fund will rarely pay specific consideration for them
(although typically the yield on a security that is subject to a put will be
lower than for an otherwise comparable security that is not subject to a put).
In no event will the specific consideration paid for puts held in the Fund's
portfolio at any time exceed 1/2 of 1% of the Fund's net assets. Puts purchased
by the Fund will generally not be marketable and the Fund's ability to exercise
puts will depend on the creditworthiness of the other party to the transaction.
ALL FUNDS
As noted in the Prospectus, each Fund may enter into repurchase
agreements, which are agreements by which the Fund purchases a security and
obtains a simultaneous commitment from the seller (a member bank of the Federal
Reserve or, to the extent permitted by the Investment Company Act of 1940 [the
"1940 Act"], a recognized securities dealer) to repurchase the security at an
agreed upon price and date (usually seven days or less from the date of original
purchase). The resale price is in excess of the purchase price and reflects an
agreed upon market rate unrelated to the coupon rate on the purchased security.
Such transactions afford each Fund the opportunity to earn a return on
temporarily available cash at relatively low market risk. While the underlying
security may be a U.S. Government Security (in the case of any Fund), a
Municipal Security (in the case of the Tax Exempt Fund) or another type of high
quality money market instrument, the obligation of the seller is not guaranteed
by the U.S. Government, the issuer of the Municipal Security, or the issuer of
any other high quality money market instrument underlying the agreement, and
there is a risk that the seller may fail to repurchase the underlying security.
In such event, the Fund would attempt to exercise rights with respect to the
underlying security, including possible disposition in the market. However, in
case of such a default, a Fund may be subject to various delays and risks of
loss, including (a) possible declines in the value of the underlying security
during the period while the Fund seeks to enforce its rights thereto, (b)
possible reduced levels of income and lack of access to income during this
period, and (c) inability to enforce rights and the expenses involved in
attempted enforcement. Each Fund will enter into repurchase agreements only
where the market
4
<PAGE>
value of the underlying security equals or exceeds the repurchase price, and
each Fund will require the seller to provide additional collateral if this
market value falls below the repurchase price at any time during the term of the
repurchase agreement.
As described in the Prospectus, all of each Fund's investments will, at
the time of investment, have remaining maturities of 397 days or less. The
average maturity of each Fund's portfolio securities based on their dollar value
will not exceed 90 days at the time of each investment. If the disposition of a
portfolio security results in a dollar-weighted average portfolio maturity in
excess of 90 days for any Fund, such Fund will invest its available cash in such
a manner as to reduce its dollar-weighted average portfolio maturity to 90 days
or less as soon as reasonably practicable. For the purposes of the foregoing
maturity restrictions, variable rate instruments which are scheduled to mature
in more than 397 days are treated as having a maturity equal to the longer of
(i) the period remaining until the next readjustment of the interest rate and
(ii) if the Fund is entitled to demand prepayment of the instrument, the notice
period remaining before the Fund is entitled to such prepayment; other variable
rate instruments are treated as having a maturity equal to the shorter of such
periods. Floating rate instruments which are scheduled to mature in more than
397 days are treated as having a maturity equal to the notice period remaining
before the Fund is entitled to demand prepayment of the instrument; other
floating rate instruments, and all such instruments which are U.S. Government
Securities, are treated as having a maturity of one day.
The value of the securities in each Fund can be expected to vary
inversely with changes in prevailing interest rates. Thus, if interest rates
increase after a security is purchased, that security, if sold, might be sold at
a loss. Conversely, if interest rates decline after purchase, the security, if
sold, might be sold at a profit. In either instance, if the security were held
to maturity, no gain or loss would normally be realized as a result of these
fluctuations. Substantial redemptions of the shares of any Fund could require
the sale of portfolio investments of that Fund at a time when a sale might not
be desirable.
After purchase by a Fund, a security may cease to be rated or its rating
may be reduced below the minimum required for purchase by such Fund. Neither
event will require a sale of such security by such Fund. However, such event
will be considered in determining whether the Fund should continue to hold the
security. To the extent that the ratings given by Moody's or S&P (or another
SEC-approved nationally recognized statistical rating organization ["NRSRO"])
may change as a result of changes in such organizations or their rating systems,
each Fund will, in accordance with standards approved by the relevant Board of
Trustees, attempt to use comparable ratings as standards for investments in
accordance with the investment policies contained in the Prospectus.
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INVESTMENT RESTRICTIONS
- -------------------------------------------------------------------------------
The following is a list of each Fund's investment restrictions. Except
as otherwise specifically indicated, they are fundamental policies and,
accordingly, will not be changed without the consent of the holders of a
majority of the outstanding voting securities of the applicable Fund.
MONEY MARKET FUND AND GOVERNMENT FUND
Neither the Money Market Fund nor the Government Fund will:
(1) Purchase any security (other than U.S. Government Securities and
repurchase agreements relating thereto) if, as a result, more than 5% of the
Fund's total assets (taken at current value) would be invested in securities of
a single issuer. This restriction applies to securities subject to repurchase
agreements but not to the repurchase agreements themselves;
(2) Purchase any security if, as a result, more than 25% of the Fund's
total assets (taken at current value) would be invested in any one industry.
This restriction does not apply to U.S. Government Securities and bank
obligations. For purposes of this restriction, telephone, gas and electric
public utilities are each regarded as separate industries and finance companies
whose financing activities are related primarily to the activities of their
parent companies are classified in the industry of their parents;
5
<PAGE>
(3) Purchase securities on margin (but it may obtain such short-term
credits as may be necessary for the clearance of purchases and sales of
securities); or make short sales except where, by virtue of ownership of other
securities, it has the right to obtain, without payment of further
consideration, securities equivalent in kind and amount to those sold, and the
Fund will not deposit or pledge more than 10% of its total assets (taken at
current value) as collateral for such sales;
(4) Acquire more than 10% of the total value of any class of the
outstanding securities of an issuer or acquire more than 10% of the outstanding
voting securities of an issuer. This restriction does not apply to U.S.
Government Securities;
(5) Borrow money, except as a temporary measure for extraordinary or
emergency purposes (but not for the purpose of investment) up to an amount not
in excess of 10% of its total assets (taken at cost) or 5% of such total assets
(taken at current value), whichever is lower;
(6) Pledge, mortgage or hypothecate more than 10% of its total assets
(taken at cost);
(7) Invest more than 5% of its total assets (taken at current value) in
securities of businesses (including predecessors) less than three years old;
(8) Purchase or retain securities of any issuer if, to the knowledge of
the Fund, officers and Trustees of the Fund or officers and directors of any
investment adviser of the Fund who individually own beneficially more than 1/2
of 1% of the securities of that company, together own beneficially more than 5%;
(9) Make loans, except by purchase of debt obligations in which the
Fund may invest consistent with its objective and investment policies. This
restriction does not apply to repurchase agreements;
(10) Buy or sell oil, gas or other mineral leases, rights or royalty
contracts, commodities or commodity contracts or real estate. This restriction
does not prevent the Fund from purchasing securities of companies investing in
real estate or of companies which are not principally engaged in the business of
buying or selling such leases, rights or contracts;
(11) Act as underwriter except to the extent that, in connection with
the disposition of portfolio securities, it may be deemed to be an underwriter
under the federal securities laws;
(12) Make investments for the purpose of exercising control or
management;
(13) Participate on a joint or joint and several basis in any trading
account in securities. (The "bunching" of orders for the purchase or sale of
portfolio securities with other accounts under the management of Back Bay
Advisors(R) to reduce acquisition costs, to average prices among them, or to
facilitate such transactions, is not considered participating in a trading
account in securities);
(14) Write or purchase puts, calls or combinations thereof; or
(15) Invest in the securities of other investment companies, except in
connection with a merger, consolidation or similar transaction.
Except as otherwise stated, the foregoing percentages and the percentage
limitations set forth in the Prospectus will apply at the time of the purchase
of a security and shall not be considered violated unless an excess or
deficiency occurs or exists immediately after and as a result of a purchase of
such security.
As a matter of operating policy and subject to change without
shareholder approval, the Funds will not purchase or sell real property,
including limited partnership interests.
6
<PAGE>
TAX EXEMPT FUND
The Tax Exempt Fund will not:
(1) Purchase any security if, as a result, more than 5% of the Fund's
total assets (based on current value) would then be invested in the securities
of a single issuer. This limitation does not apply to securities of the United
States Government, its agencies or instrumentalities or to any security
guaranteed thereby. The limitation applies to securities subject to credit
enhancement, but guarantors, insurers, issuers of puts and letters of credit and
other parties providing credit enhancement are not considered issuers for
purposes of the restriction, although investment in such securities may be
limited by applicable regulatory restrictions. The restriction also applies to
securities subject to repurchase agreements but not to the repurchase agreements
themselves. (The SEC staff currently takes the position that only fully
collateralized repurchase agreements may be excluded from such restriction);
(2) Purchase voting securities or make investments for the purpose of
exercising control or management;
(3) Invest more than 25% of its total assets in industrial development
bonds which are based, directly or indirectly, on the credit of private entities
in any one industry or in securities of private issuers in any one industry. (In
the utilities category, gas, electric, water and telephone companies will be
considered as being in separate industries.);
(4) Participate on a joint or joint and several basis in any trading
account in securities;
(5) Make short sales of securities, maintain a short position or
purchase securities on margin, except that the Fund may obtain short-term
credits as necessary for the clearance of securities transactions;
(6) Borrow money except for temporary or emergency purposes and then
only in an amount not exceeding 10% of its total assets taken at cost, except
that the Fund may enter into reverse repurchase agreements. The Fund will not,
however, borrow or enter into reverse repurchase agreements if the value of the
Fund's assets would be less than 300% of its borrowing and reverse repurchase
agreement obligations. In addition, when borrowings (other than reverse
repurchase agreements) exceed 5% of the Fund's total assets (taken at current
value), the Fund will not purchase additional portfolio securities. Permissible
borrowings and reverse repurchase agreements will be entered into solely for the
purpose of facilitating the orderly sale of portfolio securities to accommodate
redemption requests;
(7) Make loans, except that the Fund may purchase or hold debt
instruments in accordance with its investment objective and policies and may
enter into loan participations and repurchase agreements;
(8) Pledge, mortgage or hypothecate its assets except in connection with
reverse repurchase agreements and except to secure temporary borrowings
permitted by (6) above in aggregate amounts not to exceed 10% of its net assets
taken at cost at the time of the incurrence of such borrowings;
(9) Act as an underwriter of securities of other issuers except that, in
the disposition of portfolio securities, it may be deemed to be an underwriter
under the federal securities laws;
(10) Invest in securities of other investment companies, except by
purchases in the open market involving only customary brokers' commissions, or
in connection with a merger, consolidation, reorganization or similar
transaction. Under the 1940 Act the Fund may not (a) invest more than 10% of its
total assets (taken at current value) in such securities, (b) own securities of
any one investment company having a value in excess of 5% of the Fund's total
assets (taken at current value), or (c) own more than 3% of the outstanding
voting stock of any one investment company;
(11) Purchase or retain securities of an issuer if, to the knowledge of
the Fund, officers, trustees or directors of the Fund or any investment adviser
of the Fund who individually own beneficially more than 1/2 of 1% of the shares
or securities of that issuer together own beneficially more than 5% of such
shares or securities;
7
<PAGE>
(12) Purchase securities of any company which has (with predecessor
businesses and entities) a record of less than three years' continuing operation
or purchase securities whose source of repayment is based, directly or
indirectly, on the credit of such a company, except (i) obligations issued or
guaranteed by the United States Government, its agencies or instrumentalities,
or (ii) Municipal Securities which are rated by at least two nationally
recognized municipal bond rating services, if as a result more than 5% of the
total assets of the Fund (taken at current value) would be invested in such
securities;
(13) Buy or sell oil, gas or other mineral leases, rights or royalty
contracts, commodities or commodity contracts or real estate (except that the
Fund may buy Municipal Securities or other permitted investments secured by real
estate or interests therein), or
(14) Write or purchase puts, calls, warrants, straddles, spreads or
combinations thereof, except that the Fund may purchase puts as described under
"Investment Objectives and Policies -- Tax Exempt Fund -- Purchase of Securities
with Rights to Put Securities to Seller" and may purchase Municipal Securities
on a "when-issued" basis as described under "Investment Objectives and Policies
- -- Tax Exempt Fund -- When-Issued Securities";
Except as otherwise stated in restriction (6), the foregoing percentages
and the percentage limitations set forth in the Prospectus will apply at the
time of the purchase of a security and shall not be considered violated unless
an excess or deficiency occurs or exists immediately after and as a result of a
purchase of such security. As regards restriction (6), as a non-fundamental
operating policy, any borrowings of the Tax Exempt Fund will not exceed 5% of
the Fund's total assets.
For the purpose of the foregoing investment restrictions, the
identification of the "issuer" of Municipal Securities which are not general
obligation bonds (see Appendix B) is made by Back Bay Advisors(R) on the basis
of the characteristics of the obligation, the most significant of which is the
source of funds for the payment of principal and interest on such securities. If
the assets and revenues of an agency, authority, instrumentality or other
political subdivision are separate from those of the government creating the
subdivision, and the obligation is based solely on the assets and revenues of
the subdivision, such subdivision would be regarded as the sole issuer.
Similarly, in the case of industrial development bonds (see Appendix B), if the
bond is backed only by the assets and revenues of the non-governmental user, the
non-governmental user would be regarded as the sole issuer.
As a matter of operating policy and subject to change without
shareholder approval, the Fund will not purchase or sell real property,
including limited partnership interests.
ALL FUNDS
No Fund will purchase any security restricted as to disposition under
federal securities laws if, as a result, more than 10% of such Fund's net assets
would be invested in such securities or in other securities that are illiquid.
The Funds have implemented procedures to determine the liquidity of Section 4(2)
commercial paper purchased by the Funds for purposes of determining whether the
Fund's limit on the purchases of illiquid securities has been met.
The staff of the SEC is currently of the view that repurchase agreements
maturing in more than seven days are "illiquid" securities. Each Fund currently
intends to conduct its operations in a manner consistent with this view. In
addition, certain loan participations may be "illiquid" securities for this
purpose.
- -------------------------------------------------------------------------------
MANAGEMENT OF THE FUNDS
- -------------------------------------------------------------------------------
Trustees
The trustees of the Trusts and their ages (in parentheses) and principal
occupations during at least the past five years are as follows:
8
<PAGE>
GRAHAM T. ALLISON, JR.--Trustee (56); 79 John F. Kennedy Street, Cambridge,
MA 02138; Douglas Dillon Professor and Director for the Center of Science
and International Affairs, John F. Kennedy School of Government; Special
Advisor to the United States Secretary of Defense; formerly, Assistant
Secretary of Defense; formerly Dean, John F. Kennedy School of Government.
DANIEL M. CAIN - Trustee (51); 452 Fifth Avenue, New York, NY 10018; President,
Cain Brothers & Company (investment banking); Trustee, Universal Health
Realty Income Trust (REIT); Chairman, Inter Fish, Inc. (aquaculture
venture in Barbados).
KENNETH J. COWAN -- Trustee (64); One Beach Drive, S.E. #2103, St. Petersburg,
Florida 33701; Retired; formerly, Senior Vice President-Finance and Chief
Financial Officer, Blue Cross of Massachusetts, Inc. and Blue Shield of
Massachusetts, Inc.; formerly, Director, Neworld Bank for Savings and
Neworld Bancorp.
RICHARD DARMAN - Trustee (53); 1001 Pennsylvania Avenue, N.W., Washington, D.C.
20004; Partner and Managing Director, The Carlyle Group (investments);
Trustee, Council for Excellence in Government (not-for-profit);
Director, Frontier Ventures (personal investment); Director, Highway
Master Communications (mobile communications); Managing Partner, Little
Falls Partners (family investment); Director, Sequana Therapeutics
(biotechnology/genomics); Director, Telcom Ventures (telecommunications);
formerly, Director of the U.S. Office of Management and Budget and a
member of President Bush's Cabinet.
SANDRA O. MOOSE -- Trustee (54); 135 E. 57th Street New York, NY 10022; Senior
Vice President and Director, The Boston Consulting Group, Inc. (management
consulting); Director, GTE Corporation and Rohm and Haas Company
(specialty chemicals).
HENRY L. P. SCHMELZER* -- Trustee and President (53); President, Chief
Executive Officer and Director, NEF Corporation; President and Chief
Executive Officer, New England Funds, L.P.; President and Chief Executive
Officer, New England Funds Management, L.P. ("NEFM"); Director, Back Bay
Advisors(R), Inc.; formerly, Director, New England Securities Corporation
("New England Securities").
JOHN A. SHANE -- Trustee (63); 300 Unicorn Drive, Woburn, Massachusetts 01801;
President, Palmer Service Corporation (venture capital organization);
General Partner, The Palmer Organization and Palmer Partners L.P.;
Director, Abt Associates, Inc. (consulting firm); Director, Arch
Communications Group, Inc. (paging service); Director, Dowden Publishing
Company, Inc. (publishers of medical magazines); Director, Eastern Bank
Corporation; Director, Overland Data, Inc. (manufacturer of computer tape
drives); Director, Gensym Corporation (expert system software); Director,
Summa Four, Inc. (manufacturer of telephone switching equipment); Director,
United Asset Management Corporation (holding company for institutional
money management).
PETER S. VOSS* -- Chairman of the Board, Chief Executive Officer and Trustee
(49); President and Chief Executive Officer of New England Investment
Companies, L.P. ("NEIC"); Director, President and Chief Executive
Officer of New England Investment Companies, Inc. ("NEIC Inc.");
Chairman of the Board and Director, NEF Corporation; Chairman of the
Board and Director, Back Bay Advisors(R), Inc.; Director, The New
England; formerly, Group Executive Vice President, Bank of America (Los
Angeles); formerly, Group Head of International Banking, Trading and
Securities, Security Pacific National Bank and Chief Executive Officer,
Security Pacific Investment Group.
PENDLETON P. WHITE -- Trustee (65); 6 Breckenridge Lane, Savannah, Georgia
31411; Retired; formerly, President and Chairman of the Executive
Committee, Studwell Associates (executive search consultants); formerly,
Trustee, The Faulkner Corporation (community hospital corporation).
- -----------
* Trustee deemed an "interested person" of the Trusts, as defined in the
1940 Act.
9
<PAGE>
Officers
In addition to Messrs. Voss and Schmelzer, the officers of the Trusts
and their ages (in parentheses) and principal occupations during the past five
years are as follows:
BRUCE R. SPECA -- Executive Vice President (40); Executive Vice President, NEF
Corporation; Executive Vice President, New England Funds, L.P.; Executive
Vice President, NEFM.
ROBERT P. CONNOLLY -- Secretary and Clerk (42); Senior Vice President and
General Counsel, NEF Corporation; Senior Vice President and General
Counsel, New England Funds, L.P.; Senior Vice President and General
Counsel, NEFM; formerly, Managing Director and General Counsel, Kroll
Associates, Inc. (business consulting company); formerly, Managing
Director and General Counsel, Equitable Capital Management Corporation
(investment management company).
FRANK NESVET -- Treasurer (53); Senior Vice President and Chief Financial
Officer, NEF Corporation; Senior Vice President and Chief Financial
Officer, New England Funds, L.P.; Senior Vice President and Chief
Financial Officer, NEFM; formerly, Executive Vice President, SuperShare
Services Corporation (mutual fund and unit investment trust sponsor).
Previous positions during the past five years with The New England, New
England Securities or New England Funds, L.P. are omitted, if not materially
different. Each of the trustees is also a director or trustee of several other
investment companies for which New England Funds, L.P. acts as principal
underwriter and affiliates of The New England act as investment adviser.
The address of each trustee and officer affiliated with NEF Corporation,
New England Funds, L.P., NEFM or New England Securities is 399 Boylston Street,
Boston, MA 02116.
Compensation
Neither Trust pays compensation to its officers, or to its trustees who
are "interested persons" of the Trusts.
Each trustee who is not an interested person of the Trusts receives in
the aggregate for serving on the boards of the Trusts and New England Funds
Trust I and New England Funds Trust II (all four trusts collectively, the "New
England Funds Trusts"), comprising a total of 22 mutual fund portfolios, a
retainer fee at the annual rate of $40,000 and meeting attendance fees of $2,500
for each meeting of the boards he or she attends and $1,500 for each meeting he
or she attends of a committee of the board of which he or she is a member. Each
committee chairman receives an additional retainer fee at the annual rate of
$2,500. These fees are allocated among the Funds and the nineteen other mutual
fund portfolios in the New England Funds Trusts based on a formula that takes
into account, among other factors, the net assets of each fund.
During the fiscal year ended June 30, 1996, the persons who were
trustees of the Trusts for all or part of such year received the amounts set
forth in the following table for serving as a trustee of the Trusts; and during
the year ended December 31, 1995, such persons received the amounts set forth
below for serving as trustee of the Trusts and for also serving on the governing
boards of the other New England Funds Trusts, New England Zenith Fund ("Zenith")
and New England Variable Annuity Fund I ("NEVA"), comprising as of August 29,
1996 a total of thirty-seven mutual fund portfolios (not all of which were in
existence during all of 1995).
10
<PAGE>
<TABLE>
<CAPTION>
Aggregate Aggregate Pension or Total
Compensation Compensation Retirement Compensation
from New from New Benefits from the New
England Cash England Tax Accrued as Part England Funds
Management Exempt Money of Fund Estimated Trusts, Zenith and
Trust in the Year Market Trust in Expenses in the Annual NEVA in
Ended the Year Ended Year Ended Benefits Upon the Year Ended
Name of Trustee June 30, 1996 June 30, 1996 June 30, 1996 Retirement December 31, 1995
--------------- ----------------- --------------- --------------- ------------- ------------------
<S> <C> <C> <C> <C> <C>
Graham T. Allison, Jr. (a) $5,751 $2,427 $0 $0 $50,000
Daniel M. Cain (b) $2,097 $ 865 $0 $0 $ 0
Kenneth J. Cowan $6,562 $2,764 $0 $0 $69,291
Richard Darman (b) $2,097 $ 865 $0 $0 $ 0
Sandra O. Moose $5,748 $2,427 $0 $0 $56,250
James H. Scott (c) $4,271 $1,807 $0 $0 $59,000
John A. Shane $6,023 $2,564 $0 $0 $63,000
Pendleton P. White $6,023 $2,564 $0 $0 $63,000
</TABLE>
(a) Mr. Allison became a trustee of the Trusts effective April 1, 1995.
(b) Messrs. Cain and Darman were elected trustees of the Trusts on February
23, 1996.
(c) Effective March 5, 1996, Mr. Scott resigned as a trustee of the Trusts.
The Trusts provide no pension or retirement benefits to trustees, but have
adopted a deferred payment arrangement under which each trustee may elect not to
receive fees from each Fund on a current basis but to receive in a subsequent
period an amount equal to the value that such fees would have if they had been
invested in each Fund on the normal payment date for such fees. As a result of
this method of calculating the deferred payments, each Fund, upon making the
deferred payments, will be in the same financial position as if the fees had
been paid on the normal payment dates.
At August 1, 1996, the officers and trustees of the Trusts as a group
owned less than 1% of the outstanding shares of each Fund.
- -------------------------------------------------------------------------------
INVESTMENT ADVISORY, SUBADVISORY, DISTRIBUTION AND OTHER SERVICES
- -------------------------------------------------------------------------------
Investment Advisory and Subadvisory Agreements
Pursuant to separate advisory agreements, each dated January 2, 1996,
NEFM has agreed, subject to the supervision of the Board of Trustees of the
relevant Trust, to manage the investment and reinvestment of the assets of each
Fund and to provide a range of administrative services to each Fund. For the
services described in the advisory agreements, each Fund has agreed to pay NEFM
a management fee as set forth below:
Money Market Fund and Government Fund
Annual Percentage Rate Average Daily Net Asset Value Levels
---------------------- ------------------------------------
.425% the first $500 million
.400% the next $500 million
.350% the next $500 million
.300% the next $500 million
.250% amounts in excess of $2 billion
Tax Exempt Fund -- Under the advisory agreement relating to the Tax
Exempt Fund, the Fund pays NEFM a fee at the annual rate of 0.40% of the average
daily net asset value of the Fund up to $100 million and 0.30% of such asset
value in excess of $100 million.
The advisory agreements each provide that NEFM may delegate its
responsibilities thereunder to other parties. Pursuant to separate subadvisory
agreements, each dated January 2, 1996, NEFM has delegated
11
<PAGE>
responsibility for managing the investment and reinvestment of each Fund's
assets to Back Bay Advisors(R) as subadviser. For providing such subadvisory
services to the Funds, NEFM pays Back Bay Advisors(R) a subadvisory fee as set
forth below:
Annual Average Net
Fund Fee Rate Asset Levels
---- -------- ------------
Money Market Fund 0.205% the first $500 million
0.180% the next $500 million
0.160% the next $500 million
0.140% the next $500 million
0.120% amounts in excess of $2 billion
Government Fund 0.2125% the first $500 million
0.2000% the next $500 million
0.1750% the next $500 million
0.1500% the next $500 million
0.1250% amounts in excess of $2 billion
Tax Exempt Fund 0.200% the first $100 million
0.150% amounts in excess of $100 million
The Funds pay no direct fees to Back Bay Advisors.
Prior to January 2, 1996, Back Bay Advisors served as adviser to the
Funds pursuant to separate advisory agreements, each of which provided for an
advisory fee payable by the Fund to Back Bay Advisors at the same rate as the
management fee currently payable by the Fund to NEFM.
For the fiscal years ended June 30, 1994 and 1995 and the period July 1,
1995 to December 31, 1995, the advisory compensation paid to Back Bay Advisors
amounted to $3,022,248, $2,796,164 and $1,379,803, respectively, for the Money
Market Fund and $265,221, $255,727 and $126,103, respectively, for the
Government Fund.
For the six months ended June 30, 1996, the advisory compensation paid
to NEFM amounted to $726,741 and $59,722 for the Money Market Fund and the
Government Fund, respectively.
For the six months ended June 30, 1996, the subadvisory fee NEFM paid to
Back Bay Advisors amounted to $678,119 and $60,520 for the Money Market Fund and
the Government Fund, respectively.
Until further notice to the Tax Exempt Fund, NEFM and Back Bay Advisors
have agreed to reduce their fee and/or pay the charges, expenses and fees of the
Fund (not including fees payable to the trustees who are not "interested
persons" of the Trust) to the extent necessary to limit the Fund's expenses to
an annual rate of 0.5625 of 1% of average net assets. Prior to January 2, 1996,
similar voluntary limitations were in effect with regard to Back Bay Advisors(R)
and the Fund. For the fiscal years ended June 30, 1994 and 1995 and the period
July 1, 1995 to December 31, 1995, gross advisory fees payable to Back Bay
Advisors(R) of $231,093, $281,837 and $134,552, respectively, were reduced by
$192,773, $199,639 and $108,843, respectively, as a result of this expense
limitation. For the six months ended June 30, 1996, the gross management fee
payable to NEFM of $133,354 was reduced by $54,887, resulting in a net
management fee of $78,467, and the gross subadvisory fee payable by NEFM to Back
Bay Advisors(R) of $66,677 was reduced by $54,887, resulting in a net
subadvisory fee of $11,790 as a result of this expense limitation.
In General. Back Bay Advisors(R) serves as subadviser to the Funds.
Formed in 1986, Back Bay Advisors(R) provides investment management services to
institutional clients, including other registered investment companies and
accounts of The New England and its affiliates. Back Bay Advisors'(R) general
partner, Back Bay Advisors(R), Inc., is a wholly-owned subsidiary of NEIC
Holdings, Inc. ("NEIC Holdings"), which is a wholly-owned subsidiary of NEIC.
NEIC owns the entire limited partnership interest in Back Bay Advisors(R).
NEFM, formed in 1995, is a limited partnership whose sole general
partner, NEF Corporation, is a wholly-owned subsidiary of NEIC Holdings. NEF
Corporation is also the sole general partner of New England
12
<PAGE>
Funds, L.P., the distributor of the Funds (the "Distributor"). NEIC owns the
entire limited partnership interest in each of NEFM and New England Funds, L.P.
NEIC's sole general partner, NEIC Inc., is a wholly-owned subsidiary of
The New England, which owns a majority limited partnership interest in NEIC.
NEIC and its eight subsidiary or affiliated asset management firms,
collectively, have more than $87 billion of assets under management or
administration.
The New England and Metropolitan Life Insurance Company ("MetLife") have
entered into an agreement to merge, with MetLife to be the survivor of the
merger. The merger is conditioned upon, among other things, receipt of certain
regulatory approvals. After such merger, NEIC Inc. will be a wholly-owned
subsidiary of MetLife, and MetLife will own, directly or indirectly, a majority
limited partnership in NEIC. The merger is expected to occur on or after August
30, 1996.
Each Fund pays all of its expenses not assumed by NEFM or Back Bay
Advisors(R), including, but not limited to, the charges and expenses of the
Fund's custodian and transfer agent, independent auditors and legal counsel, all
brokerage commissions and transfer taxes in connection with portfolio
transactions, all taxes and filing fees, the fees and expenses for registration
or qualification of its shares under the federal or state securities laws, all
expenses of shareholders' and trustees' meetings and of preparing and printing
reports to shareholders and the compensation of trustees who are not directors,
officers or employees of NEFM, Back Bay Advisors(R) or their affiliates (other
than registered investment companies). Since January 2, 1996, the Funds have
borne the cost of certain accounting and legal services that were formerly borne
by Back Bay Advisors(R).
Under each Fund's advisory agreement, if the total ordinary business
expenses of a particular Fund (and, in the case of New England Cash Management
Trust, the total ordinary business expenses of the Trust as a whole) for any
fiscal year exceed the lowest applicable limitation (based on a percentage of
average net assets or income) prescribed by any state in which shares of that
Fund (or, with respect to New England Cash Management Trust, of any series of
the Trust) are qualified for sale, NEFM shall pay such excess. At the date of
this Statement, the most restrictive state annual expense limitation is 2 1/2%
of the average annual net assets up to $30,000,000, 2% of the next $70,000,000
of such assets and 1 1/2% of such assets in excess of $100,000,000. NEFM will
not be required to reduce its fee or pay such expenses to an extent or under
circumstances which might result in a Fund's inability to qualify as a regulated
investment company under the Code. The term "expenses" is defined in the
statutes or regulations of such jurisdictions and, generally speaking, excludes
brokerage commissions, taxes, interest, distribution-related expenses and
extraordinary expenses.
Each Fund's advisory agreement and subadvisory agreement provides that
it will continue in effect only if it is approved at least annually (i) by the
trustees of the relevant Trust or by vote of a majority of the outstanding
voting securities of the applicable Fund and (ii) by vote of a majority of the
trustees who are not interested persons of the Fund or NEFM. Any amendment to an
advisory or subadvisory agreement must be approved by vote of a majority of the
outstanding voting securities of the applicable Fund and by vote of a majority
of the trustees who are not such interested persons. Each agreement may be
terminated without penalty by the trustees or by the shareholders of the
applicable Fund upon 60 days' written notice or by NEFM upon 90 days' written
notice, and each terminates automatically in the event of its assignment. Each
subadvisory agreement also may be terminated by the subadviser upon 90 days'
notice and automatically terminates upon termination of the related advisory
agreement. In addition, each advisory agreement will automatically terminate if
the Trust or the Fund shall at any time be required by the Distributor to
eliminate all reference to the words "New England" or the letters "TNE" in the
name of the relevant Trust or the relevant Fund, unless the continuance of the
agreement after such change of name is approved by a majority of the outstanding
voting securities of the relevant Fund and by a majority of the trustees who are
not interested persons of the relevant Trust or the Fund's adviser or
subadviser.
Each Fund's advisory agreement and subadvisory agreement provides that
NEFM or Back Bay Advisors(R) shall not be subject to any liability in connection
with the performance of its services thereunder in the absence of willful
misfeasance, bad faith, gross negligence or reckless disregard of its
obligations and duties.
Prior to January 2, 1996, Back Bay Advisors(R) had contracted with New
England Securities for New England Securities to provide certain administrative
services to the Funds, at Back Bay Advisors'(R) expense.
13
<PAGE>
Certain officers and employees of Back Bay Advisors(R) have
responsibility for portfolio management of other advisory accounts and clients
of Back Bay Advisors(R) (including other registered investment companies and
accounts of affiliates of Back Bay Advisors(R)) that may invest in securities in
which the Funds also invest. If Back Bay Advisors(R) determines that an
investment purchase or sale opportunity is appropriate and desirable for more
than one advisory account, purchase and sale orders may be executed separately
or may be combined and, to the extent practicable, allocated by Back Bay
Advisors(R) to the participating accounts.
It is believed that the ability of the Funds to participate in larger
volume transactions in this manner will in some cases produce better executions
for the Funds. However, in some cases, this procedure could have a detrimental
effect on the price and amount of a security available to a Fund or the price at
which a security may be sold. The trustees are of the view that the benefits of
retaining Back Bay Advisors(R) as subadviser to each of the Funds outweigh the
disadvantages, if any, that may result from participating in such transactions.
Where advisory accounts have competing interests in a limited investment
opportunity, Back Bay Advisors(R) will allocate an investment purchase
opportunity based on the relative time the competing accounts have had funds
available for investment, and the relative amounts of available funds, and will
allocate an investment sale opportunity based on relative cash requirements and
the relative time the competing accounts have had investments available for
sale. It is Back Bay Advisors'(R) policy to allocate, to the extent practicable,
investment opportunities to each client over a period of time on a fair and
equitable basis relative to its other clients.
Distribution Agreement
Under separate agreements with each Fund, the Distributor, 399 Boylston
Street, Boston, Massachusetts 02116, acts as the distributor of the Funds'
shares, which are sold at net asset value without any sales charge. The
Distributor receives no compensation from the Funds or purchasers of Fund shares
for acting as distributor. The agreements do not obligate the Distributor to
sell a specific number of shares. Under the agreements, the Distributor pays
promotion and distribution expenses relating to the sale of Fund shares,
including the cost of preparing, printing and distributing prospectuses used in
offering shares of the Funds for sale.
The Distributor pays investment dealers a service fee in order to
compensate them for services they provide and expenses they incur in connection
with the establishment or maintenance of shareholder accounts in the Funds. The
service fee is paid quarterly at an annual rate equal to 0.10% of average Fund
net assets, including reinvested dividends, in accounts serviced by the
investment dealer during the year. In order to receive a fee for a particular
quarter, the investment dealer's clients' average daily net asset balance in a
Fund must equal or exceed $1 million. The Distributor pays the service fee; the
fee is not a direct or indirect expense of the Funds or their shareholders and
does not affect the Funds' yields.
The Distributor controls the words "New England" in the names of the
Trusts and the Funds and if it should cease to be the distributor, New England
Cash Management Trust, New England Tax Exempt Money Market Trust or the affected
Fund may be required to change their names and delete these words or letters.
The Distributor also acts as general distributor for New England Funds Trust I
and New England Trust II.
The Distributor may publish information about the Funds in the
publications described in Appendix D and may include information in advertising
and sales literature as described in Appendix E.
Independent Accountants
The Funds' independent accountants are Price Waterhouse LLP, 160 Federal
Street, Boston, Massachusetts 02110. Price Waterhouse LLP conducts an annual
audit of the Funds' financial statements, assists in the preparation of the
Funds' federal and state income tax returns and consults with the Funds as to
matters of accounting and federal and state income taxation. The information
concerning Financial Highlights in the Prospectus, and the financial statements
incorporated by reference in this Statement, have been so included in reliance
on the reports of Price Waterhouse LLP, independent accountants, given on the
authority of said firm as experts in auditing and accounting.
14
<PAGE>
Custodian
State Street Bank and Trust Company ("State Street Bank"), 225 Franklin
Street, Boston, Massachusetts 02110, is the custodian for each Fund. As such,
State Street Bank holds in safekeeping certificated securities and cash
belonging to each Fund and, in such capacity, is the registered owner of
securities in book-entry form belonging to each Fund. Upon instruction, State
Street Bank receives and delivers cash and securities in connection with
transactions of each Fund and collects all dividends and other distributions
made with respect to each Fund's portfolio securities. State Street Bank also
maintains certain accounts and records of the Funds and calculates the total net
asset value, total net income and net asset value per share of the Funds. State
Street Bank does not determine the investment policies of the Funds or decide
which securities a Fund will buy or sell.
Other Services
Pursuant to a contract between the Funds and the Distributor, the
Distributor acts as shareholder servicing and transfer agent for the Funds and
is responsible for services in connection with the establishment, maintenance
and recording of shareholder accounts, including all related tax and other
reporting requirements and the implementation of investment and redemption
arrangements offered in connection with the sale of the Funds' shares. The Funds
pay a per account fee to the Distributor for these services in the amount of
$21.50, annually, which may be increased with the approval of the Trusts'
Boards. The aggregate amount of fees paid by the Funds to the Distributor for
these services during the three most recent fiscal years of the Funds were as
follows:
<TABLE>
<CAPTION>
Trust Fiscal Year Ended June 30,
---------------------------------------------------------------------------------------------------
1994 1995 1996
---- ---- ----
<S> <C> <C> <C>
New England Cash Management Trust
Money Market Series $1,646,555 $2,011,935 $1,986,393
U.S. Government Series $ 74,257 $ 99,544 $ 98,617
New England Tax Exempt Money Market Trust $ 58,609 $ 6,391 $ 76,498
</TABLE>
The Distributor has subcontracted with State Street Bank for it to
provide, through its subsidiary, Boston Financial Data Services, Inc. ("BFDS"),
transaction processing, mail and other services.
In addition, during the fiscal year ended June 30, 1996, the Distributor
received legal and accounting services fees paid by the Money Market Fund and
Tax Exempt Fund in the amount of $21,912 and $22,044, respectively. The
Distributor has voluntarily agreed to waive these legal and accounting services
fees for the Government Fund until further notice. As a result of this voluntary
waiver, the Distributor waived its entire fee for the Government Fund of $22,044
for the fiscal year ended June 30, 1996.
- -------------------------------------------------------------------------------
PORTFOLIO TRANSACTIONS
- -------------------------------------------------------------------------------
In General
In placing orders for the purchase and sale of portfolio securities for
each Fund, Back Bay Advisors(R) will always seek the best price and execution.
It is expected that the Funds' portfolio transactions will generally be with
issuers or dealers in money market instruments acting as principal. Accordingly,
the Funds do not anticipate that they will pay significant brokerage
commissions. During the year ended June 30, 1996, the Funds did not incur any
brokerage fees in connection with portfolio transactions.
Some of the portfolio transactions for each Fund are placed with dealers
who provide Back Bay Advisors(R) with supplementary investment and statistical
information or furnish market quotations to the Funds or other investment
companies advised by Back Bay Advisors(R). The business would not be so placed
if the Funds would not thereby obtain the best price and execution. Although it
is not possible to assign an exact dollar value to these research services, they
may, to the extent used, tend to reduce the expenses of Back Bay Advisors(R).
The research services may also be used by Back Bay Advisors(R) in connection
with its other advisory accounts and in some cases may not be used with respect
to the Funds.
15
<PAGE>
The Board of Trustees of each Trust has requested that Back Bay
Advisors(R) seek to reduce underwriting commissions or similar fees on Fund
portfolio transactions through certain methods currently available. It is not
expected that these methods will result in material reductions. The Boards have
not requested that Back Bay Advisors(R) or its affiliates attempt to join
underwriting syndicates to reduce underwriting commissions or fees.
Tax Exempt Fund
It is expected that the Tax Exempt Fund's portfolio securities will
normally be purchased directly from an underwriter or in the over-the-counter
market from the principal dealers in such securities, unless it appears that a
better price or execution may be obtained elsewhere. Purchases from underwriters
will include a commission or concession paid by the issuer to the underwriter,
and purchases from dealers will include the spread between the bid and asked
price.
- -------------------------------------------------------------------------------
PERFORMANCE
- -------------------------------------------------------------------------------
From time to time, the Funds may use performance data in advertisements
and promotional material. These results may include comparisons to the average
daily yields of money market funds reporting to IBC/Donoghue's Money Fund Report
("Donoghue's"), including comparisons of such average yields for funds
considered by Donoghue's to be in the same category as each of the Funds. See
"Net Income, Dividends and Valuation" below for an explanation of how the Funds
calculate yield and "effective" (or "compound") yield.
New England Funds, L.P. may make reference in its advertising and sales
literature to awards, citations and honor bestowed on it by industry
organizations and other observers and raters, including, but not limited to
Dalbar's Quality Tested Service Seal and Key Honors Award. Such reference may
explain the criteria for the award, indicate the nature and significance of the
honor and provide statistical and other information about the award and New
England Funds, L.P.'s selection, including, but not limited to, the scores and
categories in which New England Funds, L.P. excelled, the names of funds and
fund companies that have previously won the award and comparative information
and data about those against whom New England Funds, L.P. competed for the
award, honor or citation.
New England Funds, L.P. may publish, allude to or incorporate in its
advertising and sales literature testimonials from shareholders, clients,
brokers who sell or own shares, broker-dealers, industry organizations and
officials and other members of the public, including, but not limited to, fund
performance, features and attributes, or service and assistance provided by
departments within the organization, employees or associates of New England
Funds, L.P.
From inception of each Fund (Class A shares) or date of first offering
(Class B shares) through each of the dates set forth below, an investment of
$10,000 in each Fund grew, assuming the reinvestment of all dividends, to the
respective amounts set forth below. The periods covered included periods of
widely fluctuating interest rates and should not necessarily be considered
representative of performance of an investment in a Fund today.
16
<PAGE>
New England Cash Management Trust -- Money Market Series
($10,000 investment on 7/10/78)
(Class A Shares)
<TABLE>
<CAPTION>
Value of Investment on Value of Cumulative
Period Ended First Day of Period Reinvested Dividends Total Value
------------ ---------------------- -------------------- -----------
<S> <C> <C> <C>
12/31/78 $10,000 $ 385 $10,385
12/31/79 10,385 1,504 11,504
12/31/80 11,504 2,971 12,971
12/31/81 12,971 5,194 15,194
12/31/82 15,194 7,155 17,155
12/31/83 17,155 8,680 18,680
12/31/84 18,680 10,628 20,628
12/31/85 20,628 12,259 22,259
12/31/86 22,259 13,675 23,675
12/31/87 23,675 15,110 25,110
12/31/88 25,110 16,915 26,915
12/31/89 26,915 19,320 29,320
12/31/90 29,320 21,638 31,638
12/31/91 31,638 23,499 33,499
12/31/92 33,499 24,655 34,655
12/31/93 34,655 25,536 35,536
06/30/94 35,536 26,036 36,036
06/30/95 36,036 27,761 37,761
06/30/96 37,761 29,596 39,596
</TABLE>
New England Cash Management Trust -- Money Market Series
($10,000 investment on 9/13/93)
(Class B Shares)
<TABLE>
<CAPTION>
Value of Investment on Value of Cumulative
Period Ended First Day of Period Reinvested Dividends Total Value
------------ ---------------------- -------------------- -----------
<S> <C> <C> <C>
12/31/93 $10,000 $ 74 $10,074
06/30/94 10,074 216 10,216
06/30/95 10,216 705 10,705
06/30/96 10,705 1,125 11,225
</TABLE>
17
<PAGE>
New England Cash Management Trust - U.S. Government Series
($10,000 investment on 6/2/82)
(Class A Shares)
<TABLE>
<CAPTION>
Value of Investment on Value of Cumulative
Period Ended First Day of Period Reinvested Dividends Total Value
------------ ---------------------- -------------------- -----------
<S> <C> <C> <C>
12/31/82 $10,000 $ 543 $10,543
12/31/83 10,543 1,435 11,435
12/31/84 11,435 2,559 12,559
12/31/85 12,559 3,550 13,550
12/31/86 13,550 4,402 14,402
12/31/87 14,402 5,213 15,213
12/31/88 15,213 6,232 16,232
12/31/89 16,232 7,610 17,610
12/31/90 17,610 8,925 18,925
12/31/91 18,925 10,009 20,009
12/31/92 20,009 10,694 20,694
12/31/93 20,694 11,213 21,213
06/30/94 21,213 11,500 21,500
06/30/95 21,500 12,496 22,496
06/30/96 22,496 13,570 23,570
</TABLE>
New England Cash Management Trust - U.S. Government Series
($10,000 investment on 9/20/93)
(Class B Shares)
<TABLE>
<CAPTION>
Value of Investment on Value of Cumulative
Period Ended First Day of Period Reinvested Dividends Total Value
------------ ---------------------- -------------------- -----------
<S> <C> <C> <C>
12/31/93 $10,000 $ 67 $10,067
06/30/94 10,067 203 10,203
06/30/95 10,203 672 10,672
06/30/96 10,672 1,182 11,182
</TABLE>
New England Tax Exempt Money Market Trust
($10,000 investment on 4/21/83)
(Class A Shares)
<TABLE>
<CAPTION>
Value of Investment on Value of Cumulative
Period Ended First Day of Period Reinvested Dividends Total Value
------------ ---------------------- -------------------- -----------
<S> <C> <C> <C>
12/31/83 $10,000 $ 371 $10,371
12/31/84 10,371 984 10,984
12/31/85 10,984 1,543 11,543
12/31/86 11,543 2,043 12,043
12/31/87 12,043 2,531 12,531
12/31/88 12,531 3,134 13,134
12/31/89 13,134 3,899 13,899
12/31/90 13,899 4,660 14,660
12/31/91 14,660 5,268 15,268
12/31/92 15,268 5,667 15,667
12/31/93 15,667 5,979 15,979
06/30/94 15,979 6,153 16,153
06/30/95 16,153 6,667 16,667
06/30/96 16,667 7,209 17,209
</TABLE>
18
<PAGE>
New England Tax Exempt Money Market Trust
($10,000 investment on 9/13/93)
(Class B shares)
<TABLE>
<CAPTION>
Value of Investment on Value of Cumulative
Period Ended First Day of Period Reinvested Dividends Total Value
------------ ---------------------- -------------------- -----------
<S> <C> <C> <C>
12/31/93 $10,000 $ 60 $10,060
06/30/94 10,060 170 10,170
06/30/95 10,170 493 10,493
06/30/96 10,493 834 10,834
</TABLE>
- -------------------------------------------------------------------------------
DESCRIPTION OF THE FUNDS AND OWNERSHIP OF SHARES
- -------------------------------------------------------------------------------
New England Cash Management Trust was organized as a Massachusetts
business trust under the laws of Massachusetts by an Agreement and Declaration
of Trust (a "Declaration of Trust") dated June 5, 1980. The Trust commenced
operations on October 3, 1980 by acquiring all the assets and liabilities of NEL
Cash Management Account, Inc., which commenced operations on July 10, 1978. The
Trust was established with the same investment objective, policies, restrictions
and investment adviser as the NEL Cash Management Account, Inc. then had. On
June 2, 1982 the U.S. Government Series commenced operations as a separate
portfolio of New England Cash Management Trust, the Trust's then existing
portfolio having been redesignated the "Money Market Series." The Money Market
Fund and the Government Fund are the only series of New England Cash Management
Trust currently in existence. Each such Fund has two classes of shares available
for purchase.
New England Tax Exempt Money Market Trust was organized as a
Massachusetts business trust under the laws of Massachusetts by a Declaration of
Trust dated January 18, 1983, and commenced operations on April 21, 1983. Only
one series of shares of New England Tax Exempt Money Market Trust is currently
in existence; it has two classes of shares available for purchase.
Class A and B shares of each Fund are identical, except that the classes
have different exchange privileges, as set forth in detail in the Prospectus.
The Declarations of Trust currently permit the relevant trustees to
issue an unlimited number of full and fractional shares of each Fund. Each Fund
is represented by a particular series of shares. The Declarations of Trust
further permit each Trust's trustees to divide the shares of each series into
any number of separate classes, each having such rights and preferences relative
to other classes of the same series as the trustees may determine. The shares of
each Fund have no pre-emptive rights. Upon termination of any Fund, whether
pursuant to liquidation of the Fund or otherwise, shareholders of each series of
shares are entitled to share pro rata in the net assets belonging to that series
then available for distribution to such shareholders.
The assets received by each series of New England Cash Management Trust
from the issue or sale of shares of each series thereof and all income,
earnings, profits, losses and proceeds therefrom, subject only to the rights of
creditors, are allocated to, and constitute the underlying assets of, that
series. The underlying assets of each series are segregated and are charged with
the expenses in respect of that series and with a share of the general expenses
of New England Cash Management Trust. Any general expenses of the Trust not
readily identifiable as belonging specifically to a particular series are
allocated by or under the direction of the trustees in such manner as the
trustees determine to be fair and equitable. While the expenses of the Trust are
allocated to the separate books of account of each series of the Trust, certain
expenses may be legally chargeable against the assets of both series.
The Declarations of Trust also permit the trustees to charge
shareholders directly for custodial, transfer agency and servicing expenses.
The Declarations of Trust also permit the trustees, without shareholder
approval, to subdivide any series or class of shares into various sub-series or
sub-classes participating in the same portfolio with such
19
<PAGE>
dividend preferences and other rights as the trustees may designate. While the
trustees have no current intention to exercise this power, it is intended to
allow them to provide for an equitable allocation of the impact of any future
regulatory requirements which might affect various classes of shareholders
differently. The trustees may also, without shareholder approval, establish one
or more additional series or classes or merge two or more series or classes. At
such time as the trustees of New England Tax Exempt Money Market Trust create
another series, the Trust would become a "series" company as that term is used
in Section 18(f) of the 1940 Act. Currently, New England Cash Management Trust
is such a "series" company.
The Declarations of Trust provide for the perpetual existence of the
Trusts. Either Trust or any Fund, however, may be terminated at any time by vote
of at least two-thirds of the outstanding shares of the Fund affected or by the
relevant trustees upon written notice to the shareholders. Similarly, any class
within a Fund may be terminated by vote of at least two-thirds of the
outstanding shares of such class or by the trustees upon written notice.
VOTING RIGHTS
General
As summarized in the Prospectus, shareholders are entitled to one vote
for each full share held (with fractional votes for fractional shares held) and
may vote (to the extent described below) in the election of trustees and the
termination of the Funds and on other matters submitted to the vote of
shareholders.
The Declaration of Trust for each Trust provides that, on any matter
submitted to a vote of all Trust shareholders, all of a Trust's shares entitled
to vote shall be voted together irrespective of series or class unless the
rights of a particular series or class would be adversely affected by the vote,
in which case a separate vote of that series or class shall also be required to
decide the question. Also, a separate vote shall be held whenever required by
the 1940 Act or any rule thereunder. Rule 18f-2 under the 1940 Act provides in
effect that a series or class shall be deemed to be affected by a matter unless
it is clear that the interests of each series or class in the matter are
substantially identical or that the matter does not affect any interest of such
series or class. On matters affecting an individual series or class, only
shareholders of that series or class are entitled to vote.
There will normally be no meetings of shareholders for the purpose of
electing trustees except that in accordance with the 1940 Act (i) each Trust
will hold a meeting of its shareholders for the election of trustees at such
time as less than a majority of the trustees holding office have been elected by
shareholders, and (ii) if, as a result of a vacancy in the Board of Trustees,
less than two-thirds of the trustees holding office have been elected by the
shareholders, that vacancy may only be filled by a vote of the shareholders. In
addition, trustees of the Tax Exempt Fund may be removed from office by a
written consent signed by the holders of two-thirds of the outstanding shares
and filed with the Fund's custodian or by a vote of the holders of two-thirds of
the outstanding shares at a meeting duly called for the purpose, which meeting
shall be held upon the written request of the holders of not less than 10% of
the outstanding shares.
Upon written request by the holders of shares having a net asset value
of $25,000 or constituting 1% of the outstanding shares stating that such
shareholders wish to communicate with the other shareholders for the purpose of
obtaining the signatures necessary to demand a meeting to consider removal of a
trustee, the Tax Exempt Fund has undertaken to provide a list of shareholders or
to disseminate appropriate materials (at the expense of the requesting
shareholders).
Except as set forth above, the trustees shall continue to hold office
and may appoint successor trustees. Voting rights are not cumulative.
No amendment may be made to the Declarations of Trust without the
affirmative vote of a majority of the outstanding shares of the applicable Trust
except (i) to change the name of the Trust or a series thereof or to cure
technical problems in the Declaration of Trust, (ii) to establish and designate
new series or classes of shares, and (iii) to establish, designate or modify new
and existing series or classes of shares or modify other provisions relating to
Trust shares in response to applicable laws or regulations, or, in the case of
the Tax Exempt Fund, in order to convert the Fund into a "series" company. If
one or more new series of either Trust is established and designated by the
trustees, the shareholders having beneficial interests in the Funds described in
the Prospectus and this Statement shall not be entitled to vote on matters
exclusively affecting such new series, such matters
20
<PAGE>
including, without limitation, the adoption of or any change in the investment
objectives, policies or restrictions of the new series and the approval of the
investment advisory contracts of the new series. Similarly, the shareholders of
the new series shall not be entitled to vote on any such matters as they affect
the Funds.
SHAREHOLDER AND TRUSTEE LIABILITY
Under Massachusetts law, a Trust's shareholders could, under certain
circumstances, be held personally liable for the obligations of the Trust.
However, the Declarations of Trust disclaim shareholder liability for acts or
obligations of a Fund and require that notice of such disclaimer be given in
each agreement, obligation or instrument entered into or executed by a Trust or
its trustees. The Declarations of Trust provide for indemnification out of the
assets of a Fund for all loss and expense of any shareholder held personally
liable for the obligations of that Fund. Thus, the risk of a shareholder
incurring financial loss on account of shareholder liability is considered
remote since it is limited to circumstances in which the disclaimer is
inoperative and the Fund itself would be unable to meet its obligations.
The Declarations of Trust further provide that the trustees will not be
liable for errors of judgment or mistakes of fact or law. However, nothing in
the Declarations of Trust protects a trustee against any liability to which the
trustee would otherwise be subject by reason of willful misfeasance, bad faith,
gross negligence or reckless disregard of the duties involved in the conduct of
his or her office. The By-Laws of each Trust provide for indemnification by the
Trust of the trustees and the officers of such Trust except with respect to any
matter as to which any such person did not act in good faith in the reasonable
belief that his or her action was in or not opposed to the best interests of the
Trust. Such person may not be indemnified against any liability to the Trust or
its shareholders to which he or she would otherwise be subject by reason of
willful misfeasance, bad faith, gross negligence or reckless disregard of the
duties involved in the conduct of his or her office.
OWNERSHIP OF SHARES
At August 1, 1996, there were 675,363,983 shares of the Money Market
Fund, 53,720,046 shares of the Government Fund and 65,243,042 shares of the Tax
Exempt Fund issued and outstanding. One account registered to National Financial
Services Corp. (For the Exclusive Benefit of its Customers), 200 Liberty St., 1
World Financial Center; New York, NY 10281-1003 owned 67,149,508 shares of the
Money Market's Class A shares, about 10.1% of the total Class A shares then
outstanding. Two accounts registered to National Financial Services Corp. (For
the Exclusive Benefit of its Customers), 200 Liberty St., 1 World Financial
Center; New York, NY 10281-1003 and one account registered to Kevin M. Mahony
and Mary S. Mahony, 228 Common St., Belmont, MA 02178-2916 owned 6,621,101 and
3,139,611 Class A shares of the Government Fund, respectively, about 12.6% and
6.0%, respectively, of the Class A shares then outstanding. Seven accounts
registered to Brady Diesel Inc. 401K Savings Plan, P.O. Box 4417, Houma, LA
70361-4417, Smith Barney Inc, 388 Greenwich St., New York, NY 10013-2375, Thomas
Smith Co. Inc. 401K Plan, 288 Grove St. Worcester, MA 01605-3908, Jean Magill
(Guardian, Amy L. Magill), P.O. Box 1673, Snellville, GA 30278-1673, Jean Magill
(Guardian, James C. Magill, Jr.), P.O. Box 1673, Snellville, GA 30278-1673,
Mable Snell, 2145 North Rd., Snellville GA 30278-2630 and Winnie S. Escoe, 2610
Glendale Ct., Conyers, GA 30208-1460 owned 114,612, 105,122, 87,965, 87,699,
87,669, 83,581 and 50,715 Class B shares of the fund, respectively, about 11.8%,
10.8%, 9.0%, 9.0%, 9.0%, 8.6% and 5.2% of the total Class B shares then
outstanding. For the Tax Exempt Fund's Class A shares, there were two accounts
registered to National Financial Services Corp.(For the Exclusive Benefit of its
Customers) and Mark Henkin, 265 East 66th St. #19-C, New York, NY 10021-6406
which owned 12,031,753 and 4,620,279 shares, respectively, about 18.5% and 7.1%
of the fund's Class A shares then outstanding. Five accounts registered to Harry
Graff (Trustee of the Harry Graff Trust DTD 7/27/90), 17 Raven Ln., Gloucester,
MA 01930-4177, Ruth L. Graff (Trustee of the Ruth L. Graff Trust DTD 7/27/90),
17 Raven Ln., Gloucester, MA 01930-4177, Henry S. Belber, 229 Lancaster Ave.,
Devon, PA 19333-1589, National Financial Services Corp.( For the Benefit of
Richard J. Broggi and Ellen Ann Broggi), P.O. Box 366, Bridgewater Hill,
Bridgewater Corners, VT 05035-0366 and Dorothy Kosiba Temple and Raymond Kosiba,
1548 William Peters Rd., Bogalusa, LA 70427-6053 owned 65,166, 65,001, 47,322,
37,318 and 25,000 Class B shares of the fund, respectively, about 18.2%, 18.1%,
13.2%, 10.4% and 7.0%, respectively, of the Class B shares of the fund.
21
<PAGE>
- -------------------------------------------------------------------------------
PURCHASE OF SHARES
- -------------------------------------------------------------------------------
The procedures for purchasing shares of the Funds are summarized in the
Prospectus under the caption "6 Ways to Buy Fund Shares." Shares may also be
purchased either in writing, by phone or by electronic funds transfer, or by
exchange as described in the Prospectus, through firms that have selling
agreements with the Distributor.
Shares of each Fund are offered for sale continuously at their
respective net asset values, which the Funds seek to maintain at a constant $1
per share. See "Net Income, Dividends and Valuation." There is no sales charge.
The minimum initial investment is $1,000, with a $50 minimum for
subsequent investments. There are reduced initial investment minimums for
certain investments described below under "Shareholder Services."
Banks may charge a fee for transmitting funds by wire or through the
Automated Clearing House ("ACH") system. With respect to shares purchased by
federal funds wire, shareholders should bear in mind that wire transfers may
take two or more hours to complete.
A shareholder may purchase additional shares electronically through the
ACH system so long as the shareholder's bank or credit union is a member of the
ACH system and the shareholder has a completed, approved ACH application on
file.
In all instances where checks are sent for the purchase of shares, they
must be drawn on U.S. banks and payable in U.S. dollars.
- -------------------------------------------------------------------------------
SHAREHOLDER SERVICES
- -------------------------------------------------------------------------------
Open Accounts
Except for investors who own shares through certain broker "street name"
or retirement plan arrangements, each shareholder's investment is automatically
credited to a separate open account maintained for the shareholder by the
Distributor, and the shareholder will receive a monthly statement disclosing the
current balance of shares owned in the shareholder's account and the details of
all transactions in that account during the month; however, if there were no
transactions other than dividend declarations during a month, the shareholder
will receive a quarterly statement instead of a monthly statement. After the
close of each calendar year, the Distributor will send the shareholder a
statement for each of his or her accounts providing federal tax information on
dividends and distributions paid during the year including information as to
that percentage, if any, of Tax Exempt Fund dividends that are not exempt from
federal income taxation. Shareholders should retain this as a permanent record.
The Distributor reserves the right to charge a fee for providing duplicate
information.
Automatic Investment Plans
As described in the Prospectus, shareholders may, after opening an
account, authorize automatic monthly transfers of a least $50 from the
shareholder's bank account to purchase shares of a Fund. These transfers are
effected through checks drawn under Investment Builder, a program designed to
facilitate such periodic payments.
Under Investment Builder, funds normally are credited to the Fund not
later than the fourth business day after the check is drawn. An Investment
Builder application must be completed to open an automatic investment plan. An
application is included in the Prospectus or may be obtained from your
investment dealer or from New England Funds by calling 1-800-225-5478. The plan
may be discontinued by written notice to New
22
<PAGE>
England Funds, L.P., which must be received at least five business days prior to
any payment date. The plan may be discontinued by State Street Bank at any time
without prior notice if any check is not paid upon presentation; or by written
notice to shareholders at least thirty days prior to any payment date. State
Street Bank is under no obligation to notify shareholders as to the nonpayment
of any check.
Retirement Plans Offering Tax Benefits - Money Market Fund and Government Fund
The federal tax laws provide for a variety of retirement plans offering
tax benefits. These plans may be funded with shares of the Money Market Fund or
the Government Fund, or with certain other investments. The plans include H.R.
10 (Keogh) plans for self-employed individuals and partnerships, individual
retirement accounts (IRAs), corporate pension and profit sharing plans,
including 401(k) plans, and retirement plans for public school systems and
certain tax exempt organizations (403(b) plans).
Initial investments in either Fund must be at least $250 for each
participant in corporate pension and profit sharing plans, IRAs and Keogh plans
and $50 for subsequent investments. There is a special initial and subsequent
investment minimum of $25 for payroll deduction investment programs for 401(k),
SARSEP, 403(b) and certain other retirement plans. Income dividends and capital
gain distributions will be automatically reinvested (unless the investor is age
59 1/2 or disabled). Plan documents can be obtained from the Distributor.
An investor should consult a competent tax or other adviser as to the
suitability of either Fund's shares as a vehicle for funding a plan, in whole or
in part, under the Employee Retirement Income Security Act of 1974 and as to the
eligibility requirements for a specific plan and its state as well as federal
tax aspects.
Systematic Withdrawal Plans
A shareholder owning shares having a value of $5,000 or more in any Fund
may establish a Systematic Withdrawal Plan providing for periodic payments of a
fixed or variable amount from the shareholder's account. There is no minimum
account size where payments are made directly to The New England or the
Distributor. There is no charge for this service, and the shareholder may
terminate his or her plan at any time. Shareholders can establish the plan on
the account application or obtain a Service Options Form for establishing such a
plan by calling New England Funds at 1-800-225-5478.
Under a Systematic Withdrawal Plan, shareholders may elect to receive or
direct payments monthly, quarterly, semiannually or annually for a fixed amount
of not less than $100 or a variable amount based on (1) a specified percentage
of an account's market value or (2) a specified number of years for liquidating
an account (e.g., a 20-year program of 240 monthly payments would be liquidated
at a monthly rate of 1/240, 1/239, 1/238, etc.). Under a variable payment
option, the initial payment from an account for each Fund must be $100 or more.
In addition, shareholders who have purchased insurance or annuity products of
The New England may elect to have amounts withdrawn from a Fund monthly to pay
the necessary premiums. Withdrawals may be paid to a person other than the
shareholder if a signature guarantee is provided. On Systematic Withdrawal Plans
for accounts subject to a contingent deferred sales charge ("CDSC"), the
redemption of shares will not be subject to a CDSC if the amount or percentage
you specify does not exceed, on an annualized basis, 10% of the value of your
account with the Fund (based on the day you established your Plan). In the case
of Class A and B shares not subject to a CDSC, there is no limit on the
percentage of an account that may be redeemed. Please consult your investment
dealer or New England Funds for additional information.
No share certificates will be issued for an account that is subject to a
Systematic Withdrawal Plan. Income dividends and capital gain distributions will
be reinvested.
Since Systematic Withdrawal Plan payments represent proceeds from the
liquidation of shares, withdrawals may reduce and possibly exhaust the initial
investment, particularly in the event of a period of low earnings. Accordingly,
the shareholder should consider whether a Systematic Withdrawal Plan and the
specified amounts to be withdrawn are appropriate in the circumstances. The
Funds and New England Funds make no recommendations or representations in this
regard. It may be appropriate for the shareholder to consult a tax adviser
before establishing such a Plan. See "Redemptions" and "Tax Status," below, for
certain information as to federal income taxes. New England Funds may modify or
terminate this program at any time.
23
<PAGE>
Exchange Privilege
Class A shares of a Fund may be exchanged for shares of either class of
the other Funds and Class B shares of a Fund may be exchanged for Class B shares
of any other Funds, subject to the minimum investment and eligibility
requirements of the Funds into which you are exchanging and state securities law
requirements. Shareholders may also exchange their shares in the Funds for
shares of the same class of any other fund in the New England Funds listed
below, subject to those funds' eligibility requirements and sales charges. Class
A shares of a Fund may also be exchanged for Class C shares of the New England
Stock or Bond Funds, subject to the applicable sales charge. The Stock Funds of
the New England Funds are: New England Capital Growth Fund, New England Value
Fund, New England Balanced Fund, New England Growth Opportunities Fund, New
England International Equity Fund, New England Star Advisers Fund, New England
Star Worldwide Fund, New England Growth Fund and Growth Fund of Israel; the Bond
Funds of the New England Funds are: New England Government Securities Fund, New
England Limited Term U.S. Government Fund, New England Adjustable Rate U.S.
Government Fund, New England Strategic Income Fund, New England Bond Income
Fund, New England High Income Fund, New England Municipal Income Fund, New
England Massachusetts Tax Free Income Fund, New England Intermediate Term Tax
Free Fund of California and New England Intermediate Term Tax Free Fund of New
York.
Shareholders of any of the other funds in the New England Funds may
exchange all or any portion of their shares (including the proceeds of shares of
the other funds redeemed within 120 days before the exchange) for shares of the
same class of the Funds. However, Class A or Class B shares of a Fund acquired
by exchange either from the New England Stock or Bond Funds or another Fund will
be subject to a CDSC if, and to the extent as, the shares exchanged were subject
to a CDSC. Shareholders of Class C shares of the New England Stock or Bond Funds
may exchange those shares only for Class A shares of the Funds. Such exchanges
may be made by telephoning or writing New England Funds or certain investment
dealers. Such an exchange in the case of the Class B shares of the New England
Funds stops the aging period for purposes of determining the CDSC and conversion
to Class A, and the aging resumes only when an exchange is made back into a
non-money market fund in the New England Funds.
Shares of any Fund acquired through an exchange from the New England
Funds listed above may be re-exchanged for shares of the same class of those New
England Funds. Any such exchange will be based on the respective current net
asset values of the shares involved and no sales charge will be imposed.
Shareholders making such exchanges must provide New England Funds with
sufficient information to permit verification of their prior ownership of
shares.
An exchange may be effected, provided that neither the registered name
nor address of the accounts are different and provided that a certificate
representing the shares being exchanged has not been issued to the shareholder,
by (1) a telephone request to New England Funds at 1-800-225-5478 or (2) a
written request to New England Funds, using the Service Options Form available
from your investment dealer. In any event, a current prospectus of the fund
whose shares will be received must be delivered to the shareholder before the
transaction can be completed.
Automatic Exchange Plan
Shareholders may establish an Automatic Exchange Plan under which shares
are automatically redeemed each month and immediately reinvested in shares of
the same class of one or more of the New England Funds listed below, subject to
the investor eligibility requirement of that other fund and the exchange rules
regarding Class A and Class B above. Also, proceeds of automatic redemptions of
Class A shares of the Funds may be reinvested in Class C shares of those New
England Funds' Stock or Bond Funds that offer Class C shares. Registrations on
all accounts must be identical. The two dates each month on which exchanges may
be made are the 15th or 28th (or the first business day thereafter if the 15th
or the 28th are not business days) and are made until the account is exhausted
or until New England Funds is notified in writing to terminate the plan.
Exchanges may be made in amounts of $50 or more from any Fund. A sales charge
will be imposed on such exchanges unless the shares being exchanged were
previously acquired through an exchange from one of the New England Funds listed
below. Complete the account application or the Service Options Form available
from New England Funds to establish an Automatic Exchange Plan.
24
<PAGE>
Every exchange constitutes a sale of fund shares for federal income tax
purposes, on which an investor may realize a long- or short-term capital gain or
loss.
The other New England Funds and their investment objectives are as follows:
Stock Funds:
New England Growth Fund seeks long-term growth of capital through
investments in equity securities of companies whose earnings are expected to
grow at a faster rate than the United States economy.
New England Capital Growth Fund seeks long-term growth of capital.
New England Value Fund seeks a reasonable long-term investment return
from a combination of market appreciation and dividend income from equity
securities.
New England Balanced Fund seeks a reasonable long-term investment return
from a combination of long-tern capital appreciation and moderate current
income.
New England Growth Opportunities Fund seeks opportunities for long-term
growth of capital and income.
New England International Equity Fund seeks total return from long-term
growth of capital and dividend income primarily through investment in a
diversified portfolio of marketable international equity securities.
New England Star Advisers Fund seeks long-term growth of capital.
New England Star Worldwide Fund seeks long-term growth of capital.
Growth Fund of Israel seeks long-term growth of capital.
Bond Funds:
New England Government Securities Fund seeks a high level of current
income consistent with safety of principal by investing in U.S. Government
securities and engaging in transactions involving related options, futures and
options on futures.
New England Limited Term U.S. Government Fund seeks a high current
return consistent with preservation of capital.
New England Adjustable Rate U.S. Government Fund seeks a high level of
current income consistent with low volatility of principal.
New England Strategic Income Fund seeks high current income with a
secondary objective of capital growth.
New England Bond Income Fund seeks a high level of current income
consistent with what the Fund considers reasonable risk. The Bond Income Fund
invests primarily in corporate and U.S. Government bonds.
New England High Income Fund seeks high current income plus the
opportunity for capital appreciation to produce a high total return.
New England Municipal Income Fund seeks as high a level of current
income exempt from federal income taxes as is consistent with reasonable risk
and protection of shareholders' capital. The Municipal Income Fund invests
primarily in debt securities of municipal issuers, the interest of which is
exempt from federal income tax but may be subject to the federal alternative
minimum tax, and may engage in transactions in financial futures contracts and
options on futures.
25
<PAGE>
New England Massachusetts Tax Free Income Fund seeks as high a level of
current income exempt from federal income tax and Massachusetts personal income
taxes as Back Bay Advisors, the Fund's subadviser, believes is consistent with
preservation of capital.
New England Intermediate Term Tax Free Fund of California seeks as high
a level of current income exempt from federal income tax and its state personal
income tax as is consistent with preservation of capital.
New England Intermediate Term Tax Free Fund of New York seeks as high a
level of current income exempt from federal income tax and its state personal
income tax and New York City personal income tax as is consistent with
preservation of capital.
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REDEMPTIONS
- -------------------------------------------------------------------------------
The procedures for redemption of Fund shares are summarized in the
Prospectus following the caption "Selling Fund Shares." As described in the
Prospectus, under "Contingent Deferred Sales Charges," a CDSC may be imposed in
certain instances upon the redemption of Fund shares which were acquired through
an exchange of shares of the New England Funds. For purposes of the CDSC, an
exchange of shares from one Fund to another Fund is not considered a redemption
or purchase. Any applicable CDSC will be calculated in the manner described in
the relevant prospectus of the New England Funds and the related Statement of
Additional Information.
Except as noted below, signatures on redemption requests must be
guaranteed by an "Eligible Guarantor Institution" as defined in Rule 17Ad-15
under the Securities Exchange Act of 1934. Signature guarantees by notaries
public are not acceptable. However, as noted in the Prospectus, a signature
guarantee will not be required if the proceeds of the redemption do not exceed
$100,000 and the proceeds check is made payable to the registered owner(s) and
mailed to the record address.
In order to have redemption proceeds sent to your bank by telephone, you
either must select this service when completing the new account application or
must do so subsequently on the Service Options Form (with a signature
guarantee), available from New England Funds or your investment dealer. When
selecting the service, you must designate a bank account to which the redemption
proceeds should be sent. Any change in the bank account so designated may be
made by furnishing to New England Funds or your investment dealer a completed
Service Options Form with a signature guarantee. Telephone redemptions proceeds
may be wired to a bank account only if the designated bank is a member of the
Federal Reserve System or has a correspondent bank that is a member of the
System. If the account is with a savings bank, it must have only one
correspondent bank that is a member of the System. The Funds, the Distributor
and State Street Bank are not responsible for the authenticity of withdrawal
instructions received by telephone.
In order to redeem shares electronically through the ACH system, a
shareholder's bank or credit union must be a member of the ACH system and the
shareholder must have a completed, approved ACH application on file. In
addition, the telephone request must be received no later than 4:00 p.m.
(Eastern time). Upon receipt of the required information, the appropriate number
of shares will be redeemed and the monies forwarded to the bank designated on
the shareholder's application through the ACH system. The redemption will be
processed the day the telephone call is made and the monies generally will
arrive at the shareholder's bank within three business days. The availability of
these monies will depend on the individual bank's rules.
The redemption price will be the net asset value per share next
determined after the redemption request and any necessary special documentation
are received by New England Funds in proper form. Payment normally will be made
by State Street Bank on behalf of the Fund within seven days thereafter.
However, payment of the redemption proceeds may be delayed if the purchase of
shares was made by a check or an electronic funds transfer, which was deposited
or initiated, respectively, less than ten days prior to the redemption request
(unless the Fund is aware that the check or transfer has cleared).
The Funds will normally redeem shares for cash. However, each of the
Funds reserves the right to pay the redemption price wholly or partly in kind if
the Board of Trustees of the relevant Trust determines it to be
26
<PAGE>
advisable in the interest of the remaining shareholders. If portfolio securities
are distributed in lieu of cash, the shareholder may be unable to sell the
securities for the full value placed on them when held by the Fund and will
probably have to pay a "dealer spread" or other brokerage amounts in order to
liquidate such securities. However, each Trust has elected to be governed by
Rule 18f-1 under the 1940 Act pursuant to which each Fund is obligated to redeem
shares solely in cash for any shareholder during any 90-day period up to the
lesser of $250,000 or 1% of the total net asset value of the Fund at the
beginning of such period.
- -------------------------------------------------------------------------------
NET INCOME, DIVIDENDS AND VALUATION
- -------------------------------------------------------------------------------
Determination of Net Income
The net income of each Fund is determined as of the close of regular
trading on the New York Stock Exchange (the "Exchange") on each day that the
Exchange is open for trading. The Exchange is expected to be closed on the
following holidays: New Year's Day, Presidents' Day, Good Friday, Memorial Day,
Independence Day, Labor Day, Thanksgiving Day and Christmas Day. Net income
includes (i) all interest accrued and discount earned on the portfolio
investments of the Fund, minus (ii) amortized premium on such investments, plus
or minus (iii) all realized gains and losses on such investments, and minus (iv)
all expenses of the Fund.
Determination of Yield
Yield. Each Fund's yield, as it may appear in advertisements or written
sales material, represents the net change, exclusive of capital changes, in the
value of a hypothetical account having a balance of one share at the beginning
of the period for which yield is determined (the "base period"). Current yield
for the base period (for example, seven calendar days) is calculated by dividing
(i) the net change in the value of the account for the base period by (ii) the
number of days in the base period. The resulting number is then multiplied by
365 to determine the net income on an annualized basis. This amount is divided
by the value of the account as of the beginning of the base period, normally $1,
in order to state the current yield as a percentage. Yield may also be
calculated on a compound basis ("effective" or "compound" yield) which assumes
continual reinvestment throughout an entire year of net income earned at the
same rate as net income is earned by the account for the base period.
Each Fund's yield for the seven days ended June 30, 1996 and effective
yield based on such seven-day period were, respectively, 4.46% and 4.56% (Money
Market Fund), 4.03% and 4.11% (Government Fund) and 3.08% and 3.13% (Tax Exempt
Fund).
Taxable-Equivalent Yield. The Tax Exempt Fund may also advertise a
taxable-equivalent yield or taxable-equivalent effective yield, calculated as
described above, except that, for any given tax bracket, net investment income
will be calculated using as gross investment income an amount equal to the sum
of (i) any taxable income of the Fund plus (ii) the tax exempt income of the
Fund divided by the difference between 1 and the effective federal income tax
rate for taxpayers in that tax bracket.
Taxable-Equivalent Yield and Taxable-Equivalent
Effective Yield for the 7 day period ended 6/30/96
7 day yield: 3.08%
7 day effective: 3.13%
Federal Taxable-Equivalent Taxable-Equivalent
Tax Rate Yield Effective Yield
-------- ------------------ ------------------
15% 3.62% 3.68%
28% 4.28% 4.35%
31% 4.46% 4.54%
36% 4.81% 4.89%
39.6% 5.10% 5.18%
27
<PAGE>
- -------------------------------------------------------------------------------
TAX-FREE INVESTING
- -------------------------------------------------------------------------------
The table below compares taxable and tax-free yields, based on tax rates
for 1996:
<TABLE>
<CAPTION>
Federal
TAXABLE INCOME Marginal
-------------- Tax IF TAX EXEMPT YIELD IS
Joint Single Rate ----------------------
Return Return (1996) 2% 3% 4% 5% 6%
Then the Equivalent Taxable Yield Would Be
<S> <C> <C> <C> <C> <C> <C> <C>
$0 - $40,100 $0 - $24,000 15% 2.35% 3.53% 4.71% 5.88% 7.06%
$40,101 - $96,900 $24,001 - $58,150 28% 2.78% 4.17% 5.56% 6.94% 8.33%
$96,901 - $147,700 $58,151 - $121,300 31% 2.90% 4.35% 5.80% 7.25% 8.70%
$147,701 - $263,750 $121,301 - $263,750 36% 3.13% 4.69% 6.25% 7.81% 9.38%
over $263,751 over $263,751 39.6% 3.31% 4.97% 6.62% 8.28% 9.93%
</TABLE>
The table above does not take into account the effect of state and local
taxes, if any, or federal income taxes on social security benefits which may
arise as a result of receiving tax exempt income.
In General
Yield is calculated without regard to realized and unrealized gains and
losses. The yield of each Fund will vary depending on prevailing interest rates,
operating expenses and the quality, maturity and type of instruments held in the
portfolio of that Fund. Consequently, no yield quotation should be considered as
representative of what the yield of the applicable Fund may be for any future
period. The Funds' yields are not guaranteed.
Shareholders comparing Fund yield with that of alternative investments
(such as savings accounts, various types of bank deposits, and other money
market funds) should consider such things as liquidity, minimum balance
requirements, checkwriting privileges, the differences in the periods and
methods used in the calculation of the yields being compared, and the impact of
taxes on alternative types of investments.
Yield information may be useful in reviewing each Fund's performance and
providing a basis for comparison with other investment alternatives. However,
unlike bank deposits, traditional corporate or municipal bonds or other
investments which pay a fixed yield for a stated period of time, money market
and tax exempt money market fund yields fluctuate.
Daily Dividends
As described in the Prospectus, the net income of each Fund is declared
as a dividend, at the closing of regular trading on the Exchange each day that
the Exchange is open. Dividends will be paid in cash to the shareholder if the
shareholder has notified State Street Bank in writing of the election on or
before payable date. The net income for Saturdays, Sundays and other days on
which the Exchange is closed is declared as a dividend on the immediately
preceding business day. Although the Funds do not expect to realize any
long-term capital gains, if such gains are realized they will be distributed
once a year.
Valuation of the Funds' Portfolio Investments
The total net asset value of each Fund (the excess of the Fund's assets
over its liabilities) is determined by State Street Bank as of the close of
regular trading on the Exchange on each day the Exchange is open for trading.
(See "Determination of Net Income.") The portfolio securities of each Fund are
valued at their fair
28
<PAGE>
value as determined in good faith by the relevant Trust's Board of Trustees or
persons acting at their direction. Under normal market conditions, portfolio
securities will be valued at amortized cost as described below. Expenses of each
Fund are paid or accrued each day.
Under the amortized cost method of valuation, securities are valued at
cost on the date of purchase. Thereafter, the value of securities purchased at a
discount or premium is increased or decreased incrementally each day so that at
maturity the purchase discount or premium is fully amortized and the value of
the security is equal to its principal amount. Due to fluctuations in interest
rates, the amortized cost value of the securities of a Fund may at times be more
or less than their market value.
By using amortized cost valuation, the Funds seek to maintain a
constant net asset value of $1.00 per share despite minor shifts in the market
value of their portfolio securities. The yield on a shareholder's investment may
be more or less than that which would be recognized if the net asset value per
share were not constant and were permitted to fluctuate with the market value of
the portfolio securities of each Fund. However, as a result of the following
procedures, it is believed that any difference will normally be minimal. The
trustees monitor quarterly the deviation between the net asset value per share
of each Fund as determined by using available market quotations and its
amortized cost price per share. Back Bay Advisors(R) makes such comparisons at
least weekly and will advise the trustees promptly in the event of any
significant deviation. If the deviation exceeds 1/2 of 1% for any Fund, the
relevant Board of Trustees will consider what action, if any, should be
initiated to provide fair valuation of the portfolio securities of that Fund and
prevent material dilution or other unfair results to shareholders. Such action
may include redemption of shares in kind; selling portfolio securities prior to
maturity; withholding dividends; or using a net asset value per share as
determined by using available market quotations. There is no assurance that each
Fund will be able to maintain its net asset value at $1.00.
- -------------------------------------------------------------------------------
TAXES
- -------------------------------------------------------------------------------
In General
The tax status of the Funds and the distributions that each Fund may
make are summarized in the text of the Prospectus titled "Income Tax
Considerations." Each Fund intends to qualify as a regulated investment company
under the Code. This means that the Fund is not subject to federal income tax on
net income and net realized capital gains distributed to shareholders provided
it distributes annually substantially all its net investment income and net
realized short-term capital gains.
To avoid certain excise taxes, each Fund must distribute by December 31
each year virtually all of its ordinary income realized in that year, and any
previously undistributed capital gains it realized in the twelve months ended on
October 31 of that year. Certain dividends declared by a Fund in December but
not actually received by you until January will be treated for federal tax
purposes as though you had received them in December.
Money Market Fund and Government Fund
It is not expected that either Fund will realize any long-term capital
gains. However, to the extent that distributions of any net realized long-term
capital gains are made to shareholders of either Fund, such gains are taxable to
such shareholders as long-term capital gains, whether received in cash or
additional shares and regardless of how long shareholders have held their
shares. Such distributions are not eligible for the dividends received deduction
for corporations.
The Money Market Fund and the Government Fund are treated as separate
entities for federal income tax purposes.
Tax Exempt Fund
The Fund intends to have at least 50% of its total assets invested in
Municipal Securities at the close of each quarter of its taxable year so that
dividends paid by the Fund which are derived from interest on Municipal
29
<PAGE>
Securities will be "exempt-interest dividends" within the meaning of the Code.
Exempt-interest dividends may be treated by shareholders as interest excludable
from gross income under Section 103(a) of the Code. Dividends derived from
income which is not exempt from federal income tax, including interest earned on
investments in taxable money market securities or in repurchase agreements and
any net short-term capital gains realized by the Fund, will be taxable to
shareholders as ordinary income whether received in cash or additional shares.
See the Prospectus for information concerning the federal income tax treatment
of interest on "private activity bonds" and certain other limitations on the
tax-exempt status of interest on Municipal Securities.
Net long-term capital gain distributions, if any, will be taxable to
shareholders as long-term capital gains, regardless of the length of time the
shareholder has held shares of the Fund.
None of the Funds' dividends or distributions are expected to be
eligible for the dividends-received deduction available to corporations.
Under the Code, investors may not deduct interest on indebtedness
incurred or continued to purchase or carry shares of an investment company
paying exempt-interest dividends, such as the Fund. (See Section 265(4) of the
Code.) Further, entities or persons who are "substantial users" (or persons
related to "substantial users") of facilities financed by industrial development
bonds (see Appendix A-2) should consult their tax advisers before purchasing
shares of the Fund.
Shareholders are advised to consult their own tax advisers for more
detailed information concerning the federal income taxation of the Fund and the
income tax consequences to its shareholders.
All Funds
The foregoing relates only to federal income taxation of individuals and
corporations. Prospective shareholders should consult their tax advisers as to
the possible application of state and local income tax laws to Fund dividends
and capital gain distributions and the tax consequences of retirement plans
offering tax benefits. Information regarding the tax status of distributions
made by the Funds will be sent to shareholders shortly after the end of each
calendar year.
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FINANCIAL STATEMENTS
- -------------------------------------------------------------------------------
The Financial Statements of each of the Funds and the related reports
of the independent accountants included in the annual reports of the Funds for
the year ended June 30, 1996, are incorporated herein by reference.
30
<PAGE>
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APPENDIX A
- -------------------------------------------------------------------------------
DESCRIPTION OF CERTAIN NEW ENGLAND CASH MANAGEMENT TRUST INVESTMENTS:
Obligations Backed by Full Faith and Credit of the U.S. Government(1) --
are bills, certificates of indebtedness, notes and bonds issued by (i) the U.S.
Treasury or (ii) agencies, authorities and instrumentalities of the U.S.
Government or other entities and backed by the full faith and credit of the U.S.
Government. Such obligations include, but are not limited to, obligations issued
by the Government National Mortgage Association, the Farmers' Home
Administration and the Small Business Administration.
Other U.S. Government Obligations -- are bills, certificates of
indebtedness, notes and bonds issued by agencies, authorities and
instrumentalities of the U.S. Government which are supported by the right of the
issuer to borrow from the U.S. Treasury or by the credit of the agency,
authority or instrumentality itself. Such obligations include, but are not
limited to, obligations issued by the Tennessee Valley Authority, the Bank for
Cooperatives, Federal Home Loan Banks, Federal Intermediate Credit Banks,
Federal Land Banks and the Federal National Mortgage Association.
Repurchase Agreements -- are agreements by which the Fund purchases a
security (usually a U.S. Government Obligation) and obtains a simultaneous
commitment from the seller (a member bank of the Federal Reserve System or, to
the extent permitted by the 1940 Act, a recognized securities dealer) to
repurchase the security at an agreed upon price and date. The resale price is in
excess of the purchase price and reflects an agreed upon market rate unrelated
to the coupon rate on the purchased security. Such transactions afford an
opportunity for the Fund to earn a return on temporarily available cash at
minimal market risk, although the Fund may be subject to various delays and
risks of loss if the seller is unable to meet its obligation to repurchase.
Certificate of Deposit -- are certificates issued against funds
deposited in a bank, are for a definite period of time, earn a specified rate of
return and are normally negotiable.
Bankers' Acceptances -- are short-term credit instruments used to
finance the import, export, transfer or storage of goods. They are termed
"accepted" when a bank guarantees their payment at maturity
Yankeedollar Obligations -- obligations of U.S. branches of foreign
banks.
Eurodollar Obligations -- dollar-denominated obligations of foreign
banks (including U.S. and London branches of foreign banks) and foreign branches
of U.S. banks.
Commercial Paper -- refers to promissory notes issued by corporations in
order to finance their short-term credit needs. (See Appendix C.)
Corporate Obligations -- include bonds and notes issued by corporations
in order to finance longer-term credit needs. (See Appendix C.)
- -------------
(1) These obligations, together with related repurchase agreements, are the only
obligations that may be purchased by the U.S. Government Series.
A-1
<PAGE>
- -------------------------------------------------------------------------------
APPENDIX B
- -------------------------------------------------------------------------------
DESCRIPTION OF CERTAIN NEW ENGLAND TAX-EXEMPT MONEY MARKET TRUST INVESTMENTS
The three principal classifications of Municipal Securities are "Notes,"
"Bonds" and "Commercial Paper."
Municipal Notes. Municipal Notes are generally issued to finance short-
term capital needs and generally have maturities of one year or less. Municipal
Notes include:
1. Project Notes. Project Notes are issued by public bodies (called "local
issuing agencies") created under the laws of a state, territory or U.S.
possession. They have maturities that range up to one year from the date of
issuance. These Notes provide financing for a wide range of financial assistance
programs for housing, redevelopment and related needs (such as low-income
housing programs and urban renewal programs). While they are the primary
obligations of the local public housing agencies or the local urban renewal
agencies, they are also backed by the full faith and credit of the U.S.
Government. Accordingly, investment restriction (1) of New England Tax Exempt
Money Market Trust is not applicable to Project Notes. See "Investment
Restrictions."
2. Tax Anticipation Notes. Tax Anticipation Notes are issued to finance working
capital needs of states, counties, municipalities and other public bodies which
have the legal power to tax. Generally, they are issued in anticipation of
various seasonal tax revenues, such as real and personal property, income,
sales, use and business taxes, and are payable from some or all of these
specific future taxes.
3. Revenue Anticipation Notes. Revenue Anticipation Notes are issued to provide
interim financing in expectation of receipt of various types of non-tax revenue,
such as revenues available to the issuer under various federal revenue sharing
programs. In some cases, Revenue Anticipation Notes may be payable additionally
from tax revenues.
4. Bond Anticipation Notes. Bond Anticipation Notes are issued to provide
interim financing until long-term financing can be arranged. In most cases, the
long-term bonds, when sold and issued, then provide the money for repayment of
the Notes.
5. Construction Loan Notes. Construction Loan Notes are sold to provide
construction financing. After successful completion and acceptance, many
projects receive permanent financing through the Federal Housing Administration
under "Fannie Mae" (the Federal National Mortgage Association) or "Ginnie Mae"
(the Government National Mortgage Association) programs.
Municipal Bonds. Municipal Bonds, which meet longer-term capital needs
and generally have maturities of more than one year when issued, have two
principal classifications: General Obligation Bonds and Limited Obligation or
Revenue Bonds. One type of Municipal Revenue Bonds is referred to as Industrial
Development Bonds. These three are discussed below.
1. General Obligation Bonds. Issuers of General Obligation Bonds include states,
counties, cities, towns and regional districts. The proceeds of these
obligations are used to fund a wide range of public projects, including
construction or improvement of schools, highways and roads, and water and sewer
systems. The basic security behind General Obligation Bonds is the issuer's
pledge of its full faith and credit and taxing power for the payment of
principal and interest. General Obligation Bonds are not payable from any
particular fund or source. The characteristics and method of enforcement of
General Obligation Bonds vary according to the law applicable to the particular
issuer and payment may be dependent upon an appropriation by the issuer's
legislative body. The taxes that can be levied for the payment of debt service
may be limited or unlimited as to rate or amount. Such bonds may be additionally
secured by special assessments.
B-1
<PAGE>
2. Limited Obligation or Revenue Bonds. The principal source for repayment of a
Revenue Bond is generally the net revenues derived from a particular facility or
group of facilities or, in some cases, the proceeds of a special excise or other
specific revenue source. Revenue Bonds have been or may be issued to finance a
wide variety of capital projects including: electric, gas, water and sewer
systems; highways, bridges and tunnels; port facilities; colleges and
universities; and hospitals. Although the principal security behind these bonds
may vary, many provide additional security in the form of a debt service reserve
fund whose money may be used to make principal and interest payments on the
issuer's obligations. Housing finance authorities have a wide range of security,
including partially or fully insured mortgages, rent subsidies and/or
collateralized mortgages, and/or the net revenues from housing or other public
projects. Some authorities provide further security in the form of a state's
ability (without obligation) to make up deficiencies in the debt service reserve
fund.
3. Industrial Development Bonds. Prior to the Tax Reform Act of 1986, certain
debt obligations known as Industrial Development Bonds could be issued by or on
behalf of public authorities to raise money to finance various
privately-operated facilities for business and manufacturing, housing, sports
and pollution control; such obligations are included within the term Municipal
Bonds if the interest paid thereon is, in the opinion of bond counsel, exempt
from federal income tax. These bonds also have been or may be used to finance
public facilities, which may be privately used and operated, such as airports,
mass transit systems, ports and parking. The payment of the principal and
interest on such bonds is dependent solely on the ability of the facility's user
to meet its financial obligations and the pledge, if any, of real or personal
property so financed as security for such payment. The Tax Reform Act of 1986
eliminated some types of industrial revenue bonds but retained others under the
general category of "private activity bonds."
Tax-Exempt Commercial Paper. Tax-Exempt Commercial Paper is a short-
term obligation with a stated maturity of 365 days or less. It is issued by
agencies of state and local governments to finance seasonal working capital
needs or as short-term financing in anticipation of longer term financing.
Tax-Exempt Commercial Paper is often renewed or refunded at its maturity by the
issuance of other short or long-term obligations.
Other Types of Municipal Securities. The foregoing described types of
Municipal Securities which are presently available. New England Tax Exempt
Money Market Trust may, to the extent consistent with its investment objective,
policies and restrictions, invest in other types of Municipal Securities as
they become available in the future.
B-2
<PAGE>
- -------------------------------------------------------------------------------
APPENDIX C
- -------------------------------------------------------------------------------
RATINGS OF CORPORATE AND MUNICIPAL BONDS, COMMERCIAL PAPER AND
SHORT-TERM TAX-EXEMPT OBLIGATIONS
Set forth below are descriptions of the highest ratings of Moody's Investors
Service, Inc. ("Moody's") and Standard & Poor's Ratings Group ("S&P") for
corporate and muhicipal bonds, commercial paper and short-term tax-exempt
obligations. Ratings for commercial paper have been included since certain of
the obligations which the Funds are authorized to purchase have characteristics
of commercial paper and have been rated as such by Moody's and S&P.
MOODY'S RATINGS
Corporate and Municipal Bonds
Aaa -- Bonds which are rated Aaa are judged to be of the best quality. They
carry the smallest degree of investment risk and are generally referred to as
"gilt edge." Interest payments are protected by a large or by an exceptionally
stable margin and principal is secure. While the various protective elements are
likely to change, such changes as can be visualized are most unlikely to impair
the fundamentally strong position of such issues.
Aa -- Bonds which are rated Aa are judged to be high quality by all standards.
Together with the Aaa group they comprise what are generally known as high grade
bonds. They are rated lower than the best Bonds because margins of protection
may not be as large as in Aaa securities or fluctuation of protective elements
may be of greater amplitude or there may be other elements present which make
the long-term risks appear somewhat larger than in Aaa securities.
Short-Term Municipal Notes
The two highest ratings of Moody's for short-term municipal notes are MIG-1 and
MIG-2: MIG-1 denotes "best quality, enjoying strong protection from established
cash flows;" MIG-2 denotes "high quality," with margins of protection ample
although not so large as in the preceding group.
Commercial Paper
The rating P-1 is the highest commercial paper rating assigned by
Moody's. Among the factors considered by Moody's in assigning ratings are the
following: (1) evaluation of the management of the issuer; (2) economic
evaluation of the issuer's industry or industries and an appraisal of
speculative-type risks which may be inherent in certain areas; (3) evaluation of
the issuer's products in relation to competition and customer acceptance; (4)
liquidity; (5) amount and quality of long-term debt; (6) trend of earnings over
a period of ten years; (7) financial strength of a parent company and the
relationships which exist with the issuer; and (8) recognition by the management
of obligations which may be present or may arise as a result of public interest
questions and preparations to meet such obligations.
Issuers rated Prime-1 are judged to be of the best quality. Their short-term
debt obliations carry the smallest degree of investment risk. Margins of support
for current indebtedness are large or stable with cash flow and asset protection
well assured. Current liquidity provides ample coverage of near-term liabilities
and unused alternative financing arrangements are generally available. While
protective elements may change over the intermediate or long term, such changes
are most unlikely to impair the fundamentally strong position of short-term
obligations.
C-1
<PAGE>
S&P RATINGS
Corporate and Municipal Bonds
AAA -- This is the highest rating assigned by S&P to a debt obligation and
indicates an extremely strong capacity to pay principal and interest.
AA -- Bonds rated AA also qualify as high quality debt obligations. Capacity to
pay principal and interest is very strong, and in the majority of instances they
differ from AAA issues only in small degree.
Short-Term Municipal Notes
S&P does not rate short-term municipal notes as such.
Commercial Paper
Commercial paper rated A-1 by S&P has the following characteristics: Liquidity
ratios are adequate to meet cash requirements. Long-term senior debt is rated
"A" or better. The issuer has access to at least two additional channels of
borrowing. Basic earnings and cash flow have an upward trend with allowance made
for unusual circumstances. Typically, the issuer's industry is well established
and the issuer has a strong position within the industry. The reliability and
quality of management are unquestioned. Commercial paper within the A-1 category
which has overwhelming safety characteristics is denoted "A-1+."
C-2
<PAGE>
- -------------------------------------------------------------------------------
APPENDIX D
- -------------------------------------------------------------------------------
PUBLICATIONS THAT MAY BE REFERRED TO IN FUND ADVERTISEMENTS OR
SALES LITERATURE
ABC and affiliates Fitch Insights
Adam Smith's Money World Forbes
America On Line Fort Worth Star-Telegram
Anchorage Daily News Fortune
Atlanta Constitution Fox Network and affiliates
Atlanta Journal Fund Action
Arizona Republic Fund Decoder
Austin American Statesman Global Finance
Baltimore Sun (the) Guarantor
Bank Investment Marketing Hartford Courant
Barron's Houston Chronicle
Bergen County Record (NJ) INC
Bloomberg Business News Indianapolis Star
B'nai B'rith Jewish Monthly Individual Investor
Bond Buyer Institutional Investor
Boston Business Journal International Herald Tribune
Boston Globe Internet
Boston Herald Investment Advisor
Broker World Investment Company Institute
Business Radio Network Investment Dealers Digest
Business Week Investment Profiles
CBS and affiliates Investment Vision
CFO Investor's Daily
Changing Times IRA Reporter
Chicago Sun Times Journal of Commerce
Chicago Tribune Kansas City Star
Christian Science Monitor KCMO (Kansas City)
Christian Science Monitor News Service KOA-AM (Denver)
Cincinnati Enquirer Los Angeles Times
Cincinnati Post Leckey, Andrew (syndicated column)
CNBC Lear's
CNN Life Association News
Columbus Dispatch Lifetime Channel
CompuServe Miami Herald
Dallas Morning News Milwaukee Sentinel
Dallas Times-Herald Money
Denver Post Money Maker
Des Moines Register Money Management Letter
Detroit Free Press Morningstar
Donoghues Money Fund Report Mutual Fund Market News
Dorfman, Dan (syndicated column) Mutual Funds Magazine
Dow Jones News Service National Public Radio
Economist National Underwriter
FACS of the Week NBC and affiliates
Financial News Network New England Business
Financial Planning New England Cable News
Financial Planning on Wall Street New Orleans Times-Picayune
Financial Research Corp. New York Daily News
Financial Services Week New York Times
Financial World Newark Star Ledger
D-1
<PAGE>
Newsday
Newsweek
Nightly Business Report
Orange County Register
Orlando Sentinel
Palm Beach Post
Pension World
Pensions and Investments
Personal Investor
Philadelphia Inquirer
Porter, Sylvia (syndicated column)
Portland Oregonian
Prodigy
Public Broadcasting Service
Quinn, Jane Bryant (syndicated column)
Registered Representative
Research Magazine
Resource
Reuters
Rocky Mountain News
Rukeyser's Business (syndicated column)
Sacramento Bee
San Diego Tribune
San Francisco Chronicle
San Francisco Examiner
San Jose Mercury
Seattle Post-Intelligencer
Seattle Times
Securities Industry Management
Smart Money
St. Louis Post Dispatch
St. Petersburg Times
Standard & Poor's Outlook
Standard & Poor's Stock Guide
Stanger's Investment Advisor
Stockbroker's Register
Strategic Insight
Tampa Tribune
Time
Tobias, Andrew (syndicated column)
Toledo Blade
UPI
US News and World Report
USA Today
USA TV Network
Value Line
Wall St. Journal
Wall Street Letter
Wall Street Week
Washington Post
WBZ
WBZ-TV
WCVB-TV
WEEI
WHDH
Worcester Telegram
World Wide Web
Worth Magazine
WRKO
D-2
<PAGE>
- -------------------------------------------------------------------------------
APPENDIX E
- -------------------------------------------------------------------------------
CERTAIN INFORMATION THAT MAY BE INCLUDED IN ADVERTISING AND
PROMOTIONAL LITERATURE
References may be included in New England Funds' advertising and
promotional literature to NEIC and its affiliates that perform advisory or
subadvisory functions for New England Funds including, but not limited to: New
England Funds Management, L.P., Back Bay Advisors(R), Loomis, Sayles & Company,
L.P., Capital Growth Management Limited Partnership, Draycott Partners, Ltd. and
Westpeak Investment Advisors, L.P.
References may be included in New England Funds' advertising and
promotional literature to NEIC affiliates that do not perform advisory or
subadvisory functions for the Funds including, but not limited to, New England
Investment Associates, L.P., Copley Real Estate Advisors, L.P., Marlborough
Capital Advisors, L.P., Reich & Tang Capital Management and Reich & Tang Mutual
Funds Group.
References to subadvisers unaffiliated with NEIC that perform
subadvisory functions on behalf of New England Funds may be contained in New
England Funds' advertising and promotional literature including, but not limited
to, Berger Associates, Inc., Janus Capital Corporation, Founders Asset
Management, Inc. and Montgomery Asset Management, L.P.
New England Funds' advertising and promotional material may include, but
is not limited to, discussions of the following information about the above
entities:
(box) Specific and general investment emphasis, specialties, competencies,
operations and functions
(box) Specific and general investment philosophies, strategies, processes
and techniques
(box) Specific and general sources of information, economic models,
forecasts and data services utilized, consulted or considered in the
course of providing advisory or other services
(box) The corporate histories, founding dates and names of founders of the
entities
(box) Awards, honors and recognition given to the firms
(box) The names of those with ownership interest and the percentage of
ownership
(box) Current capitalization, levels of profitability and other financial
information
(box) Identification of portfolio managers, researchers, economists,
principals and other staff members and employees
(box) The specific credentials of the above individuals, including but not
limited to, previous employment, current and past positions, titles
and duties performed, industry experience, educational background and
degrees, awards and honors
(box) Specific identification of, and general reference to, current
individual, corporate and institutional clients, including pension and
profit sharing plans
(box) Current and historical statistics about:
-total dollar amount of assets managed
-New England Funds' assets managed in total and by fund
-the growth of assets
E-1
<PAGE>
-asset types managed
-numbers of principal parties and employees, and the length of their
tenure, including officers, portfolio managers, researchers,
economists, technicians and support staff
-the above individuals' total and average number of years of industry
experience and the total and average length of their service to the
adviser or the subadviser
In addition, communications and materials developed by New England Funds
may make reference to the following information about NEIC and its affiliates:
NEIC is the fifth largest publicly traded money manager in the U.S.
listed on the New York Stock Exchange. NEIC maintains over $87 billion in assets
under management. Clients serviced by NEIC and its affiliates, besides New
England Funds, include wealthy individuals, major corporations and large
institutions.
Back Bay Advisors(R) employs a conservative style of management
emphasizing short and intermediate term securities to reduce volatility, adds
value through careful, continuous credit analysis and has expertise in
government, corporate and tax-free municipal bonds and equity securities. Among
its clients are Boston City Retirement System, Public Service Electric & Gas of
New Jersey, Petrolite Corp. and General Mills.
Capital Growth Management Limited Partnership seeks to deliver
exceptional growth for its clients through the selection of stocks with the
potential to outperform the market and grow at a faster rate than the U.S.
economy. Among its approaches are pursuit of growth 50% above the Standard &
Poor's Index of 500 Common Stocks, prompt responses to changes in the market or
economy and aggressive, highly concentrated portfolios.
Loomis, Sayles & Company, L.P. is one of the oldest and largest
investment firms in the U.S. and has provided investment counseling to
individuals and institutions since 1926. Characteristic of Loomis, Sayles &
Company, L.P. is that it has one of the largest staffs of research analysts in
the industry, practices strict buy and sell disciplines and focuses on sound
value in stock and bond selection. Among its clients are large corporations such
as Chrysler, Mobil Oil and Revlon.
Westpeak Investment Advisors, L.P. ("Westpeak") employs proprietary
research and a disciplined stock selection process that seeks rigorously to
control unnecessary risk. Its investment process is designed to evaluate when
value and growth styles - two primary approaches to stock investing - hold
potential for reward. Over seventy fundamental attributes are continuously
analyzed by Westpeak's experienced analysts and sophisticated computer systems.
The results are assessed against Wall Street's consensus thinking, in pursuit of
returns in excess of appropriate benchmarks. The value/growth strategy is a
unique blend of investment styles, seeking opportunities for increased return
with reduced risk. Among the keys to Westpeak's investment process are
continuous review of timely, accurate data on over 3600 companies, analysis of
dozens of factors for excess return potential and identification of overvalued
and undervalued stocks.
Harris Associates L.P. is a Chicago-based investment management company
with more than $9.5 billion in assets under management, including the $5.4
billion Oakmark Fund Group and $4.1 billion in multi-manager partnerships,
individual accounts and institutional assets. Harris Associates L.P.'s
investment philosophy is predicated on the belief that over time market price
and value converge and that investment in securities prices significantly below
long-term value presents the best opportunity to achieve long-term growth of
capital.
On June 30, 1995, NEIC purchased the assets of Graystone Partners, L.P.
("Graystone"), a Chicago-based consulting firm focusing exclusively on working
with the wealthiest families in the country. Founded in 1993, Graystone
specializes in assisting high net worth families in developing asset allocation
strategies, identifying appropriate portfolio managers and the monitoring of
investment performance.
References may be included in New England Funds' advertising and
promotional literature about its 401(k) and retirement plans. The information
may include, but is not limited to:
E-2
<PAGE>
(box) Specific and general references to industry statistics regarding 401(k)
and retirement plans including historical information and industry
trends and forecasts regarding the growth of assets, numbers of plans,
funding vehicles, participants, sponsors and other demographic data
relating to plans, participants and sponsors, third party and other
administrators, benefits consultants and firms including, but not
limited to, DC Xchange, William Mercer and other organizations
involved in 401(k) and retirement programs with which New England
Funds may or may not have a relationship.
(box) Specific and general reference to comparative ratings, rankings and
other forms of evaluation as well as statistics regarding the New
England Funds as a 401(k) or retirement plan funding vehicle produced
by, including, but not limited to, Access Research, Dalbar, Investment
Company Institute and other industry authorities, research
organizations and publications.
(box) Specific and general discussion of economic, legislative and other
environmental factors affecting 401(k) and retirement plans, including
but not limited to, statistics, detailed explanations or broad
summaries of:
-past, present and prospective tax legislation and IRS requirements and
rules, including, but not limited to, reporting standards, minimum
distribution notices, Forms 5500, Form 1099R and other relevant forms
and documents, Department of Labor rules and standards and other
regulations. This includes past, current and future initiatives,
interpretive releases and positions of regulatory authorities about
the past, current or future eligibility, availability, operations,
administration, structure, features, provisions or benefits of 401(k)
and other retirement plans
-information about the history, status and future trends of Social
Security and similar government benefit programs including, but not
limited to, eligibility and participation, availability, operations
and administration, structure and design, features, provisions,
benefits and costs
-current and prospective ERISA regulations and requirements.
(box) Specific and general discussion of the benefits of 401(k) investment
and retirement plans, and, in particular, the New England Funds 401(k)
and retirement plans, to the participant and plan sponsor, including
explanations, statistics and other data about:
-increased employee retention
-reinforcement or creation of morale
-deductibility of contributions for participants
-deductibility of expenses for employers
-tax deferred growth, including illustrations and charts
-loan features and exchanges among accounts
-educational services, materials and efforts, including, but not
limited to, videos, slides, presentation materials, brochures, an
investment calculator, payroll stuffers, quarterly publications,
releases and information on a periodic basis and the availability of
wholesalers and other personnel.
(box) Specific and general reference to the benefits of investing in mutual
funds for 401(k) and retirement plans, and, in particular, New England
Funds and its 401(k) and retirement plan offerings, including but not
limited to:
-the significant economies of scale experienced by mutual fund
companies in the 401(k) and retirement benefits arena
-broad choice of investment options and competitive fees
-plan sponsor and participant statements and notices
E-3
<PAGE>
-the plan prototype, summary descriptions and board resolutions
-plan design and customized proposals
-trusteeship, record keeping and administration
-the services of State Street Bank, including but not limited to,
trustee services and tax reporting
-the services of DST Systems, Inc. and BFDS, including but not limited
to mutual fund processing support, participant 800 numbers and
participant 401(k) statements
-the services of Trust Consultants Inc., including but not limited to,
sales support, plan record keeping, document service support, plan
sponsor support, compliance testing and Form 5500 preparation.
(box) Specific and general reference to the role of the investment dealer
and the benefits and features of working with a financial professional
including:
-access to expertise on investments
-assistance in interpreting past, present and future market trends
and economic events
-providing information to clients, including participants, during
enrollment and on an ongoing basis after enrollment
-promoting and understanding the benefits of investing, including
mutual fund diversification and professional management.
E-4
<PAGE>
NEW ENGLAND CASH MANAGEMENT TRUST
Part C. OTHER INFORMATION
Item 24. Financial Statements and Exhibits
(a) Financial Highlights for each series of the Registrant are included in
the prospectus filed as Part A hereof. The following financial
statements are incorporated in Part II of the statement of additional
information included in Part B hereof by reference to the annual report
to shareholders of the series of the Registrant listed below for the
fiscal year ended June 30, 1996, which was filed with the Commission on
August 19, 1996.
(1) Money Market Series
(i) Portfolio Composition
(ii) Statement of Assets & Liabilities
(iii) Statement of Operations
(iv) Statement of Changes in Net Assets
(v) Per Share Data and Ratios
(2) U.S. Government Series
(i) Portfolio Composition
(ii) Statement of Assets & Liabilities
r (iii) Statement of Operations
(iv) Statement of Changes in Net Assets
(v) Per Share Data and Ratios
(b) Exhibits
1. Fourth Amended and Restated Agreement and Declaration of Trust and
Amendments Nos. 1 and 2 thereto are incorporated herein by reference
to Post-Effective Amendment No. 29 to the Registrant's Registration
Statement on Form N-1A (File No. 2-68348), filed on August 31, 1994.
2. Amended By-Laws are incorporated herein by reference to
Post-Effective Amendment No. 30 to the Registrant's Registration
Statement on Form N1-A (File No. 2-68348), filed on September 1,
1995.
3. None.
4. Not applicable.
5. (a) Advisory Agreement between Registrant, with respect to its Money
Market Series, and New England Funds Management, L.P. ("NEFM") dated
January 2, 1996 is filed herewith.
(b) Advisory Agreement between Registrant, with respect to its U.S.
Government Series, and NEFM dated January 2, 1996 is filed herewith.
(c) Subadvisory Agreement, relating to the Money Market Series of
the Registrant, between NEFM and Back Bay Advisors, L.P. dated
January 2, 1996 is filed herewith.
(d) Subadvisory Agreement, relating to the U.S. Government Series
of the Registrant, between NEFM and Back Bay Advisors, L.P. is
filed herewith.
1
<PAGE>
6. Form of Distribution Agreement between the Registrant, on behalf of
its series, and New England Funds, L.P. is incorporated herein by
reference to Post-Effective Amendment No. 24 to the Registrant's
Registration Statement on Form N-1A (File No. 2-68348), filed on
July 1, 1991.
7. None.
8. (a) Custodian Agreement is incorporated herein by reference to the
Registrant's Registration Statement on Form S-14 (File No. 2-68348),
filed on July 1, 1980.
(b) Letter of Amendment to Custodian Agreement is incorporated
herein by reference to Post-Effective Amendment No. 6 to the
Registrant's Registration Statement on Form N-1A (File No.
2-68348), filed on April 1, 1982.
9. (a) Agency Agreement is incorporated herein by reference to the
Registrant's Registration Statement on Form S-14 (File No. 2-68348),
filed on July 1, 1980.
(b) Amendment to Agency Agreement dated January 2, 1981, is
incorporated herein by reference to Post-Effective Amendment No. 5
to the Registrant's Registration Statement on Form N-1 (File No.
2-68348), filed on August 27, 1981.
(c) Letter of Amendment to Agency Agreement is incorporated herein
by reference to Post-Effective Amendment No. 6 to the Registrant's
Registration Statement on Form N-1 (File No. 2-68348), filed on
April 1, 1982.
(d) Powers of attorney designating Edward A. Benjamin, Frank Nesvet,
Henry L.P. Schmelzer and Robert P. Connolly as attorneys to sign for
Daniel M. Cain and Richard Darman are filed herewith.
10. Opinion and consent of counsel is filed herewith.
11. Consent of Price Waterhouse LLP is filed herewith.
12. None.
13. Not applicable.
14. The following are filed herewith: (i) New England Funds, L.P. Tax
Sheltered Custodial Account Agreement; (ii) New England Funds, L.P.
Keogh Plan; (iii) New England Funds, Simplified Employee Pension
Plan; (iv) New England Funds, L.P. Individual Retirement Account
Prototype; and (v) New England Funds, L.P. 401(k) Plan Prototype.
15. Not applicable.
16. Schedule for calculation of performance data is incorporated herein
by reference to Post-Effective Amendment No. 21 to the Registrant's
Registration Statement on Form N-1A (File No. 2-68348), filed on
August 19, 1988.
17. Financial Data Schedules are filed herewith.
Item 25. Persons Controlled by or Under Common Control with Registrant
None.
2
<PAGE>
Item 26. Number of Holders of Securities
The following table sets forth the number of record holders of each
class of securities of the Registrant as of June 30, 1996:
<TABLE>
<CAPTION>
(1) (2)
Title of Class Number of Record Holders
New England Cash Management Trust
Class A Class B
------ ------
<S> <C> <C> <C>
Shares of beneficial interest, no par value (a) Money Market Series 59,879 1,245
(b) U.S. Gov't Series 2,655 102
</TABLE>
Item 27. Indemnification
See Post-Effective Amendment No. 17 to the Registrant's Registration
Statement on Form N-1A (File No. 2-68348), filed on July 3, 1986,
which is incorporated herein by reference.
Item 28: Business and Other Connections of Investment Adviser
(a) Back Bay Advisors, L.P. ("Back Bay Advisors"), which serves as
subadviser to each series of the Registrant, is a registered
investment adviser that is wholly-owned by New England Investment
Companies, L.P. ("NEIC"), a New York Stock Exchange listed company.
Back Bay Advisors serves as investment adviser to a number of other
registered investment companies.
Back Bay Advisors' general partner and officers have been engaged
during the past two fiscal years in the following businesses,
professions, vocations or employments of a substantial nature
(former affiliations are marked with an asterisk):
<TABLE>
<CAPTION>
Name and Office with Name and Address of Nature of
Back Bay Advisors Other Affiliations Connection
-------------------- ------------------- ----------
<S> <C> <C>
Back Bay Advisors, Inc. None General Partner
Charles T. Wallis, NEF Corporation Director
President and Chief 399 Boylston Street
Executive Officer Boston, MA 02116
Back Bay Advisors, Inc. President, CEO and
399 Boylston Street Director
Boston, MA 02116
Edgar M. Reed, Executive Aetna Capital Management* Head of Fixed Income
Vice President and Chief 151 Farmington Avenue Management Group
Investment Officer Hartford, CT 06156
Scott A. Millimet, Back Bay Advisors, Inc. Executive Vice President
Executive Vice President 399 Boylston Street
Boston, MA 02116
3
<PAGE>
Name and Office with Name and Address of Nature of
Back Bay Advisors Other Affiliations Connection
-------------------- ------------------- ----------
Kimberly J. Forsyth, Senior Legg Mason, Incorporated* Senior Vice President and
Vice President 7 East Redwood Street Director of Tax-Exempt
Baltimore, MD 21202 Credit Research
Via International City/County Independent Consultant to
Management Association* Bulgaria
777 North Capitol Street, NE
Washington, DC 20002
Charles G. Glueck, Senior None None
Vice President
Catherine Bunting, Senior None None
Vice President
J. Scott Nicholson, Senior None None
Vice President
Eric Gutterson, Vice None None
President
Harold B. Bjornson, Vice None None
President
Peter Palfrey, Vice None None
President
Nathan R. Wentworth, Vice None None
President
Paul Zamagni, Vice None
President and Treasurer
</TABLE>
(b) New England Funds Management, L.P., a registered investment
adviser that is wholly-owned by NEIC, serves as investment adviser
to each of the series of the Registrant. NEFM, organized in 1995,
also serves as investment adviser to most of the series of New
England Funds Trust I, all of the series of New England Funds Trust
II, New England Tax Exempt Money Market Trust and New England Equity
Income Fund. NEFM's general partner, directors and officers have
been engaged during the past two fiscal years in the following
businesses, professions, vocations or employments of a substantial
nature (former affiliations are marked with an asterisk):
4
<PAGE>
<TABLE>
<CAPTION>
Name and Office with Name and Address of Nature of
NEFM Other Affiliations Connection
---- ------------------- ----------
<S> <C> <C>
NEF Corporation New England Funds, L.P. General Partner
General Partner 399 Boylston Street
Boston, MA 02116
Henry L.P. Schmelzer, New England Funds, L.P. President and Chief
President and Chief Executive Officer
Executive Officer
NEF Corporation President, Chief
Executive Officer and
Director
Back Bay Advisors, Inc. Director
New England Securities Director
Corporation*
399 Boylston Street
Boston, MA 02116
Frank Nesvet, New England Funds, L.P. Senior Vice President and
Senior Vice President, Chief Financial Officer
Chief Financial Officer and
Treasurer
NEF Corporation Senior Vice President,
Chief Financial Officer
and Treasurer
Robert P. Connolly, NEF Corporation Senior Vice President,
Senior Vice President, General Counsel,
General Counsel, Assistant Secretary and Clerk
Secretary and Clerk
New England Funds, L.P. Senior Vice President,
General Counsel,
Secretary and Clerk
Kroll Associates, Inc.* Managing Director and
900 3rd Avenue General Counsel
New York, NY 10022
Bruce R. Speca, NEF Corporation Executive Vice President
Executive Vice President
New England Funds, L.P. Executive Vice President
Peter H. Duffy, NEF Corporation Vice President
Vice President
New England Funds, L.P. Vice President
5
<PAGE>
Name and Office with Name and Address of Nature of
NEFM Other Affiliations Connection
---- ------------------- ----------
Martin G. Dyer NEF Corporation Vice President
New England Funds, L.P. Vice President
Ralph M. Greggs NEF Corporation Vice President
New England Funds, L.P. Vice President
Beatriz A. Pina-Smith NEF Corporation Assistant Controller
New England Funds, L.P. Assistant Controller
</TABLE>
Item 29. Principal Underwriters
(a) New England Funds, L.P. also serves as principal underwriter for:
New England Funds Trust I
New England Funds Trust II
New England Funds Trust III
New England Tax Exempt Money Market Trust
(b) The general partner and officers of the Registrant's principal
underwriter, New England Funds, L.P., and their addresses are as
follows:
<TABLE>
<CAPTION>
Positions and Offices with Positions and Offices
Name Principal Underwriter with Registrant
---- -------------------------- ---------------------
<S> <C> <C>
NEF Corporation General Partner None
Henry L.P. Schmelzer President and Chief Executive President and Trustee
Officer
Bruce R. Speca Executive Vice President Executive Vice President
Robert P. Connolly Senior Vice President, General Secretary
Counsel, Secretary and Clerk
Frank Nesvet Senior Vice President and Treasurer
Chief Financial Officer
Munish Agrawal Vice President None
Elizabeth P. Burns Vice President None
James H. Davis Vice President None
Peter H. Duffy Vice President None
6
<PAGE>
Positions and Offices with Positions and Offices
Name Principal Underwriter with Registrant
---- -------------------------- ---------------------
Martin G. Dyer Vice President None
Tracy A. Fagan Vice President None
William H. Finnegan Vice President None
Raymond K. Girouard Vice President, Treasurer and None
Controller
Ralph M. Greggs Vice President None
Lynne H. Johnson Vice President None
Caren I. Leedom Vice President None
Marie G. McKenzie Vice President None
Robert E. O'Hare Vice President and Senior None
Counsel
Bernard M. Shavelson Vice President None
Christine L. Swanson Vice President None
Kristine E. Swanson Vice President None
Beatriz A. Pina-Smith Assistant Controller None
</TABLE>
The principal business address of all the above persons or entities is 399
Boylston Street, Boston, MA 02116.
(c) Not Applicable.
Item 30. Location of Accounts and Records
The following companies maintain possession of the documents required by
the specified rules:
(a) Registrant
Rule 31a-1(b)(4)
Rule 31a-2(a)
(b) State Street Bank and Trust Company
225 Franklin Street
Boston, Massachusetts 02110
Rule 31a-1(a)
Rule 31a-1(b) (1), (2), (3), (5), (6), (7), (8)
Rule 31a-2(a)
(c) Back Bay Advisors, L.P.
399 Boylston Street
Boston, Massachusetts 02116
Rule 31a-1(a) (9), (10), (11); (f)
Rule 31a-2(a); (e)
7
<PAGE>
(d) New England Funds, L.P.
501 Boylston Street
Boston, Massachusetts 02116
Rule 31a-1(d)
Rule 31a-2(c)
Item 31. Management Services
Not Applicable.
Item 32. Undertakings
Not Applicable.
8
<PAGE>
NEW ENGLAND CASH MANAGEMENT TRUST
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, the Registrant certifies that it meets all the
requirements for effectiveness of this Post-Effective Amendment No. 31 to its
Registration Statement pursuant to Rule 485(b) under the Securities Act of 1933
and has duly caused this Post-Effective Amendment No. 31 to its Registration
Statement to be signed on its behalf by the undersigned, thereto duly
authorized, in the City of Boston, in the Commonwealth of Massachusetts on the
22nd day of August, 1996.
NEW ENGLAND CASH MANAGEMENT TRUST
By: PETER S. VOSS*
--------------
Peter S. Voss
Chief Executive Officer
*By: /s/ROBERT P. CONNOLLY
------------------------
Robert P. Connolly
Attorney-in-Fact
9
<PAGE>
Pursuant to the requirements of the Securities Act of 1933, this
Post-Effective Amendment No. 31 to Registration Statement No. 2-68348 has been
signed below by the following persons in the capacities and on the date
indicated.
Signature Title Date
- --------- ----- ----
PETER S. VOSS* Chairman of the Board; August 22, 1996
- -------------
Peter S. Voss Chief Executive Officer;
Principal Executive
Officer; Trustee
/s/FRANK NESVET Treasurer August 22, 1996
- -----------------
Frank Nesvet
HENRY L.P. SCHMELZER* Trustee and President August 22, 1996
- ---------------------
Henry L.P. Schmelzer
GRAHAM T. ALLISON, JR.* Trustee August 22, 1996
- -----------------------
Graham T. Allison
DANIEL M. CAIN* Trustee August 22, 1996
- ----------------
Daniel M. Cain
KENNETH J. COWAN* Trustee August 22, 1996
- ------------------
Kenneth J. Cowan
RICHARD DARMAN* Trustee August 22, 1996
- ------------------
Richard Darman
SANDRA O. MOOSE* Trustee August 22, 1996
- ------------------
Sandra O. Moose
JOHN A. SHANE* Trustee August 22, 1996
- -----------------
John A. Shane
PENDLETON P. WHITE* Trustee August 22, 1996
- -------------------
Pendleton P. White
*By: /s/ ROBERT P. CONNOLLY
----------------------
Robert P. Connolly
Attorney-In-Fact
August 22, 1996
- --------
* Trustee deemed an "interested person" of the Trusts, as defined in the
1940 Act.
10
<PAGE>
N-1A EXHIBITS ITEM 24(B)
EX-99.B5(A) Advisory Agreement between Registrant, with respect to its Money
Market Series, and New England Funds Management, L.P.
EX-99.B5(B) Advisory Agreement between Registrant, with respect to its U.S.
Government Series, and New England Funds Management, L.P.
EX-99.B5(C) Subadvisory Agreement, relating to the Money Market Series of the
Registrant, between New England Funds Management, L.P. and Back Bay
Advisors, L.P.
EX-99.B5(D) Subadvisory Agreement, relating to the U.S. Government Series of
the Registrant, between New England Funds Management, L.P. and Back
Bay Advisors, L.P.
EX-99.B9D Powers of Attorney for Trustees, Daniel M. Cain and Richard Darman
EX-99.B10 Opinion and Consent of Counsel
EX-99.B11 Consent of Price Waterhouse LLP
EX-99.B14 New England Funds, L.P. Tax Sheltered Custodial Account Agreement;
New England Funds, L.P. Keogh Plan; New England Funds, L.P.
Simplified Employee Pension Plan; New England Funds, L.P.
Individual Retirement Account Prototype; New England Funds, L.P.
401(k) Plan Prototype
EX-27.B16 Schedule for Calculation of Performance Data
EX-27.B17 Financial Data Schedule
11
EXHIBIT-99.B5:
ADVISORY AGREEMENT BETWEEN REGISTRANT, WITH RESPECT TO ITS MONEY MARKET SERIES,
AND NEW ENGLAND FUNDS MANAGEMENT, L.P.; ADVISORY AGREEMENT BETWEEN
REGISTRANT, WITH RESPECT TO ITS U.S. GOVERNMENT SERIES, AND NEW ENGLAND FUNDS
MANAGEMENT, L.P.; SUBADVISORY AGREEMENT, RELATING TO THE MONEY MARKET SERIES OF
THE REGISTRANT, BETWEEN NEW ENGLAND FUNDS MANAGEMENT, L.P. AND BACK BAY
ADVISORS, L.P.; SUBADVISORY AGREEMENT, RELATING TO THE U.S. GOVERNMENT SERIES OF
THE REGISTRANT, BETWEEN NEW ENGLAND FUNDS MANAGEMENT, L.P. AND BACK BAY
ADVISORS, L.P.
<PAGE>
NEW ENGLAND CASH MANAGEMENT TRUST - MONEY MARKET SERIES
Advisory Agreement
AGREEMENT made this 2nd day of January, 1996 by and between NEW ENGLAND
CASH MANAGEMENT TRUST (the "Fund"), with respect to its Money Market Series (the
"Series"), and NEW ENGLAND FUNDS MANAGEMENT, L.P., a Delaware limited
partnership (the "Manager").
WITNESSETH:
WHEREAS, the Fund and the Manager wish to enter into an agreement
setting forth the terms upon which the Manager (or certain other parties acting
pursuant to delegation from the Manager) will perform certain services for the
Series;
NOW, THEREFORE, in consideration of the premises and covenants
hereinafter contained, the parties agree as follows:
1. (a) The Fund hereby employs the Manager to furnish the Fund with
Portfolio Management Services (as defined in Section 2 hereof) and
Administrative Services (as defined in Section 3 hereof), subject to the
authority of the Manager to delegate any or all of its responsibilities
hereunder to other parties as provided in Sections 1(b) and (c) hereof.
The Manager hereby accepts such employment and agrees, at its own
expense, to furnish such services (either directly or pursuant to
delegation to other parties as permitted by Sections 1(b) and (c)
hereof) and to assume the obligations herein set forth, for the
compensation herein provided. The Manager shall, unless otherwise
expressly provided or authorized, have no authority to act for or
represent the Fund in any way or otherwise be deemed an agent of the
Fund.
(b) The Manager may delegate any or all of its responsibilities
hereunder with respect to the provision of Portfolio Management Services
(and assumption of related expenses) to one or more other parties (each
such party, a "Sub-Adviser"), pursuant in each case to a written
agreement with such Sub-Adviser that meets the requirements of Section
15 of the Investment Company Act of 1940 and the rules thereunder (the
"1940 Act") applicable to contracts for service as investment adviser of
a registered investment company (including without limitation the
requirements for approval by the trustees of the Fund and the
shareholders of the Series), subject, however, to such exemptions as may
be granted by the Securities and Exchange Commission. Any Sub-Adviser
may (but need not) be affiliated with the Manager. If different
Sub-Advisers are engaged to provide Portfolio Management Services with
respect to different segments of the portfolio of the Series, the
Manager shall determine, in the manner described in the prospectus of
the Series from time to time in effect, what portion of the assets
belonging to the Series shall be managed by each Sub-Adviser.
<PAGE>
(c) The Manager may delegate any or all of its responsibilities
hereunder with respect to the provision of Administrative Services to
one or more other parties (each such party, an "Administrator") selected
by the Manager. Any Administrator may (but need not) be affiliated
with the Manager.
2. As used in this Agreement, "Portfolio Management Services" means
management of the investment and reinvestment of the assets belonging to the
Series, consisting specifically of the following:
(a) obtaining and evaluating such economic, statistical and
financial data and information and undertaking such additional
investment research as shall be necessary or advisable for the
management of the investment and reinvestment of the assets belonging to
the Series in accordance with the Series' investment objectives and
policies;
(b) taking such steps as are necessary to implement the investment
policies of the Series by purchasing and selling of securities,
including the placing of orders for such purchase and sale; and
(c) regularly reporting to the Board of Trustees of the Fund with
respect to the implementation of the investment policies of the Series.
3. As used in this Agreement, "Administrative Services" means the
provision to the Fund, by or at the expense of the Manager, of the following:
(a) office space in such place or places as may be agreed upon
from time to time by the Fund and the Manager, and all necessary office
supplies, facilities and equipment;
<PAGE>
(b) necessary executive and other personnel for managing the
affairs of the Series (exclusive of those related to and to be performed
under contract for custodial, transfer, dividend and plan agency
services by the entity or entities selected to perform such services and
exclusive of any managerial functions described in Section 4);
(c) compensation, if any, of trustees of the Fund who are
directors, officers or employees of the Manager, any Sub-Adviser or any
Administrator or of any affiliated person (other than a registered
investment company) of the Manager, any Sub-Adviser or any
Administrator; and
(d) supervision and oversight of the Portfolio Management
Services provided by each Sub-Adviser, and oversight of all matters
relating to compliance by the Fund with applicable laws and with the
Series' investment policies, restrictions and guidelines, if the Manager
has delegated to one or more Sub-Advisers any or all of its
responsibilities hereunder with respect to the provision of Portfolio
Management Services.
4. Nothing in section 3 hereof shall require the Manager to bear,
or to reimburse the Fund for:
(a) any of the costs of printing and mailing the items
referred to in sub-section (n) of this section 4;
(b) any of the costs of preparing, printing and distributing
sales literature;
(c) compensation of trustees of the Fund who are not
directors, officers or employees of the Manager, any Sub-Adviser or any
Administrator or of any affiliated person (other than a registered
investment company) of the Manager,any Sub-Adviser or any Administrator;
(d) registration, filing and other fees in connection with
requirements of regulatory authorities;
(e) the charges and expenses of any entity appointed by the
Fund for custodial, paying agent, shareholder servicing and plan agent
services;
<PAGE>
(f) charges and expenses of independent accountants retained
by the Fund;
(g) charges and expenses of any transfer agents and registrars
appointed by the Fund;
(h) brokers' commissions and issue and transfer taxes
chargeable to the Fund in connection with securities transactions to
which the Fund is a party;
(i) taxes and fees payable by the Fund to federal, state or
other governmental agencies;
(j) any cost of certificates representing shares of the Fund;
(k) legal fees and expenses in connection with the affairs of
the Fund, including registering and qualifying its shares with Federal
and State regulatory authorities;
(l) expenses of meetings of shareholders and trustees of the
Fund;
(m) interest, including interest on borrowings by the Fund;
(n) the costs of services, including services of counsel,
required in connection with the preparation of the Fund's registration
statements and prospectuses, including amendments and revisions thereto,
annual, semiannual and other periodic reports of the Fund, and notices
and proxy solicitation material furnished to shareholders of the Fund or
regulatory authorities; and
(o) the Fund's expenses of bookkeeping, accounting, auditing
and financial reporting, including related clerical expenses.
5. All activities undertaken by the Manager or any Sub-Adviser or
Administrator pursuant to this Agreement shall at all times be subject to the
supervision and control of the Board of Trustees of the Fund, any duly
constituted committee thereof or any officer of the Fund acting pursuant to like
authority.
<PAGE>
6. The services to be provided by the Manager and any Sub-Adviser or
Administrator hereunder are not to be deemed exclusive and the Manager and any
Sub-Adviser or Administrator shall be free to render similar services to others,
so long as its services hereunder are not impaired thereby.
7. As full compensation for all services rendered, facilities furnished
and expenses borne by the Manager hereunder, the Fund shall pay the Manager
compensation at the annual rate of 0.425% of the first $500 million of the
average daily net assets of the Series, 0.400% of the next $500 million of the
average daily net assets of the Series, 0.350% of the next $500 million of the
average daily net assets of the Series, 0.300% of the next $500 million of the
average daily net assets of the Series, and 0.250% over $2 billion of such
assets, respectively (or such lesser amount as the Manager may from time to time
agree to receive). Such compensation shall be payable monthly in arrears or at
such other intervals, not less frequently than quarterly, as the Board of
Trustees of the Fund may from time to time determine and specify in writing to
the Manager. The Manager hereby acknowledges that the Fund's obligation to pay
such compensation is binding only on the assets and property belonging to the
Series.
8. If the total of all ordinary business expenses of the Fund as a
whole (including investment advisory fees but excluding interest, taxes,
portfolio brokerage commissions, distribution-related expenses and extraordinary
expenses) for any fiscal year exceeds the lowest applicable percentage of
average net assets or income limitations prescribed by any state in which shares
of the Series are qualified for sale, the Manager shall pay such excess. Solely
for purposes of applying such limitations in accordance with the foregoing
sentence, the Series and the Fund shall each be deemed to be a separate fund
subject to such limitations. Should the applicable state limitation provisions
fail to specify how the average net assets of the Fund or belonging to the
Series are to be calculated, that figure shall be calculated by reference to the
average daily net assets of the Fund or the Series, as the case may be.
9. It is understood that any of the shareholders, trustees, officers,
employees and agents of the Fund may be a shareholder, director, officer,
employee or agent of, or be otherwise interested in, the Manager, any affiliated
person of the Manager, any organization in which the Manager may have an
interest or any organization which may have an interest in the Manager; that the
Manager, any such affiliated person or any such organization may have an
interest in the Fund; and that the existence of any such dual interest shall not
affect the validity hereof or of any transactions hereunder except as otherwise
provided in the Agreement and Declaration of Trust of the Fund, the partnership
agreement of the Manager or specific provisions of applicable law.
<PAGE>
10. This Agreement shall become effective as of the date of its
execution, and
(a) unless otherwise terminated, this Agreement shall continue in
effect for two years from the date of execution, and from year to year
thereafter so long as such continuance is specifically approved at least
annually (i) by the Board of Trustees of the Fund or by vote of a
majority of the outstanding voting securities of the Series, and (ii) by
vote of a majority of the trustees of the Fund who are not interested
persons of the Fund or the Manager, cast in person at a meeting called
for the purpose of voting on, such approval;
(b) this Agreement may at any time be terminated on sixty days'
written notice to the Manager either by vote of the Board of Trustees
of the Fund or by vote of a majority of the outstanding voting
securities of the Series;
(c) this Agreement shall automatically terminate in the event of
its assignment;
(d) this Agreement may be terminated by the Manager on ninety
days' written notice to the Fund;
(e) if New England Funds, L.P., the Fund's principal underwriter,
requires the Fund or the Series to change its name so as to eliminate
all references to the words "New England" or the letters "TNE" pursuant
to the provisions of the Fund's Distribution Agreement relating to the
Series with said principal underwriter, this Agreement shall
automatically terminate at the time of such change unless the
continuance of this Agreement after such change shall have been
specifically approved by vote of a majority of the outstanding voting
securities of the Series and by vote of a majority of the trustees of
the Fund who are not interested persons of the Fund or the Manager, cast
in person at a meeting called for the purpose of voting on such
approval.
Termination of this Agreement pursuant to this Section 10 shall be
without the payment of any penalty.
11. This Agreement may be amended at any time by mutual consent of the
parties, provided that such consent on the part of the Fund shall have been
approved by vote of a majority of the outstanding voting securities of the
Series and by vote of a majority of the trustees of the Fund who are not
interested persons of the Fund or the Manager, cast in person at a meeting
called for the purpose of voting on such approval.
<PAGE>
12. For the purpose of this Agreement, the terms "vote of a majority of
the outstanding voting securities," "interested person," "affiliated person" and
"assignment" shall have their respective meanings defined in the 1940 Act,
subject, however, to such exemptions as may be granted by the Securities and
Exchange Commission under the 1940 Act. References in this Agreement to any
assets, property or liabilities "belonging to" the Series shall have the meaning
defined in the Fund's Agreement and Declaration of Trust as amended from time to
time.
13. In the absence of willful misfeasance, bad faith or gross negligence
on the part of the Manager, or reckless disregard of its obligations and duties
hereunder, the Manager shall not be subject to any liability to the Fund, to any
shareholder of the Fund or to any other person, firm or organization, for any
act or omission in the course of, or connected with, rendering services
hereunder.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement on
the day and year first above written.
NEW ENGLAND CASH MANAGEMENT TRUST - MONEY MARKET SERIES
By: /s/ Henry L.P. Schmelzer
________________________________
Name: Henry L.P. Schmelzer
Title: President
NEW ENGLAND
FUNDS MANAGEMENT, L.P.
By NEF Corporation, its general partner
By: /s/ Bruce R. Speca
________________________________
Name: Bruce R. Speca
Title: Executive Vice President
NOTICE
A copy of the Agreement and Declaration of Trust establishing New
England Cash Management Trust (the "Fund") is on file with the Secretary of The
Commonwealth of Massachusetts, and notice is hereby given that this Agreement is
executed with respect to the Fund's Money Market series (the "Series") on behalf
of the Fund by officers of the Fund as officers and not individually and that
the obligations of or arising out of this Agreement are not binding upon any of
the trustees, officers or shareholders individually but are binding only upon
the assets and property belonging to the Series.
NEW ENGLAND CASH MANAGEMENT TRUST -
U.S. GOVERNMENT SERIES
Advisory Agreement
AGREEMENT made this 2nd day of January, 1996 by and between NEW ENGLAND
CASH MANAGEMENT TRUST (the "Fund"), with respect to its U.S. Government Series
(the "Series"), and NEW ENGLAND FUNDS MANAGEMENT, L.P., a Delaware limited
partnership (the "Manager").
WITNESSETH:
WHEREAS, the Fund and the Manager wish to enter into an agreement
setting forth the terms upon which the Manager (or certain other parties acting
pursuant to delegation from the Manager) will perform certain services for the
Series;
NOW, THEREFORE, in consideration of the premises and covenants
hereinafter contained, the parties agree as follows:
1. (a) The Fund hereby employs the Manager to furnish the Fund with
Portfolio Management Services (as defined in Section 2 hereof) and
Administrative Services (as defined in Section 3 hereof), subject to the
authority of the Manager to delegate any or all of its responsibilities
hereunder to other parties as provided in Sections 1(b) and (c) hereof.
The Manager hereby accepts such employment and agrees, at its own
expense, to furnish such services (either directly or pursuant to
delegation to other parties as permitted by Sections 1(b) and (c)
hereof) and to assume the obligations herein set forth, for the
compensation herein provided. The Manager shall, unless otherwise
expressly provided or authorized, have no authority to act for or
represent the Fund in any way or otherwise be deemed an agent of the
Fund.
(b) The Manager may delegate any or all of its responsibilities
hereunder with respect to the provision of Portfolio Management Services
(and assumption of related expenses) to one or more other parties (each
such party, a "Sub-Adviser"), pursuant in each case to a written
agreement with such Sub-Adviser that meets the requirements of Section
15 of the Investment Company Act of 1940 and the rules thereunder (the
"1940 Act") applicable to contracts for service as investment adviser of
a registered investment company (including without limitation the
requirements for approval by the trustees of the Fund and the
shareholders of the Series), subject, however, to such exemptions as may
be granted by the Securities and Exchange Commission. Any Sub-Adviser
may (but need not) be affiliated with the Manager. If different
Sub-Advisers are engaged to provide Portfolio Management Services with
respect to different segments of the portfolio of the Series, the
Manager shall determine, in the manner described in the prospectus of
the Series from time to time in effect, what portion of the assets
belonging to the Series shall be managed by each Sub-Adviser.
<PAGE>
(c) The Manager may delegate any or all of its responsibilities
hereunder with respect to the provision of Administrative Services to
one or more other parties (each such party, an "Administrator") selected
by the Manager. Any Administrator may (but need not) be affiliated with
the Manager.
2. As used in this Agreement, "Portfolio Management Services" means
management of the investment and reinvestment of the assets belonging to the
Series, consisting specifically of the following:
(a) obtaining and evaluating such economic, statistical and
financial data and information and undertaking such additional
investment research as shall be necessary or advisable for the
management of the investment and reinvestment of the assets belonging to
the Series in accordance with the Series' investment objectives and
policies;
(b) taking such steps as are necessary to implement the investment
policies of the Series by purchasing and selling of securities,
including the placing of orders for such purchase and sale; and
(c) regularly reporting to the Board of Trustees of the Fund with
respect to the implementation of the investment policies of the Series.
3. As used in this Agreement, "Administrative Services" means the
provision to the Fund, by or at the expense of the Manager, of the following:
(a) office space in such place or places as may be agreed upon
from time to time by the Fund and the Manager, and all necessary office
supplies, facilities and equipment;
<PAGE>
(b) necessary executive and other personnel for managing the
affairs of the Series (exclusive of those related to and to be performed
under contract for custodial, transfer, dividend and plan agency
services by the entity or entities selected to perform such services and
exclusive of any managerial functions described in Section 4);
(c) compensation, if any, of trustees of the Fund who are
directors, officers or employees of the Manager, any Sub-Adviser or any
Administrator or of any affiliated person (other than a registered
investment company) of the Manager,any Sub-Adviser or any Administrator;
and
(d) supervision and oversight of the Portfolio Management
Services provided by each Sub-Adviser, and oversight of all matters
relating to compliance by the Fund with applicable laws and with the
Series' investment policies, restrictions and guidelines, if the Manager
has delegated to one or more Sub-Advisers any or all of its
responsibilities hereunder with respect to the provision of Portfolio
Management Services.
4. Nothing in section 3 hereof shall require the Manager to bear, or
to reimburse the Fund for:
(a) any of the costs of printing and mailing the items referred
to in sub-section (n) of this section 4;
(b) any of the costs of preparing, printing and distributing
sales literature;
(c) compensation of trustees of the Fund who are not directors,
officers or employees of the Manager, any Sub-Adviser or any
Administrator or of any affiliated person (other than a registered
investment company) of the Manager,any Sub-Adviser or any Administrator;
(d) registration, filing and other fees in connection with
requirements of regulatory authorities;
(e) the charges and expenses of any entity appointed by the Fund
for custodial, paying agent, shareholder servicing and plan agent
services;
<PAGE>
(f) charges and expenses of independent accountants retained by
the Fund;
(g) charges and expenses of any transfer agents and registrars
appointed by the Fund;
(h) brokers' commissions and issue and transfer taxes chargeable
to the Fund in connection with securities transactions to which the
Fund is a party;
(i) taxes and fees payable by the Fund to federal, state or other
governmental agencies;
(j) any cost of certificates representing shares of the Fund;
(k) legal fees and expenses in connection with the affairs of the
Fund, including registering and qualifying its shares with Federal and
State regulatory authorities;
(l) expenses of meetings of shareholders and trustees of the Fund;
(m) interest, including interest on borrowings by the Fund;
(n) the costs of services, including services of counsel,
required in connection with the preparation of the Fund's registration
statements and prospectuses, including amendments and revisions thereto,
annual, semiannual and other periodic reports of the Fund, and notices
and proxy solicitation material furnished to shareholders of the Fund or
regulatory authorities; and
(o) the Fund's expenses of bookkeeping, accounting, auditing and
financial reporting, including related clerical expenses.
5. All activities undertaken by the Manager or any Sub-Adviser or
Administrator pursuant to this Agreement shall at all times be subject to the
supervision and control of the Board of Trustees of the Fund, any duly
constituted committee thereof or any officer of the Fund acting pursuant to like
authority.
<PAGE>
6. The services to be provided by the Manager and any Sub-Adviser or
Administrator hereunder are not to be deemed exclusive and the Manager and any
Sub-Adviser or Administrator shall be free to render similar services to others,
so long as its services hereunder are not impaired thereby.
7. As full compensation for all services rendered, facilities furnished
and expenses borne by the Manager hereunder, the Fund shall pay the Manager
compensation at the annual rate of 0.425% of the first $500 million of the
average daily net assets of the Series, 0.400% of the next $500 million of the
average daily net assets of the Series, 0.350% of the next $500 million of the
average daily net assets of the Series, 0.300% of the next $500 million of the
average daily net assets of the Series, and 0.250% over $2 billion of such
assets, respectively (or such lesser amount as the Manager may from time to time
agree to receive). Such compensation shall be payable monthly in arrears or at
such other intervals, not less frequently than quarterly, as the Board of
Trustees of the Fund may from time to time determine and specify in writing to
the Manager. The Manager hereby acknowledges that the Fund's obligation to pay
such compensation is binding only on the assets and property belonging to the
Series.
8. If the total of all ordinary business expenses of the Fund as a
whole (including investment advisory fees but excluding interest, taxes,
portfolio brokerage commissions, distribution-related expenses and extraordinary
expenses) for any fiscal year exceeds the lowest applicable percentage of
average net assets or income limitations prescribed by any state in which shares
of the Series are qualified for sale, the Manager shall pay such excess. Solely
for purposes of applying such limitations in accordance with the foregoing
sentence, the Series and the Fund shall each be deemed to be a separate fund
subject to such limitations. Should the applicable state limitation provisions
fail to specify how the average net assets of the Fund or belonging to the
Series are to be calculated, that figure shall be calculated by reference to the
average daily net assets of the Fund or the Series, as the case may be.
9. It is understood that any of the shareholders, trustees, officers,
employees and agents of the Fund may be a shareholder, director, officer,
employee or agent of, or be otherwise interested in, the Manager, any affiliated
person of the Manager, any organization in which the Manager may have an
interest or any organization which may have an interest in the Manager; that the
Manager, any such affiliated person or any such organization may have an
interest in the Fund; and that the existence of any such dual interest shall not
affect the validity hereof or of any transactions hereunder except as otherwise
provided in the Agreement and Declaration of Trust of the Fund, the partnership
agreement of the Manager or specific provisions of applicable law.
10. This Agreement shall become effective as of the date of its
execution, and
(a) unless otherwise terminated, this Agreement shall continue in
effect for two years from the date of execution, and from year to year
thereafter so long as such continuance is specifically approved at least
annually (i) by the Board of Trustees of the Fund or by vote of a
majority of the outstanding voting securities of the Series, and (ii) by
vote of a majority of the trustees of the Fund who are not interested
persons of the Fund or the Manager, cast in person at a meeting called
for the purpose of voting on, such approval;
(b) this Agreement may at any time be terminated on sixty days'
written notice to the Manager either by vote of the Board of Trustees
of the Fund or by vote of a majority of the outstanding voting
securities of the Series;
(c) this Agreement shall automatically terminate in the event
of its assignment;
(d) this Agreement may be terminated by the Manager on ninety
days' written notice to the Fund;
(e) if New England Funds, L.P., the Fund's principal underwriter,
requires the Fund or the Series to change its name so as to eliminate
all references to the words "New England" or the letters "TNE" pursuant
to the provisions of the Fund's Distribution Agreement relating to the
Series with said principal underwriter, this Agreement shall
automatically terminate at the time of such change unless the
continuance of this Agreement after such change shall have been
specifically approved by vote of a majority of the outstanding voting
securities of the Series and by vote of a majority of the trustees of
the Fund who are not interested persons of the Fund or the Manager, cast
in person at a meeting called for the purpose of voting on such
approval.
Termination of this Agreement pursuant to this Section 10 shall be
without the payment of any penalty.
11. This Agreement may be amended at any time by mutual consent of the
parties, provided that such consent on the part of the Fund shall have been
approved by vote of a majority of the outstanding voting securities of the
Series and by vote of a majority of the trustees of the Fund who are not
interested persons of the Fund or the Manager, cast in person at a meeting
called for the purpose of voting on such approval.
<PAGE>
12. For the purpose of this Agreement, the terms "vote of a majority of
the outstanding voting securities," "interested person," "affiliated person" and
"assignment" shall have their respective meanings defined in the 1940 Act,
subject, however, to such exemptions as may be granted by the Securities and
Exchange Commission under the 1940 Act. References in this Agreement to any
assets, property or liabilities "belonging to" the Series shall have the meaning
defined in the Fund's Agreement and Declaration of Trust as amended from time to
time.
13. In the absence of willful misfeasance, bad faith or gross negligence
on the part of the Manager, or reckless disregard of its obligations and duties
hereunder, the Manager shall not be subject to any liability to the Fund, to any
shareholder of the Fund or to any other person, firm or organization, for any
act or omission in the course of, or connected with, rendering services
hereunder.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement on
the day and year first above written.
NEW ENGLAND CASH MANAGEMENT TRUST - U.S. GOVERNMENT SERIES
By: /s/ Henry L.P. Schmelzer
________________________________
Name: Henry L.P. Schmelzer
Title: President
NEW ENGLAND
FUNDS MANAGEMENT, L.P.
By NEF Corporation, its general partner
By: /s/ Bruce R. Speca
________________________________
Name: Bruce R. Speca
Title: Executive Vice President
NOTICE
A copy of the Agreement and Declaration of Trust establishing New
England Cash Management Trust (the "Fund") is on file with the Secretary of The
Commonwealth of Massachusetts, and notice is hereby given that this Agreement is
executed with respect to the Fund's U.S. Government series (the "Series") on
behalf of the Fund by officers of the Fund as officers and not individually and
that the obligations of or arising out of this Agreement are not binding upon
any of the trustees, officers or shareholders individually but are binding only
upon the assets and property belonging to the Series.
NEW ENLAND CASH MANAGEMENT TRUST -
MONEY MARKET SERIES
Sub-Advisory Agreement
(Back Bay Advisors)
This Sub-Advisory Agreement (this "Agreement") is entered into as of
January 2, 1996 by and between New England Funds Management, L.P., a Delaware
limited partnership (the "Manager"), and Back Bay Advisors, L.P., a Delaware
limited partnership (the "Sub-Adviser").
WHEREAS, the Manager has entered into an Advisory Agreement dated
January 2, 1996 (the "Advisory Agreement") with New England Cash Management
Trust (the "Trust"), pursuant to which the Manager provides portfolio management
and administrative services to New England Cash Management Trust - Money Market
Series, a series of the Trust (the "Series");
WHEREAS, the Advisory Agreement provides that the Manager may delegate
any or all of its portfolio management responsibilities under the Advisory
Agreement to one or more sub-advisers;
WHEREAS, the Manager and the trustees of the Trust desire to retain the
Sub-Adviser to render portfolio management services in the manner and on the
terms set forth in this Agreement.
NOW, THEREFORE, in consideration of the mutual covenants and agreements
set forth in this Agreement, the Manager and the Sub-Adviser agree as follows:
<PAGE>
I. Sub-Advisory Services.
a. The Sub-Adviser shall, subject to the supervision of the
Manager and of any administrator appointed by the Manager (the
"Administrator"), manage the investment and reinvestment of the assets
of the Series, and have the authority on behalf of the Series to vote
all proxies and exercise all other rights of the Series as a security
holder of companies in which the Series from time to time invests. The
Sub-Adviser shall manage the Series in conformity with (1) the
investment objective, policies and restrictions of the Series set forth
in the Trust's prospectus and statement of additional information
relating to the Series, (2) any additional policies or guidelines
established by the Manager or by the Trust's trustees that have been
furnished in writing to the Sub-Adviser and (3) the provisions of the
Internal Revenue Code (the "Code") applicable to "regulated investment
companies" (as defined in Section 851 of the Code), all as from time to
time in effect (collectively, the "Policies"), and with all applicable
provisions of law, including without limitation all applicable
provisions of the Investment Company Act of 1940 (the "1940 Act") and
the rules and regulations thereunder. Subject to the foregoing, the
Sub-Adviser is authorized, in its discretion and without prior
consultation with the Manager, to buy, sell, lend and otherwise trade in
any stocks, bonds and other securities and investment instruments on
behalf of the Series, without regard to the length of time the
securities have been held and the resulting rate of portfolio turnover
or any tax considerations; and the majority or the whole of the Series
may be invested in such proportions of stocks, bonds, other securities
or investment instruments, or cash, as the Sub-Adviser shall determine.
b. The Sub-Adviser shall furnish the Manager and the
Administrator monthly, quarterly and annual reports concerning portfolio
transactions and performance of the Series in such form as may be
mutually agreed upon, and agrees to review the Series and discuss the
management of it. The Sub-Adviser shall permit all books and records
with respect to the Series to be inspected and audited by the Manager
and the Administrator at all reasonable times during normal business
hours, upon reasonable notice. The Sub-Adviser shall also provide the
Manager with such other information and reports as may reasonably be
requested by the Manager from time to time, including without limitation
all material requested by or required to be delivered to the Trustees of
the Trust.
c. The Sub-Adviser shall provide to the Manager a copy of the
Sub-Adviser's Form ADV as filed with the Securities and Exchange
Commission and a list of the persons whom the Sub-Adviser wishes to have
authorized to give written and/or oral instructions to custodians of
assets of the Series.
<PAGE>
2. Obligations of the Manager.
a. The Manager shall provide (or cause the Series' Custodian (as
defined in Section 3 hereof) to provide) timely information to the
Sub-Adviser regarding such matters as the composition of assets of the
Series, cash requirements and cash available for investment in the
Series, and all other information as may be reasonably necessary for the
Sub-Adviser to perform its responsibilities hereunder.
b. The Manager has furnished the Sub-Adviser a copy of the
prospectus and statement of additional information of the Series and
agrees during the continuance of this Agreement to furnish the
Sub-Adviser copies of any revisions or
agrees to furnish the Sub-Adviser with minutes of meetings of the
trustees of the Trust applicable to the Series to the extent they may
affect the duties of the Sub-Adviser, and with copies of any financial
statements or reports made by the Series to its shareholders, and any
further materials or information which the Sub-Adviser may reasonably
request to enable it to perform its functions under this Agreement.
3. Custodian. The Manager shall provide the Sub-Adviser with a copy of
the Series's agreement with the custodian designated to hold the assets of the
Series (the "Custodian") and any modifications thereto (the "Custody
Agreement"), copies of such modifications to be provided to the Sub-Adviser a
reasonable time in advance of the effectiveness of such modifications. The
assets of the Series shall be maintained in the custody of the Custodian
identified in, and in accordance with the terms and conditions of, the Custody
Agreement (or any sub-custodian properly appointed as provided in the Custody
Agreement). The Sub-Adviser shall have no liability for the acts or omissions of
the Custodian, unless such act or omission is taken in reliance upon instruction
given to the Custodian by a representative of the Sub-Adviser properly
authorized to give such instruction under the Custody Agreement. Any assets
added to the Series shall be delivered directly to the Custodian.
4. Proprietary Rights. The Manager agrees and acknowledges that the
Sub-Adviser is the sole owner of the name "Back Bay Advisors, L.P." and that all
use of any designation consisting in whole or part of "Back Bay Advisors, L.P."
under this Agreement shall inure to the benefit of the Sub-Adviser. The Manager
on its own behalf and on behalf of the Series agrees not to use any such
designation in any advertisement or sales literature or other materials
promoting the Series, except with the prior written consent of the Sub-Adviser.
Without the prior written consent of the Sub-Adviser, the Manager shall not, and
the Manager shall use its best efforts to cause the Series not to, make
representations regarding the Sub-Adviser in any disclosure document,
advertisement or sales literature or other materials relating to the Series.
Upon termination of this Agreement for any reason, the Manager shall cease, and
the Manager shall use its best efforts to cause the Series to cease, all use of
any such designation as soon as reasonably practicable.
<PAGE>
5. Expenses. Except for expenses specifically assumed or agreed to be
paid by the Sub-Adviser pursuant hereto, the Sub-Adviser shall not be liable for
any organizational, operational or business expenses of the Manager or the Trust
including, without limitation, (a) interest and taxes, (b) brokerage commissions
and other costs in connection with the purchase or sale of securities or other
investment instruments with respect to the Series, and (c) custodian fees and
expenses. Any reimbursement of advisory fees required by any expense limitation
provision of any law shall be the sole responsibility of the Manager. The
Manager and the Sub-Adviser shall not be considered as partners or participants
in a joint venture. The Sub-Adviser will pay its own expenses incurred in
furnishing the services to be provided by it pursuant to this Agreement. Neither
the Sub-Adviser nor any affiliated person thereof shall be entitled to any
compensation from the Manager or the Trust with respect to service by any
affiliated person of the Sub-Adviser as an officer or trustee of the Trust
(other than the compensation to the Sub-Adviser payable by the Manager pursuant
to Section 7 hereof).
<PAGE>
6. Purchase and Sale of Assets. The Sub-Adviser shall place all orders
for the purchase and sale of securities for the Series with brokers or dealers
selected by the Sub-Adviser, which may include brokers or dealers affiliated
with the Sub-Adviser, provided such orders comply with Rule 17e-1 under the 1940
Act in all respects. To the extent consistent with applicable law, purchase or
sell orders for the Series may be aggregated with contemporaneous purchase or
sell orders of other clients of the Sub-Adviser. The Sub-Adviser shall use its
best efforts to obtain execution of transactions for the Series at prices which
are advantageous to the Series and at commission rates that are reasonable in
relation to the benefits received. However, the Sub-Adviser may select brokers
or dealers on the basis that they provide brokerage, research or other services
or products to the Series and/or other accounts serviced by the Sub-Adviser. To
the extent consistent with applicable law, the Sub-Adviser may pay a broker or
dealer an amount of commission for effecting a securities transaction in excess
of the amount of commission or dealer spread another broker or dealer would have
charged for effecting that transaction if the Sub-Adviser determines in good
faith that such amount of commission was reasonable in relation to the value of
the brokerage and research products and/or services provided by such broker or
dealer. This determination, with respect to brokerage and research services or
products, may be viewed in terms of either that particular transaction or the
overall responsibilities which the Sub-Adviser and its affiliates have with
respect to the Series or to accounts over which they exercise investment
discretion. Not all such services or products need be used by the Sub-Adviser in
managing the Series.
7. Compensation of the Sub-Adviser. As full compensation for all
services rendered, facilities furnished and expenses borne by the Sub-Adviser
hereunder, the Manager shall pay the Sub-Adviser compensation at the annual rate
of 0.205% of the first $500 million of the average daily net assets of the
Series, 0.180% of the next $500 million of the average daily net assets of the
Series, 0.160% of the next $500 million of the average daily net assets of the
Series, 0.140% of the next $500 million of the average daily net assets of the
Series and 0.120% in excess of $2 billion of such assets, respectively (or such
lesser amount as the Sub-Adviser may from time to time agree to receive). Such
compensation shall be payable monthly in arrears or at such other intervals, not
less frequently than quarterly, as the Manager is paid by the Series pursuant to
the Advisory Agreement.
8. Non-Exclusivity. The Manager and the Series agree that the services
of the Sub-Adviser are not to be deemed exclusive and that the Sub-Adviser and
its affiliates are free to act as investment manager and provide other services
to various investment companies and other managed accounts, except as the
Sub-Adviser and the Manager or the Administrator may otherwise agree from time
to time in writing before or after the date hereof. This Agreement shall not in
any way limit or restrict the Sub-Adviser or any of its directors, officers,
employees or agents from buying, selling or trading any securities or other
investment instruments for its or their own account or for the account of others
for whom it or they may be acting, provided that such activities do not
adversely affect or otherwise impair the performance by the Sub-Adviser of its
duties and obligations under this Agreement. The Manager and the Series
recognize and agree that the Sub-Adviser may provide advice to or take action
with respect to other clients, which advice or action, including the timing and
nature of such action, may differ from or be identical to advice given or action
taken with respect to the Series. The Sub-Adviser shall for all purposes hereof
be deemed to be an independent contractor and shall, unless otherwise provided
or authorized, have no authority to act for or represent the Series or the
Manager in any way or otherwise be deemed an agent of the Series or the Manager.
<PAGE>
9. Liability. Except as may otherwise be provided by the 1940 Act or
other federal securities laws, neither the Sub-Adviser nor any of its officers,
directors, partners, employees or agents (the "Indemnified Parties") shall be
subject to any liability to the Manager, the Trust, the Series or any
shareholder of the Series for any error of judgment, any mistake of law or any
loss arising out of any investment or other act or omission in the course of,
connected with, or arising out of any service to be rendered under this
Agreement, except by reason of willful misfeasance, bad faith or gross
negligence in the performance of the Sub-Adviser's duties or by reason of
reckless disregard by the Sub-Adviser of its obligations and duties hereunder.
The Manager shall hold harmless and indemnify the Sub-Adviser for any loss,
liability, cost, damage or expense (including reasonable attorneys fees and
costs) arising from any claim or demand by any past or present shareholder of
the Series that is not based upon the obligations of the Sub-Adviser under this
Agreement.
10. Effective Date and Termination. This Agreement shall become
effective as of the date of its execution, and
a. unless otherwise terminated, this Agreement shall continue in
effect for two years from the date of execution, and from year to year
thereafter so long as such continuance is specifically approved at least
annually (i) by the Board of Trustees of the Trust or by vote of a
majority of the outstanding voting securities of the Series, and (ii) by
vote of a majority of the trustees of the Trust who are not interested
persons of the Trust, the Manager or the Sub-Adviser, cast in person at
a meeting called for the purpose of voting on such approval;
b. this Agreement may at any time be terminated on sixty days'
written notice to the Sub-Adviser either by vote of the Board of
Trustees of the Trust or by vote of a majority of the outstanding voting
securities of the Series;
<PAGE>
c. this Agreement shall automatically terminate in the event of
its assignment or upon the termination of the Advisory Agreement;
d. this Agreement may be terminated by the Sub-Adviser on ninety
days' written notice to the Manager and the Trust, or by the Manager on
ninety days' written notice to the Sub-Adviser.
Termination of this Agreement pursuant to this Section 10 shall be
without the payment of any penalty.
11. Amendment. This Agreement may be amended at any time by mutual
consent of the Manager and the Sub-Adviser, provided that, if required by law,
such amendment shall also have been approved by vote of a majority of the
outstanding voting securities of the Series and by vote of a majority of the
trustees of the Trust who are not interested persons of the Trust, the Manager
or the Sub-Adviser, cast in person at a meeting called for the purpose of voting
on such approval.
12. Certain Definitions. For the purpose of this Agreement, the terms
"vote of a majority of the outstanding voting securities," "interested person,"
"affiliated person" and "assignment" shall have their respective meanings
defined in the 1940 Act, subject, however, to such exemptions as may be granted
by the Securities and Exchange Commission under the 1940 Act.
13. General.
a. The Sub-Adviser may perform its services through any
employee, officer or agent of the Sub-Adviser, and the Manager shall not
be entitled to the advice, recommendation or judgment of any specific
person; provided, however, that the persons identified in the prospectus
of the Series shall perform the day-to-day portfolio management duties
described therein until the Sub-Adviser notifies the Manager that one or
more other employees, officers or agents of the Sub-Adviser, identified
in such notice, shall assume such duties as of a specific date.
<PAGE>
b. If any term or provision of this Agreement or the
application thereof to any person or circumstances is held to be invalid
or unenforceable to any extent, the remainder of this Agreement or the
application of such provision to other persons or circumstances shall
not be affected thereby and shall be enforced to the fullest extent
permitted by law.
c. This Agreement shall be governed by and interpreted in
accordance with the laws of the Commonwealth of Massachusetts.
NEW ENGLAND FUNDS MANAGEMENT, L.P.
By NEF Corporation, its general partner
By: /s/ Bruce R. Speca
_________________________
Name: Bruce R. Speca
Title: Executive Vice President
BACK BAY ADVISORS, L.P.
By Back Bay Advisors, Inc.,
its general partner
By: /s/ Charles T. Wallis
________________________________
Name: Charles T. Wallis
________________________________
Title: President
________________________________
NEW ENGLAND CASH MANAGEMENT TRUST -
U.S. GOVERNMENT SERIES
Sub-Advisory Agreement
(Back Bay Advisors)
This Sub-Advisory Agreement (this "Agreement") is entered into as of
January 2, 1996 by and between New England Funds Management, L.P., a Delaware
limited partnership (the "Manager"), and Back Bay Advisors, L.P., a Delaware
limited partnership (the "Sub-Adviser").
WHEREAS, the Manager has entered into an Advisory Agreement dated
January 2, 1996 (the "Advisory Agreement") with New England Cash Management
Trust (the "Trust"), pursuant to which the Manager provides portfolio management
and administrative services to New England Cash Management Trust - U.S.
Government Series, a series of the Trust (the "Series");
WHEREAS, the Advisory Agreement provides that the Manager may delegate
any or all of its portfolio management responsibilities under the Advisory
Agreement to one or more sub-advisers;
WHEREAS, the Manager and the trustees of the Trust desire to retain the
Sub-Adviser to render portfolio management services in the manner and on the
terms set forth in this Agreement.
NOW, THEREFORE, in consideration of the mutual covenants and agreements
set forth in this Agreement, the Manager and the Sub-Adviser agree as follows:
<PAGE>
1. Sub-Advisory Services.
a. The Sub-Adviser shall, subject to the supervision of the
Manager and of any administrator appointed by the Manager (the
"Administrator"), manage the investment and reinvestment of the assets
of the Series, and have the authority on behalf of the Series to vote
all proxies and exercise all other rights of the Series as a security
holder of companies in which the Series from time to time invests. The
Sub-Adviser shall manage the Series in conformity with (1) the
investment objective, policies and restrictions of the Series set forth
in the Trust's prospectus and statement of additional information
relating to the Series, (2) any additional policies or guidelines
established by the Manager or by the Trust's trustees that have been
furnished in writing to the Sub-Adviser and (3) the provisions of the
Internal Revenue Code (the "Code") applicable to "regulated investment
companies" (as defined in Section 851 of the Code), all as from time to
time in effect (collectively, the "Policies"), and with all applicable
provisions of law, including without limitation all applicable
provisions of the Investment Company Act of 1940 (the "1940 Act") and
the rules and regulations thereunder. Subject to the foregoing, the
Sub-Adviser is authorized, in its discretion and without prior
consultation with the Manager, to buy, sell, lend and otherwise trade in
any stocks, bonds and other securities and investment instruments on
behalf of the Series, without regard to the length of time the
securities have been held and the resulting rate of portfolio turnover
or any tax considerations; and the majority or the whole of the Series
may be invested in such proportions of stocks, bonds, other securities
or investment instruments, or cash, as the Sub-Adviser shall determine.
b. The Sub-Adviser shall furnish the Manager and the
Administrator monthly, quarterly and annual reports concerning portfolio
transactions and performance of the Series in such form as may be
mutually agreed upon, and agrees to review the Series and discuss the
management of it. The Sub-Adviser shall permit all books and records
with respect to the Series to be inspected and audited by the Manager
and the Administrator at all reasonable times during normal business
hours, upon reasonable notice. The Sub-Adviser shall also provide the
Manager with such other information and reports as may reasonably be
requested by the Manager from time to time, including without limitation
all material requested by or required to be delivered to the Trustees of
the Trust.
c. The Sub-Adviser shall provide to the Manager a copy of the
Sub-Adviser's Form ADV as filed with the Securities and Exchange
Commission and a list of the persons whom the Sub-Adviser wishes to have
authorized to give written and/or oral instructions to custodians of
assets of the Series.
<PAGE>
2. Obligations of the Manager.
a. The Manager shall provide (or cause the Series' Custodian
(as defined in Section 3 hereof) to provide) timely information to the
Sub-Adviser regarding such matters as the composition of assets of the
Series, cash requirements and cash available for investment in the
Series, and all other information as may be reasonably necessary for the
Sub-Adviser to perform its responsibilities hereunder.
b. The Manager has furnished the Sub-Adviser a copy of the
prospectus and statement of additional information of the Series and
agrees during the continuance of this Agreement to furnish the
Sub-Adviser copies of any revisions or agrees to furnish the Sub-Adviser
with minutes of meetings of the trustees of the Trust applicable to the
Series to the extent they may affect the duties of the Sub-Adviser, and
with copies of any financial statements or reports made by the Series to
its shareholders, and any further materials or information which the
Sub-Adviser may reasonably request to enable it to perform its functions
under this Agreement.
3. Custodian. The Manager shall provide the Sub-Adviser with a copy of
the Series's agreement with the custodian designated to hold the assets of the
Series (the "Custodian") and any modifications thereto (the "Custody
Agreement"), copies of such modifications to be provided to the Sub-Adviser a
reasonable time in advance of the effectiveness of such modifications. The
assets of the Series shall be maintained in the custody of the Custodian
identified in, and in accordance with the terms and conditions of, the Custody
Agreement (or any sub-custodian properly appointed as provided in the Custody
Agreement). The Sub-Adviser shall have no liability for the acts or omissions of
the Custodian, unless such act or omission is taken in reliance upon instruction
given to the Custodian by a representative of the Sub-Adviser properly
authorized to give such instruction under the Custody Agreement. Any assets
added to the Series shall be delivered directly to the Custodian.
4. Proprietary Rights. The Manager agrees and acknowledges that the
Sub-Adviser is the sole owner of the name "Back Bay Advisors, L.P." and that all
use of any designation consisting in whole or part of "Back Bay Advisors, L.P."
under this Agreement shall inure to the benefit of the Sub-Adviser. The Manager
on its own behalf and on behalf of the Series agrees not to use any such
designation in any advertisement or sales literature or other materials
promoting the Series, except with the prior written consent of the Sub-Adviser.
Without the prior written consent of the Sub-Adviser, the Manager shall not, and
the Manager shall use its best efforts to cause the Series not to, make
representations regarding the Sub-Adviser in any disclosure document,
advertisement or sales literature or other materials relating to the Series.
Upon termination of this Agreement for any reason, the Manager shall cease, and
the Manager shall use its best efforts to cause the Series to cease, all use of
any such designation as soon as reasonably practicable.
<PAGE>
5. Expenses. Except for expenses specifically assumed or agreed to be
paid by the Sub-Adviser pursuant hereto, the Sub-Adviser shall not be liable for
any organizational, operational or business expenses of the Manager or the Trust
including, without limitation, (a) interest and taxes, (b) brokerage commissions
and other costs in connection with the purchase or sale of securities or other
investment instruments with respect to the Series, and (c) custodian fees and
expenses. Any reimbursement of advisory fees required by any expense limitation
provision of any law shall be the sole responsibility of the Manager. The
Manager and the Sub-Adviser shall not be considered as partners or participants
in a joint venture. The Sub-Adviser will pay its own expenses incurred in
furnishing the services to be provided by it pursuant to this Agreement. Neither
the Sub-Adviser nor any affiliated person thereof shall be entitled to any
compensation from the Manager or the Trust with respect to service by any
affiliated person of the Sub-Adviser as an officer or trustee of the Trust
(other than the compensation to the Sub-Adviser payable by the Manager pursuant
to Section 7 hereof).
<PAGE>
6. Purchase and Sale of Assets. The Sub-Adviser shall place all orders
for the purchase and sale of securities for the Series with brokers or dealers
selected by the Sub-Adviser, which may include brokers or dealers affiliated
with the Sub-Adviser, provided such orders comply with Rule 17e-1 under the 1940
Act in all respects. To the extent consistent with applicable law, purchase or
sell orders for the Series may be aggregated with contemporaneous purchase or
sell orders of other clients of the Sub-Adviser. The Sub-Adviser shall use its
best efforts to obtain execution of transactions for the Series at prices which
are advantageous to the Series and at commission rates that are reasonable in
relation to the benefits received. However, the Sub-Adviser may select brokers
or dealers on the basis that they provide brokerage, research or other services
or products to the Series and/or other accounts serviced by the Sub-Adviser. To
the extent consistent with applicable law, the Sub-Adviser may pay a broker or
dealer an amount of commission for effecting a securities transaction in excess
of the amount of commission or dealer spread another broker or dealer would have
charged for effecting that transaction if the Sub-Adviser determines in good
faith that such amount of commission was reasonable in relation to the value of
the brokerage and research products and/or services provided by such broker or
dealer. This determination, with respect to brokerage and research services or
products, may be viewed in terms of either that particular transaction or the
overall responsibilities which the Sub-Adviser and its affiliates have with
respect to the Series or to accounts over which they exercise investment
discretion. Not all such services or products need be used by the Sub-Adviser in
managing the Series.
7. Compensation of the Sub-Adviser. As full compensation for all
services rendered, facilities furnished and expenses borne by the Sub-Adviser
hereunder, the Manager shall pay the Sub-Adviser compensation at the annual rate
of 0.2125% of the first $500 million of the average daily net assets of the
Series, 0.2000% of the next $500 million of the average daily net assets of the
Series, 0.1750% of the next $500 million of the average daily net assets of the
Series, 0.1500% of the next $500 million of the average daily net assets of the
Series and 0.1250% in excess of $2 billion of such assets, respectively (or such
lesser amount as the Sub-Adviser may from time to time agree to receive). Such
compensation shall be payable monthly in arrears or at such other intervals, not
less frequently than quarterly, as the Manager is paid by the Series pursuant to
the Advisory Agreement.
8. Non-Exclusivity. The Manager and the Series agree that the services
of the Sub-Adviser are not to be deemed exclusive and that the Sub-Adviser and
its affiliates are free to act as investment manager and provide other services
to various investment companies and other managed accounts, except as the
Sub-Adviser and the Manager or the Administrator may otherwise agree from time
to time in writing before or after the date hereof. This Agreement shall not in
any way limit or restrict the Sub-Adviser or any of its directors, officers,
employees or agents from buying, selling or trading any securities or other
investment instruments for its or their own account or for the account of others
<PAGE>
for whom it or they may be acting, provided that such activities do not
adversely affect or otherwise impair the performance by the Sub-Adviser of its
duties and obligations under this Agreement. The Manager and the Series
recognize and agree that the Sub-Adviser may provide advice to or take action
with respect to other clients, which advice or action, including the timing and
nature of such action, may differ from or be identical to advice given or action
taken with respect to the Series. The Sub-Adviser shall for all purposes hereof
be deemed to be an independent contractor and shall, unless otherwise provided
or authorized, have no authority to act for or represent the Series or the
Manager in any way or otherwise be deemed an agent of the Series or the Manager.
9. Liability. Except as may otherwise be provided by the 1940 Act or
other federal securities laws, neither the Sub-Adviser nor any of its officers,
directors, partners, employees or agents (the "Indemnified Parties") shall be
subject to any liability to the Manager, the Trust, the Series or any
shareholder of the Series for any error of judgment, any mistake of law or any
loss arising out of any investment or other act or omission in the course of,
connected with, or arising out of any service to be rendered under this
Agreement, except by reason of willful misfeasance, bad faith or gross
negligence in the performance of the Sub-Adviser's duties or by reason of
reckless disregard by the Sub-Adviser of its obligations and duties hereunder.
The Manager shall hold harmless and indemnify the Sub-Adviser for any loss,
liability, cost, damage or expense (including reasonable attorneys fees and
costs) arising from any claim or demand by any past or present shareholder of
the Series that is not based upon the obligations of the Sub-Adviser under this
Agreement.
10. Effective Date and Termination. This Agreement shall become
effective as of the date of its execution, and
a. unless otherwise terminated, this Agreement shall continue
in effect for two years from the date of execution, and from year to
year thereafter so long as such continuance is specifically approved at
least annually (i) by the Board of Trustees of the Trust or by vote of a
majority of the outstanding voting securities of the Series, and (ii) by
vote of a majority of the trustees of the Trust who are not interested
persons of the Trust, the Manager or the Sub-Adviser, cast in person at
a meeting called for the purpose of voting on such approval;
b. this Agreement may at any time be terminated on sixty days'
written notice to the Sub-Adviser either by vote of the Board of
Trustees of the Trust or by vote of a majority of the outstanding voting
securities of the Series;
<PAGE>
c. this Agreement shall automatically terminate in the event of
its assignment or upon the termination of the Advisory Agreement;
d. this Agreement may be terminated by the Sub-Adviser on ninety
days' written notice to the Manager and the Trust, or by the Manager on
ninety days' written notice to the Sub-Adviser.
Termination of this Agreement pursuant to this Section 10 shall be
without the payment of any penalty.
11. Amendment. This Agreement may be amended at any time by mutual
consent of the Manager and the Sub-Adviser, provided that, if required by law,
such amendment shall also have been approved by vote of a majority of the
outstanding voting securities of the Series and by vote of a majority of the
trustees of the Trust who are not interested persons of the Trust, the Manager
or the Sub-Adviser, cast in person at a meeting called for the purpose of voting
on such approval.
12. Certain Definitions. For the purpose of this Agreement, the terms
"vote of a majority of the outstanding voting securities," "interested person,"
"affiliated person" and "assignment" shall have their respective meanings
defined in the 1940 Act, subject, however, to such exemptions as may be granted
by the Securities and Exchange Commission under the 1940 Act.
13. General.
a. The Sub-Adviser may perform its services through any
employee, officer or agent of the Sub-Adviser, and the Manager shall not
be entitled to the advice, recommendation or judgment of any specific
person; provided, however, that the persons identified in the prospectus
of the Series shall perform the day-to-day portfolio management duties
described therein until the Sub-Adviser notifies the Manager that one or
more other employees, officers or agents of the Sub-Adviser, identified
in such notice, shall assume such duties as of a specific date.
<PAGE>
b. If any term or provision of this Agreement or the
application thereof to any person or circumstances is held to be invalid
or unenforceable to any extent, the remainder of this Agreement or the
application of such provision to other persons or circumstances shall
not be affected thereby and shall be enforced to the fullest extent
permitted by law.
c. This Agreement shall be governed by and interpreted in
accordance with the laws of the Commonwealth of Massachusetts.
NEW ENGLAND FUNDS MANAGEMENT, L.P.
By NEF Corporation, its general partner
By: /s/ Bruce R. Speca
_________________________
Name: Bruce R. Speca
Title: Executive Vice President
BACK BAY ADVISORS, L.P.
By Back Bay Advisors, Inc.,
its general partner
By: /s/ Charles T. Wallis
________________________________
Name: Charles T. Wallis
________________________________
Title: President
________________________________
EXHIBIT-99.B9D:
POWERS OF ATTORNEY FOR TRUSTEES, DANIEL M. CAIN AND RICHARD DARMAN
<PAGE>
POWER OF ATTORNEY
I, the undersigned, hereby constitute Edward A. Benjamin, Frank Nesvet,
Henry L.P. Schmelzer and Robert P. Connolly, each of them singly, my true and
lawful attorneys, with full power to them and each of them to sign for me, and
in my name in the capacity indicated below, any and all registration statements
and any and all amendments thereto to be filed with the Securities and Exchange
Commission for the purpose of registering from time to time investment companies
of which I am now or hereafter a Director or Trustee and for which Capital
Growth Management Limited Partnership, Back Bay Advisors, L.P., Loomis, Sayles &
Company, L.P., New England Funds Management, L.P., Westpeak Investment Advisors,
L.P. and/or any other affiliate of New England Mutual Life Insurance Company
serves as adviser, sub-adviser or co-adviser, registering the shares of such
companies and generally to do all such things in my name and in my behalf to
enable such registered investment companies to comply with the provisions of the
Securities Act of 1933, as amended, and the Investment Company Act of 1940, as
amended, and all requirements and regulations of the Securities and Exchange
Commission, hereby ratifying and confirming my signature as it may be signed by
my said attorneys and any and all registration statements and amendments
thereto.
Witness my hand on the 1st day of April, 1996.
/s/DANIEL M. CAIN
------------------------
Daniel M. Cain - Trustee
<PAGE>
POWER OF ATTORNEY
I, the undersigned, hereby constitute Edward A. Benjamin, Frank Nesvet,
Henry L.P. Schmelzer and Robert P. Connolly, each of them singly, my true and
lawful attorneys, with full power to them and each of them to sign for me, and
in my name in the capacity indicated below, any and all registration statements
and any and all amendments thereto to be filed with the Securities and Exchange
Commission for the purpose of registering from time to time investment companies
of which I am now or hereafter a Director or Trustee and for which Capital
Growth Management Limited Partnership, Back Bay Advisors, L.P., Loomis, Sayles &
Company, L.P., New England Funds Management, L.P., Westpeak Investment Advisors,
L.P. and/or any other affiliate of New England Mutual Life Insurance Company
serves as adviser, sub-adviser or co-adviser, registering the shares of such
companies and generally to do all such things in my name and in my behalf to
enable such registered investment companies to comply with the provisions of the
Securities Act of 1933, as amended, and the Investment Company Act of 1940, as
amended, and all requirements and regulations of the Securities and Exchange
Commission, hereby ratifying and confirming my signature as it may be signed by
my said attorneys and any and all registration statements and amendments
thereto.
Witness my hand on the 1st day of April, 1996.
RICHARD DARMAN
------------------------
Richard Darman - Trustee
EXHIBIT-99.B10:
OPINION AND CONSENT OF COUNSEL
<PAGE>
ROPES & GRAY
One International Place
Boston, MA 02110-2624
(617) 951-7000
Fax: (617) 951-7050
August 22, 1996
New England Cash Management Trust
399 Boylston Street
Boston, Massachusetts 02116
Ladies and Gentlemen:
You have informed us that you propose to offer and sell from time to
time 110,078,279 of your shares of beneficial interest, no par value, of your
Money Market Series and your U.S. Government Series (the "Shares"), for cash or
securities at the net asset value per share, determined in accordance with your
By-Laws, which Shares are in addition to your shares of beneficial interest
which you have previously offered and sold or which you are currently offering.
We have examined your Fourth Amended and Restated Agreement and
Declaration of Trust and Amendments Nos. 1 and 2 thereto (together, the
"Agreement and Declaration of Trust") on file in the office of the Secretary of
State of The Commonwealth of Massachusetts and are familiar with the actions
taken by your Trustees to authorize the issuance and sale from time to time of
your authorized and unissued shares of beneficial interest at not less than net
asset value. We have also examined a copy of your By-Laws and such other
documents, receipts and records as we have deemed necessary for the purposes of
this opinion.
Based upon the foregoing, we are of the opinion that:
1. New England Cash Management Trust (the "Trust") is a legally
organized and validly existing voluntary association with transferable shares of
beneficial interest under the laws of The Commonwealth of Massachusetts and is
authorized to issue an unlimited number of shares of beneficial interest of each
of your Money Market Series and your U.S.
Government Series.
2. Upon the issue of any of the Shares for cash or securities at net
asset value, and the receipt of the appropriate consideration therefor as
provided in your By-Laws, such Shares so issued will be validly issued, fully
paid and nonassessable by the Trust.
<PAGE>
New England Cash
Management Trust -2- August 22, 1996
The Trust is an entity of the type commonly known as a "Massachusetts
business trust." Under Massachusetts law, shareholders could, under certain
circumstances, be held personally liable for the obligations of the Trust.
However, the Agreement and Declaration of Trust disclaims shareholder liability
for acts or obligations of the Trust and requires that notice of such disclaimer
be given in each agreement, obligation or instrument entered into or executed by
the Trust or its Trustees. The Agreement and Declaration of Trust provides for
indemnification out of the property of the particular series of shares for all
loss and expense of any shareholder of that series held personally liable for
the obligations of the Trust solely by reason of his or her being or having been
such a shareholder. Thus, the risk of a shareholder's incurring financial loss
on account of shareholder liability is limited to circumstances in which the
series of shares itself would be unable to meet its obligations.
We understand that this opinion is to be used in connection with the
registration of the Shares for offering and sale pursuant to the Securities Act
of 1933, as amended, and the provisions of Rule 24e-2 under the Investment
Company Act of 1940, as amended. We consent to the filing of this opinion with
and as part of Post-Effective Amendment No. 31 to your Registration Statement
No. 2-68348.
Very truly yours,
Ropes & Gray
EXHIBIT-99.B11:
CONSENT OF PRICE WATERHOUSE LLP
<PAGE>
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the incorporation by reference in the Prospectus and
Statement of Additional Information constituting parts of this Post-Effective
Amendment No. 31 to the registration statement on Form N-1A (the "Registration
Statement") of our report dated August 8, 1996, relating to the financial
statements and financial highlights appearing in the June 30, 1996 Annual
Report to Shareholders of New England Cash Management Trust, which are
also incorporated by reference into the Registration Statement. We also consent
to the references to us under the heading "Financial Highlights" in the
Prospectus and under the headings "Independent Accountants" and "Financial
Statements" in the Statement of Additional Information.
Price Waterhouse LLP
Boston, Massachustts
August 21, 1996
EXHIBIT-99.B14:
NEW ENGLAND FUNDS, L.P. TAX SHELTERED CUSTODIAL ACCOUNT AGREEMENT; NEW
ENGLAND FUNDS, L.P. KEOGH PLAN; NEW ENGLAND FUNDS, L.P. SIMPLIFIED EMPLOYEE
PENSION PLAN; NEW ENGLAND FUNDS, L.P. INDIVIDUAL RETIREMENT ACCOUNT PROTOTYPE;
NEW ENGLAND FUNDS, L.P. 401(K) PLAN PROTOTYPE
<PAGE>
#
1
- -------------------------------------------------------------------------------
New England Funds, L.P.Tax-Sheltered Custodial Account Agreement
- -------------------------------------------------------------------------------
This Tax-Sheltered Custodial Account Agreement (the "Agreement") is intended to
establish a separate investment custodial account under a qualified Tax
Sheltered Annuity Program (the "TSA Program") sponsored by the Employer under
Section 403(b) of the Internal Revenue Code (the "Code"). The Employer,
Participant and Custodian agree that the custodial account is intended to
satisfy the requirements of Section 403(b)(7) of the Code, and that
Contributions made thereto by the Employer on behalf of the Participant will be
accepted by the Custodian for investment in mutual fund shares for the benefit
of the Participant and/or his Beneficiaries. The Employer, Participant and
Custodian agree to perform any and all acts, and to execute any and all
documents which may be necessary or desirable for the proper administration of
this Agreement or any of its provisions.
- -------------------------------------------------------------------------------
ARTICLE I
Definition of Terms
Where used in this Agreement, the following words and phrases shall have the
following meanings unless the context clearly indicates otherwise. Singular
nouns may include the plural and the masculine gender the feminine, as
appropriate.
1.01 "Beneficiary" shall mean a person or entity designated by a
Participant to receive benefits from the Participant Account upon
the death of the Participant. In the case of a married Participant, the
Beneficiary shall be his Spouse unless the designation of a non-Spouse
Beneficiary is consented to by the Spouse in accordance with Section 5.08 of
this Agreement.
1.02 "Code" shall mean the Internal Revenue Code of 1986, and regulations
thereunder, as amended from time to time.
1.03 "Contributions" shall mean any amount received by the Custodian for
investment under this Agreement, including Salary Reduction
Contributions, Employer Contributions, and contributions resulting from a
rollover and/or a transfer as provided for in Article III of this Agreement.
1.04 "Custodian" shall mean the State Street Bank and Trust Company, or any
qualified successor custodian which meets the requirements of Section 6.01 of
this Agreement.
1.05 "Employee" shall mean a person who performs services for the Employer and
who is eligible to participate in the Employer's TSA program. A plan which
provides for Employer contributions may not require as a condition of
participation, that an employee complete a period of service with the
employer extending beyond the later of the following dates
(i) The date on which the employee attains the age of 21; or
(ii) The date on which the employee completes one year of service.
1.06 "Employer" shall mean the Employer named in the Employer Affiliation
Agreement, who must be an eligible organization under Section 403(b)(1)(A) of
the Code for purposes of purchasing tax sheltered annuities for its eligible
Employees.
1.07 "Employer Affiliation Agreement" or "Affiliation Agreement" shall mean the
agreement in which the Employer adopts this Agreement and appoints a
Custodian to the custodial account established thereunder.
1.08 "Employer Contributions" shall mean contributions attributable to the
Employer which are discretionary in nature and are not made pursuant to a
Salary Reduction Agreement.
1.09 "New England Funds" shall mean those Massachusetts business trusts
registered as open-end management investment companies for a series of mutual
fund shares which may be purchased through New England Funds, L.P. The term
New England Funds shall include New England Funds Trust I, New England Funds
Trust II, New England Cash Management Trust and New England Tax Exempt Money
Market Trust.
1.10 New England Funds, L.P., is a Massachusetts corporation which is a
broker-dealer and which is an indirect subsidiary of New England Mutual Life
Insurance Company.
1.11 "Participant" shall mean an Employee who is eligible to participate in the
Employer's TSA program and for whom the Custodial Account under this
Agreement is established.
1.12 "Participant Custodial Account" or "Participant's Account" or "Account"
shall mean the custodial account established under this Agreement which is
intended to satisfy the requirements of Section 401(f)(2) of the Code, under
which Contributions attributable to the Employer are made for the benefit of
the Participant.
1.13 "Participant Investment Application" or "Investment Application" shall mean
the New England Funds form used to purchase shares of New England Funds with
the Contributions made to the Custodial Account as specified by the
Participant in such form.
1.14 "Salary Reduction Contributions" shall mean contributions attributable to
the Employer that are made to the Participant's Account pursuant to a Salary
Reduction Agreement.
1.15 "Salary Reduction Agreement" is a separate written agreement between the
Employer and the Participant to either reduce the Participant's salary or
forego increases so that such amounts could be contributed to the
Participant's Account.
1.16 "Spouse" shall mean the Spouse of the Participant; provided, however, that
to the extent required by any qualified domestic relations order (as defined
in Section 414(p) of the Code), a former Spouse of the Participant shall be
treated as Spouse of the Participant.
1.17 "TSA Custodial Account Agreement" or "Agreement" shall mean this Agreement,
together with the Employer Affiliation Agreement and each Participant
Investment Application, as hereby incorporated.
1.18 "Withdrawal" shall mean the partial liquidation of a Participant's Account
by virtue of the Participant's attainment of age 591/2 or financial hardship
as provided in Section 5.01 and 5.02 of this Agreement.
ARTICLE II
Establishment of Custodial Account
2.01 Participant's Custodial Account. Upon receipt of a signed Employer
Affiliation Agreement, Participant Investment Application and an initial
Contribution, the Custodian shall establish a separate investment account in
the name of the Participant and such account shall be maintained for the
exclusive benefit of the Participant and/or his Beneficiaries. The
Participant's Account shall include Contributions and such assets as may be
purchased by the Custodian on behalf of the Participant.
2.02 Participant's Rights are Nonforfeitable and Nontransferable. Except for
fees, expenses and any other charges as described in Section 6.04 of this
Agreement, the Participant's interest in the balance of his Account shall be
nonforfeitable and nontransferable by the Participant. The Participant's
Account shall not be subject to assignment, attachment, execution,
garnishment, pledge, encumbrance, charge, other legal or equitable process,
or otherwise alienable. Any attempt at such shall be void; provided, however,
the Custodian shall not be precluded from complying with a qualified domestic
relations order (as defined in Section 414(p) of the Code) with respect to
payment of alimony and/or child support. The Participant's Account shall not
be subject to the claims of the Employer's creditors.
ARTICLE III
Contributions
3.01 Discretionary Employer Contributions. The Employer may contribute to the
Participant's Account an amount which has been allocated according to the
allocation method specified in the Employer Affiliation Agreement which
allocation shall be nondiscriminatory within the meaning of Section 403(b)(1)
of the Code. Such Employer's Contributions shall be subject to the following
limitations:
(A) Payment. Employer Contributions made under this Agreement must be paid to
the Custodian in one or more installments not later than December 31 of
each calendar year.
(B) Nonforfeitable. Such Employer Contributions shall be fully vested and
nonforfeitable when made to the Participant's Account.
(C) Participant's Investment Direction. Employer Contributions shall be under
the investment direction of the Participant in accordance with Section
4.02 of this Agreement.
(D) Excess Contributions Resulting from Employer Contributions. In the event
the nondiscriminatory testing under Section 403(b)(12) of the Code
results in excess contributions in the Participant's Account, the
Employer must notify the Participant of such excess amounts and must
instruct the Participant to withdraw such amounts (and any earnings
thereon) as Excess Contributions in the manner prescribed in Section 3.08
of this Agreement.
3.02 Salary Reduction Contributions. The Employer shall make available to all
eligible Employees the opportunity to make Salary Reduction Contributions on
a basis that does not favor highly compensated Employees within the meaning
of Code Section 414(q). Each Participant may make Salary Reduction
Contributions by electing to reduce annually his or her salary by more than
$200 under a written Salary Reduction Agreement. Any such Salary Reduction
Agreement shall provide that the Participant agrees to forego an increase in
salary or to accept a reduction in salary from the Employer, equal to any
whole percentage or dollar amount of her/his Compensation per payroll period,
but in no event shall the maximum deferral amount under such agreement exceed
the dollar limitations described in Section 3.03 of this Agreement. While
such Agreement is in effect, the Employer will make Salary Reduction
Contributions to the Participant's Account on behalf of the Participant in an
amount equal to the total amount by which the Participant's salary is reduced
pursuant to the Salary Reduction Agreement.
3.03 Limitation of the Salary Reduction Agreement. A Salary Reduction Agreement
to which the Participant's Account relates shall be subject to the following
additional limitations:
(A) The maximum deferral amount under a Salary Reduction Agreement cannot
exceed $9500 for any given taxable year of the Participant, except that
such Participant, if eligible, may increase the maximum deferral amount
in accordance with the special election available under Section 402(g)(8)
of the Code. Any Salary Reduction Contributions in excess of $9500 shall
be treated by the Custodian as permissible increases available to the
Participant under Section 402(g)(8) of the Code, unless otherwise
directed by the Participant to treat such amounts as Excess Deferrals
under Section 3.08 of this Agreement.
1
<PAGE>
(B) Any Salary Reduction Agreement between the Employer and the Participant
shall be irrevocable only as to amounts earned by the Participant after
such agreement becomes effective.
(C) The Participant may not make more than one Salary Reduction Agreement
with the Employer during any taxable year of the Participant.
(D) Any such Salary Reduction Agreement may be terminated as of the end of
any payroll period by either the Employer or Participant. (E) Salary
Reduction Contributions shall be fully vested and nonforfeitable when
made to the Participant's Account.
3.04 Annual Contribution Limit. The annual contribution limit applicable to the
sum of Employer Contributions and Salary Reduction Contributions made in any
taxable year of the Participant, may not exceed the Participant's exclusion
allowance, as defined in Section 403(b)(2) of the Code, except that such
Participant may elect to have the exclusion allowance determined under
Section 415(c) of the Code. The Participant shall be responsible for
computing his exclusion allowance under Sections 403(b)(2), or if applicable,
under Section 415(c) of the Code, and shall promptly notify the Custodian
when the sum of Employer Contributions and Salary Reduction Contributions
exceeds the applicable exclusion allowance of the Participant. In that event,
the Participant shall direct the Custodian to distribute the amounts in
excess of the exclusion allowance as Excess Contributions under Section 3.08
of this Agreement.
3.05 Transfers to and from Other Accounts. With the consent of the Custodian,
the proceeds from an existing annuity contract or custodial account described
in Section 403(b) of the Code may be transferred into the Participant's
Account. However, the balance of the Participant's Account may only be
transferred into another custodial account described in Section 403(b)(7) of
the Code unless otherwise permitted by law, regulation or administrative
pronouncement. Any transfer described in this Section shall be made only
after receipt of documents reasonably required by the Custodian to effect the
transfer.
3.06 Rollover Contributions. The Participant may make a rollover contribution to
the Participant's Account to the extent that such contribution qualifies in
all respects as a rollover contribution within the meaning of Section
403(b)(8) of the Code or any other applicable provisions of the Code in
effect at the time the contribution is made. Rollover contributions shall be
accepted by the Custodian upon receipt of documents reasonably required by
the Custodian to effect the rollover into the Participant's Account.
3.07 Receipt and Acceptance of Contributions. Contributions attributable to the
Employer and Contributions resulting from transfers and roll-overs made
pursuant to Sections 3.05 and 3.06 of this Agreement, shall be credited to
the Participant's Account upon receipt by the Custodian and shall be invested
in accordance with the provisions of Article IV.
3.08 Responsibility for Excess Deferrals and Excess Contributions. The
Participant shall be responsible for determining the maximum deferral amount
described in Section 3.03 of this Agreement, the annual contribution limit as
described in Section 3.04 of this Agreement, and for making the elections
related thereto under Sections 402(g), 403(b), and/or 415(c) of the Code. In
the event that there are amounts in excess of the permissible limits
described in Sections 3.03 and 3.04 of this Agreement, the Participant shall
direct the Custodian to treat such excess as either Excess Deferrals or
Excess Contributions.
(A) Excess Deferrals. For purposes of this Agreement, Excess Deferrals shall
mean Salary Reduction Contributions made in a given taxable year in
excess of $9500 which are not treated by the Participant as permissible
increases to the maximum deferral amount provided under Section 402(g) of
the Code. The Participant shall direct the Custodian in writing no later
than April 1st of the following tax year to which the Excess Deferrals
relate, to distribute such Excess Deferrals and earnings thereon no later
than April 15th of that year. If the Participant fails to notify the
Custodian on a timely basis and the Excess Deferrals and earnings thereon
are not distributed as of that April 15th, the Participant shall report
such amounts to the Internal Revenue Service as income both in the year
the Excess Deferrals arose and in the year they are actually distributed
from the Participant's Account. Such Excess Deferrals shall also reduce
the Participant's future exclusion allowance.
(B) Excess Contributions. For purposes of this Agreement, Excess
Contributions shall mean all Contributions attributable to the Employer
which exceed the annual contribution limit described in Section 3.04 of
this Agreement. In the case of a highly compensated Participant, Excess
Contributions shall also mean excess discretionary Employer Contributions
as determined by the Employer pursuant to Section 3.01 of this Agreement
and in accordance with Section 401(m) of the Code. The Employer shall be
responsible for notifying the Participant to withdraw such excess
discretionary Employer Contributions in the manner prescribed herein. The
Participant shall direct the Custodian in writing no later than April 1st
of the tax year following that in which the Excess Contributions were
made, to distribute such Excess Contributions and earnings thereon no
later than April 15 of that same year. If the Participant fails to notify
the Custodian on a timely basis and such Excess Contributions and
earnings thereon are not distributed as of that date, then the
Participant shall report such amounts to the Internal Revenue Service as
income for the year in which the Excess Contribution arose and shall be
subject to any excise tax imposed by Section 4973 of the Code.
ARTICLE IV
Investment of Contributions
4.01 Types of Investments. Contributions under this Agreement shall be invested
at the direction of the Participant in shares of one or more New England
Funds, which shares may be purchased through New England Funds, L.P.
4.02 Participant to Direct Investments. The Participant shall direct the
Custodian to invest the initial Contribution made to the Participant's
Account in the manner specified in the Participant Investment
Application. Thereafter, any subsequent Contributions shall be invested
by the Custodian in accordance with the written instructions of the
Participant.
(A) Exchange of Shares in the New England Funds. The Participant may at any
time direct the Custodian in writing to exchange any portion of shares in
the New England Funds held in the Participant's Account for other shares
in the New England Funds having different investment objectives, if such
exchange is permitted by the current prospectus.
(B) Limitation of Liability for Investment Losses. The Custodian shall have
no duty to look beyond the written instructions received by it from the
Participant and shall in no event be responsible for any loss incurred
with respect to any investments made or retained in accordance with the
directions of the Participant.
4.03 Reinvestment of Earnings. All income, dividends, capital gains or other
earnings on the shares of New England Funds in the Participant's Account
shall be reinvested in additional full and/or fractional shares of New
England Funds which shall be credited to the Participant's Account. If such
earnings may be received in shares or in cash, the Custodian shall elect to
receive such earnings in additional shares.
4.04 Ownership of Investments. All shares in the New England Funds purchased for
a Participant's Account shall be registered in the name of the Custodian or
its nominee.
4.05 Information to Participants. The Custodian shall deliver in accordance with
the requirements of applicable law, to the Participant any notices of
Shareholders' meetings, proxies, and proxy-soliciting materials, prospectuses
and annual and other reports to shareholders relating to the shares of the
New England Funds held in the Participant's Account, which have been received
by the Custodian with respect to such investments.
4.06 Voting Powers. With respect to shares of the New England Funds, the
Participant may direct the Custodian as to the manner in which any shares
(including fractional shares) or units held by the Custodian for the
Participant's Account shall be voted with respect to any matters being voted
upon by the entity which issued such shares. All such directions by the
Participant shall be in writing, on a form approved by the Custodian, signed
by the Participant and delivered to the Custodian within the time prescribed
by it. The Custodian shall not vote in the absence of such directions.
ARTICLE V
Withdrawals and Liquidation
5.01 Withdrawals after Age 591/2. After the Participant has attained age 591/2,
the Participant may at any time make a Withdrawal from his Account in cash by
submitting a written request to the Custodian with such proof of age as the
Custodian may require.
5.02 Hardship Withdrawals. If the Participant encounters financial hardship
within the meaning of Section 403(b)(7)(A)(ii) of the Code, whether before or
after age 591/2, the Participant may withdraw only the Salary Reduction
Contributions (not including earnings thereon) made to the Participant's
Account. This restriction on hardship withdrawal will not apply to the
Participant's Account balance as of December 31, 1988. The Participant must
submit a written request to the Custodian with evidence satisfactory to the
Custodian that the Withdrawal is necessary to meet an immediate and heavy
financial need of the Participant created by the hardship, and that the
amount requested is not reasonably available from other resources of the
Participant. Following any Withdrawal under this Section, the Custodian may
refuse to accept additional Contributions to the Participant's Account in the
calendar year of the Withdrawal or in the succeeding calendar year.
5.03 Liquidation of Participant's Account.
(A) Distribution Event. The Participant may elect to have the assets in the
Participant's Account fully liquidated, or may commence distribution upon
any of the following events:
(1) The Participant's attainment of age 591/2.
(2) The Participant's becoming disabled such that he is unable to engage
in any substantial gainful activity by reason of a medically
determinable physical or mental impairment which may be expected to
result in death or to be of long-continued and indefinite duration,
provided that the disability satisfies Section 403(b)(7)(ii) of the
Code.
(3) The Participant's separation from service.
(4) The Participant's death.
(B)Notice of the Occurrence of a Distribution Event. The Participant, the
Employer or, upon death, the Participant's Beneficiary or legal
representative, must provide the Custodian with written notice of the
occurrence of one of the foregoing events, with any other documentation
deemed necessary to effect the liquidation of a Participant's Account. In
the case of disability, such documentation shall include a physician's
certificate or opinion that the conditions of clause (2) above are
satisfied.
2
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5.04 Distribution of Benefits.
(A)Account Liquidation Methods. Except as otherwise provided below, upon
proper notification of a Distribution Event as described in Section 5.03
of this Agreement, the Participant or Beneficiary may elect to liquidate
the Account under one of the prescribed methods:
(1) One lump-sum payment in cash;
(2) Periodic Payments over a period certain in monthly, quarterly,
semiannual, or annual cash installments, such payments to be provided
under a cash installment plan available through the Custodian under
the rules of the New England Funds whose shares are held in the
Participant's Account.
5.05 Minimum Distribution Amount. The entire interest of the individual for
whose benefit the contract is maintained (Participant) will be distributed or
commence to be distributed, no later than the first day of April following
the calendar year in which such individual attains age 701/2 (required
beginning date), over (a) the life of such individual, or the lives of such
individual and his or her designated beneficiary, or (b) a period certain not
extending beyond the life expectancy of such individual and his or her
designated beneficiary. Payments must be made in periodic payments at
intervals of no longer than one year. In addition, payments must be either
non-increasing or they may increase only as provided in Q&A F-3 of Section
1.401 (a)(9)-1 of the Proposed Income Tax Regulations.
All distributions made hereunder shall be made in accordance with the
requirements of Section 401(a)(9) of the Code, including the incidental death
benefit requirements of Section 401(a)(9)(G) of the Code, and the regulations
thereunder, including the minimum distribution incidental benefit requirement
of section 4.401(a)(9)-2 of the Proposed Income Tax Regulations.
Life expectancy is computed by use of the expected return multiples in Tables
V and VI of Section 1.72-9 of the Income Tax Regulations. Unless otherwise
elected by the individual by the time distributions are required to begin,
life expectancies shall be recalculated annually. Such election shall be
irrevocable by the individual and shall apply to all subsequent years. The
life expectancy of a non-spouse beneficiary may not be recalculated. Instead,
life expectancy will be calculated using the attained age of such beneficiary
during the calendar year in which the individual attains age 701/2, and
payments for subsequent years shall be calculated based on such life
expectancy reduced by one for each calendar year which has elapsed since the
calendar year life expectancy was first calculated.
5.06 (a) Distributions 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 individual's death.
(b) Distributions 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 individual's death except to the extent that an election is
made to receive distributions in accordance with (1) or (2) below:
(1) If the Participant interest is payable to a designated
beneficiary, then the entire interest of the Participant may be
distributed 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.
(2) If the designated beneficiary is the Participant's surviving
spouse, the date distributions are required to begin in accordance
with (1) above shall not be earlier than the later of (A) December
31 of the calendar year immediately following the calendar year in
which the Participant died or (B) December 31 of the calendar year
in which the Participant would have attained age 70 1/2.
(3) If the designated beneficiary is the Participant's surviving
spouse, the spouse may rollover the account into his or her
Individual Retirement Account (IRA).
(c) Life expectancy is computed by use of the expected return multiples in
Tables V and VI of Section 1.72-9 of the Income Tax Regulations. For
purposes of distributions beginning after the Participant's death,
unless otherwise elected by the surviving spouse by the time
distributions are required to begin, life expectancies shall be
recalculated annually. Such election shall be irrevocable by the
surviving spouse and shall apply to all subsequent years. In the case
of any other designated beneficiary, life expectancies shall be
calculated using the attained age of such beneficiary during the
calendar year in which distributions are required to begin pursuant to
this section, and payments for any subsequent calendar year shall be
calculated based on such life expectancy reduced by one for each
calendar year which has elapsed since the calendar year life
expectancy was first calculated.
(d)Distributions under the section are considered to have begun if
distributions are made on account of the Participant reaching his or
her required beginning date or if prior to the required beginning date
distributions irrevocably commence to an individual over a period
permitted and in an annuity form acceptable under Section 1.401(a)(9)
of the Regulations.
5.07 Designation of Beneficiary by Participant. If the plan contains employer
contributions, a married Participant must designate his Spouse as the
Beneficiary unless such Participant obtains spousal consent to name a
non-Spouse Beneficiary. Spousal consent must be given in writing by the
Participant's Spouse. Further, the Spouse's consent shall be irrevocable and
shall acknowledge the specific non-Spouse Beneficiary designated by the
Participant, including the designation of classes of Beneficiaries. If the
Participant's Spouse fails to provide written consent as to the designation
of a non-Spouse Beneficiary, then one half of the Participant's account
balance shall be paid automatically to the Surviving Spouse without regard to
the named Beneficiary who shall be entitled to receive only the remaining
half of the Participant's account balance upon the Participant's death. The
Participant may change the Beneficiary designation at any time prior to his
death by written instrument satisfactory to the Custodian. Such instrument
shall be dated and signed by the Participant and filed with the Custodian.
5.08 Benefits Payable by Custodian. The Custodian shall have full authority to
carry out the instructions of the Participant or Beneficiary for the payment
of such benefits. Upon the Participant's death, the balance in the
Participant's Account shall be distributed in accordance with the last valid
beneficiary designation form, but to the extent such designation is not
dispositive, such amounts shall be distributed to the Participant's surviving
Spouse or, if none, to the Participant's estate. All beneficiary designation
forms shall be considered to be part of this Agreement and shall be enforced
and administered according to the laws of the State in which the Custodian is
located. 5.09 Direct Rollovers and Mandatory Withholding. For distributions
made on or after January 1, 1993, a distributee may elect to have any portion
of an Eligible Rollover Distribution paid in a Direct Rollover to an Eligible
Retirement Plan specified by the Distributee. For purposes of this Section:
(a) "Direct Rollover" shall mean a payment by the Plan directly to an
Eligible Retirement Plan.
(b) "Distributee" shall mean an Employee or former Employee, and Employee's
or former Employee's Surviving Spouse and the Employee's for former
Employee's Spouse or former Spouse who is the alternate payee under a
qualified Domestic Relations Order, as defined in s414(p) of the Code.
(c)"Eligible Retirement Plan" shall mean an individual retirement account
described in s408(a) of the Code, an individual retirement annuity
described in s408(b) of the Code, or a tax-sheltered annuity, described
in s403(b) of the Code, that accepts the Distributee's Eligible Rollover
Distribution to the Surviving Spouse an "Eligible Retirement Plan" shall
mean an individual retirement account or individual retirement annuity.
(d) "Eligible Rollover Distribution" shall mean any distribution of all or
any portion of the balance to credit of the Distributee, except that an
Eligible Rollover Distribution does not include: any distribution that is
one of a series of substantially equal period (at least annually)
payments made for the life (or life expectancy) of the Distributee and
the Distributee's designated beneficiary, or for a specified period of 10
years or more; any distribution to the extent such distributions are
required under s401(a) (9) of the Code; and the portion of any
distribution that is not includible in gross income. Eligible Rollover
Distributions which are not rolled over to an Eligible Retirement Plan or
otherwise exempt shall be subject to mandatory Federal withholding of tax
at the rate of 20%".
ARTICLE VI
Custodian
6.01 Requirements for Appointment. The Custodian and any successor Custodian
appointed to serve under this Agreement must be a bank or a person who has
been approved by the Commissioner of Internal Revenue under Section
1.401-12(n) of the Internal Revenue Service Regulations.
6.02 Duties. The Custodian shall be an agent for the Employer and the
Participant to receive and to invest Contributions as directed by the
Participant under Article IV hereof, hold and distribute such investments,
and keep adequate records and report thereon relating to transactions
affecting the Participant's Account, all in accordance with this Agreement.
The Custodian shall file with the Internal Revenue Service returns, reports,
forms or other information which may relate to Contributions and/or
distributions from the Participant's Account.
The Custodian may perform any of its administrative duties through other
persons designated by the Custodian from time to time. When State Street Bank
and Trust Company serves as Custodian, the Custodian intends to delegate
certain administrative functions among its partially owned subsidiary, Boston
Financial Data Services, Inc., and New England Funds, L.P. No such delegation
or future change therein shall be considered an amendment of this Agreement.
Not later than sixty (60) days after the close of each calendar year, after
the Custodian's resignation or removal pursuant to Section 6.05 of this
Agreement, or termination by the Custodian of this Agreement pursuant to
Section 6.06, the Custodian shall provide the Participant or his Beneficiary
with a written statement of the transactions in the Participant's Account
during such periods, including Contributions made, dividends paid, and
distributions made. The Custodian shall be released from all liability to the
Participant or any third party as to matters contained in such statement
unless the Participant files written objections with the Custodian within
thirty (30) days after the Custodian provides such statement.
6.03 Limitations of Custodian's Liabilities and Duties. The Custodian shall be
fully protected in acting or omitting to take any action, in reliance upon
any order, notice, request, consent, certificate or other direction from the
Employer, the Participant or their legal representatives believed by the
Custodian to be genuine and properly given. If such instructions or
directions are not timely received as required under this Agreement, or if
received, are in the opinion of the Custodian unclear, the Custodian shall
not be liable for loss of income, or decrease in value of assets, and shall
not be liable for interest, pending receipt of further written instructions
or other clarification. The Custodian shall not be liable and assumes no
responsibility for: the determination of Contribution amounts and the
collection of Contributions; the deductibility of any Contribution or its
propriety under this Agreement; the purpose, propriety, amount, or timing of
any distribution under the Agreement; or the selection of investments and any
losses incurred, which matters are the sole responsibility of the Participant
or his Beneficiary under Sections 3.03, 3.04, 3.08 and 4.02 of this
Agreement.
Furthermore, the Custodian will not be required to effect any transaction by
order of the Participant or his Beneficiary unless and until the requisite
written instructions specifying the occasion for such action are rendered to
the Custodian. The Custodian must be furnished with any and all applications,
certificates, tax waivers, signature guarantees and other documents
(including proof of any legal representative's authority) deemed necessary or
advisable by the Custodian to effect such transaction. The Custodian shall
have no liability to the Participant or his Beneficiary for any tax penalty
or other damages resulting from any inadvertent failure by the Custodian to
make a distribution under this Agreement.
The Custodian shall not be liable for interest on temporary cash balances, if
any, maintained in the Account.
The Custodian shall not be obligated or expected to commence or defend any
legal action or proceeding in connection with this Agreement or such matters
unless agreed upon by the Custodian and the Participant or said legal
representative, and unless fully indemnified for so doing to the Custodian's
satisfaction.
6.04 Fees, Expenses and Taxes; Custodian's Right to Reserve Assets in
Participant's Account. The Custodian is entitled to charge the Participant's
Account for reasonable expenses arising in connection with this Agreement
including the fees specified on its current fee schedule, initially appearing
in the Participant Investment Application. The Custodian may change such fees
on thirty (30) days written notice to the Participant.
The following shall constitute a charge to the Participant, or, at the
Custodian's option, to the Participant's Account, and shall be paid from the
assets held in such Account by means of liquidation of shares in the New
England Funds: the Custodian's fees; and taxes incurred in connection with
the investment and reinvestment of the assets of the Account; taxes that may
be levied or assessed against such assets; and all other administrative
expenses incurred by the Custodian in the performance of its duties including
fees for legal services rendered to the Custodian.
6.05 Resignation and
Removal. The Custodian may resign by giving at least sixty (60) days written
notice to New England Funds, L.P., the Employer and the Participant. New
England Funds, L.P. may remove the Custodian by giving at least sixty (60)
days written notice to the Custodian. In each case, New England Funds, L.P.
shall designate a successor Custodian qualified under Code Section 403(B)(7)
and Regulation Section 1.401-12(n), which successor Custodian shall accept
such appointment by a writing submitted to the Custodian. Upon request, the
successor Custodian shall submit evidence satisfactory to the Custodian of
its qualification under Regulation Section 1.401-12(n).
Upon receipt by the Custodian of written acceptance of such appointment by
the successor Custodian, the Custodian shall transfer to such successor
Custodian the assets of the Participant's Account and all necessary records
or copies thereof, provided that any successor Custodian shall agree not to
dispose of any records without the Custodian's consent (which shall not be
unreasonably withheld). The Custodian is authorized, however, to retain
whatever assets it reasonably deems necessary for payment of its fees, costs
and expenses, and any other liabilities which constitute a charge on or
against the assets of the Participant's Account or on or against the
Custodian.
After the Custodian has transferred the assets of the Participant's Account
to the successor Custodian, the Custodian shall be relieved of all further
responsibility with respect to this Agreement, the Participant's Account, and
the assets thereof. The Custodian shall not be liable for the acts or
omissions of any successor Custodian.
6.06 Termination by Custodian. The Custodian may terminate this Agreement if,
within sixty (60) days after its resignation or removal pursuant to Section
6.05 hereof, New England Funds, L.P. has not appointed a successor Custodian
which has accepted such appointment. Termination of this Agreement shall be
effected by written notice to the Employer and the Participant and by
distributing all assets in the Participant's Account in cash or in kind to
the Participant (or, at the Participant's request, to another custodial
account established under Section 403(b)(7) of the Code), or, in the event of
his death, to his Beneficiary or Beneficiaries, subject to the Custodian's
right to certain expense charges under Section 6.04 of this Agreement.
ARTICLE VII Amendment and Termination
7.01 Amendment.
(A)Amendments to Comply with Law. New England Funds, L.P. may, with the
approval of the Custodian, amend this Agreement and the documents
incorporated herein, including retroactive amendment, to conform to the
requirements of Section 403(b) of the Code or any other law or regulation
affecting this Agreement. The Employer and Participant shall be deemed to
have consented to any such amendment. New England Funds, L.P. shall give
prompt written notice to the Employer and the Participant of any such
amendment. However, New England Funds, L.P. has no affirmative obligation
to so amend the Agreement.
(B)Other Amendments. Any amendment other than an amendment described in
paragraph (A) above may be proposed by New England Funds, L.P., the
Employer or the Custodian, and shall be effective if agreed to in writing
by New England Funds, L.P., the Employer and the Custodian.
(C)Limitations. Notwithstanding the above provisions concerning amendments,
no amendment of this Agreement shall be made which would:
(1) Cause or permit any part of the assets in the Participant's Account
to be diverted to purposes other than for the exclusive benefit of the
Participant or his Beneficiary or cause or permit any portion of such
assets to revert to or become the property of the Employer;
(2) Place any greater burden on the Custodian without its written
consent;
(3) Retroactively deprive the Participant or his Beneficiary of any
benefit to which he was entitled under this Agreement by reason of
Contributions made prior to the effective date of the amendment,
unless such amendment is necessary to conform the Agreement to, or
satisfy the conditions of any law, governmental regulation or ruling,
or to permit the Participant's Account to meet the requirements of
Section 403(b)(7) of the Code.
7.02 Termination of Agreement.
(A)The Participant or the Employer may terminate this Agreement at any time
by an instrument in writing delivered to the Custodian. Such termination
shall not be effective until and unless the Custodian receives written
instructions from the Participant or the Employer directing that the
assets in the Participant's Account be transferred to another custodial
account established under Section 403(b)(7) of the Code, and receives a
formal acceptance letter from a successor Custodian qualified under
Section 1.041-12(n) of the Regulations.
(B)This Agreement shall not terminate if the Employer named in the
Affiliation Agreement is succeeded by an Employer which meets the
requirements of Section 1.06, and such successor elects in writing with
the written acceptance of the Custodian, to continue the Agreement.
(C)If it is determined by the Internal Revenue Service that this Agreement,
after initially meeting the requirements of Section 403(b)(7) of the Code,
no longer meets those requirements, this Agreement shall terminate. The
assets which are derived from Contributions made while the Agreement met
the requirements of Section 403(b)(7) of the Code, and earnings thereon,
shall continue to be held by the Custodian until written instructions are
received either to transfer the assets of the Participant's Account in
accordance with the preceding Paragraph (A), or to distribute such assets
to the Participant or Beneficiary. Such transfer on distribution will
occur to the Participant within thirty (30) days following the Custodian's
receipt of notice of such failure from the Employer or the Participant,
subject to the Custodian's right to deduct fees and expenses under Section
6.04 of this Agreement.
7.03 Termination of Distribution. This Agreement shall terminate when all assets
held in the Participant's Account have been distributed to the Participant or
Beneficiary.
ARTICLE VIII
Miscellaneous
8.01 Agreement Neither Creates Nor Modifies Contract of Employment. This
Agreement shall not be deemed to create or modify any contract of employment
between the Employer and the Participant.
8.02 Successors. This Agreement shall be binding upon the heirs, executors,
administrators, successors and assigns of any and all parties hereto whether
present or future.
8.03 Applicable Law. This Agreement is accepted by the Custodian in, and shall
be construed and administered in accordance with laws of, the State in which
the Custodian is located.
8.04 New England Funds, L.P. Not Party. Neither New England Funds, L.P. nor New
England Funds whose shares are issued in connection with this Agreement shall
be considered to be a party to this Agreement; they shall be fully protected
in acting in accordance with any written direction of the Custodian and shall
not be required to question any actions directed by the Custodian, except as
otherwise required by law. Neither New England Funds, L.P. nor any New
England Funds whose shares are issued in connection with this Agreement shall
be responsible for the propriety of Contributions, distributions or
investment losses under this Agreement. Under no circumstances will New
England Funds, L.P. or any of the New England Funds be a fiduciary within the
meaning of Section 3(21) of the Employee Retirement Income Security Act of
1974 with respect to the Participant's Account or any plan maintained by the
Employer.
4
<PAGE>
8.05 Cooperation in Carrying Out Agreement. The parties to this Agreement and
all persons claiming any interest whatsoever hereunder agree to perform any
and all acts and to execute any and all documents and paper which may be
necessary or desirable for the proper administration of this Agreement or any
of its provisions.
8.06 Construction. No provision of this Agreement, including the documents
incorporated herein by reference, shall be construed to conflict with any
provision of Treasury Department or Internal Revenue Service regulations,
rulings, releases or other orders which affects its qualification under
Section 403(b)(7) of the Code. It is intended that this Agreement, including
said documents, shall be construed in a manner consistent with that purpose.
Subject to the foregoing provisions of this Paragraph, in the event of any
conflict between this Custodial Agreement and the Employer Affiliation
Agreement or the Participant Investment Application, the provisions of this
Custodial Agreement shall prevail.
8.07 Tax Treatment. Neither the Custodian, New England Funds, L.P., nor any of
the New England Funds have any responsibility with respect to such tax
treatment of any Contributions to or distributions from the Participant's
Account, nor shall any term or provision of this Agreement be construed so as
to place any such responsibility upon any one of them. Furthermore, the
Employer and/or the Participant shall have sole responsibility for filing
with the Internal Revenue Service and/or any other government agency such
returns, reports, forms, and other information as may be required of them.
8.08 Notice. Any notice from the Custodian to the Participant pursuant to this
Agreement shall be effective if sent by first class mail to the address
specified in the Participant Investment Application until the Participant
specifies a different address in a form acceptable to the Custodian. Any
notice from the Participant or Employer to the Custodian pursuant to this
Agreement shall be by first class mail addressed to its home office.
8.09 Change of Name and Address. The Participant shall notify the Custodian
in writing of any change of name or address within thirty
(30) days of such change.
8.10 Separability. If any provision of this Agreement shall be held invalid or
illegal for any reason, such determination shall not affect any remaining
provisions of this Agreement, but this Agreement shall be construed and
enforced as if such invalid or illegal provision had never been included in
this Agreement.
<PAGE>
QUALIFIED RETIREMENT PLAN AND TRUST
Defined Contribution Basic Plan Document 03
SECTION ONE DEFINITIONS
The following words and phrases when used in the Plan with initial capital
letters shall, for the purpose of this Plan, have the meanings set forth below
unless the context indicates that other meanings are intended:
1.01 Adoption Agreement
Means the document executed by the Employer through which it adopts the
Plan and Trust and thereby agrees to be bound by all terms and
conditions of the Plan and Trust.
1.02 Basic Plan Document
Means this prototype Plan and Trust document.
1.03 Break in Eligibility Service
Means a 12 consecutive month period which coincides with an Eligibility
Computation Period during which an Employee fails to complete more than
500 Hours of Service (or such lesser number of Hours of Service
specified in the Adoption Agreement for this purpose).
1.04 Break in Vesting Service
Means a Plan Year during which an Employee fails to complete more than
500 Hours of Service (or such lesser number of Hours of Service
specified in the Adoption Agreement for this purpose).
1.05 Code
Means the Internal Revenue Code of 1986 as amended from time-to-time.
1.06 Compensation
For Plan Years beginning on or after January 1, 1989, the following
definition of Compensation shall apply:
Compensation will mean Compensation as that term is defined in Section
3.05(E)(2) of the Plan. For any Self-Employed Individual covered under
the Plan, Compensation will mean Earned Income. Compensation shall
include only that Compensation which is actually paid to the
Participant during the applicable period. Except as provided elsewhere
in this Plan, the applicable period shall be the Plan Year unless the
Employer has selected another period in the Adoption Agreement.
Unless otherwise indicated 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 includible in the
gross income of the Employee under Sections 125, 402(a)(8), 402(h) or
403(b) of the Code.
For years beginning after December 31, 1988, the annual Compensation of
each Participant taken into account under the Plan for any year shall
not exceed $200,000. This limitation shall be adjusted by the Secretary
at the same time and in the same manner as under Section 415(d) of the
Code, except that the dollar increase in effect on January 1 of any
calendar year is effective for years beginning in such calendar year
and the first adjustment to the $200,000 limitation is effected on
January 1, 1990. If a Plan determines Compensation on a period of time
that contains fewer than 12 calendar months, then the annual
Compensation limit is an amount equal to the annual Compensation limit
for the calendar year in which the compensation period begins
multiplied by the ratio obtained by dividing the number of full months
in the period by 12.
In determining the Compensation of a Participant for purposes of this
limitation, the rules of Section 414(q)(6) of the Code shall apply,
except in applying such rules, the term "family" shall include only the
spouse of the Participant and any lineal descendants of the Participant
who have not attained age 19 before the close of the year.
If, as a result of the application of such rules the adjusted $200,000
limitation is exceeded, then (except for purposes of determining the
portion of Compensation up to the integration level if this Plan
provides for permitted disparity), the limitation shall be prorated
among the affected individuals in proportion to each such individual's
Compensation as determined under this Section prior to the application
of this limitation.
If Compensation for any prior Plan Year is taken into account in
determining an Employee's contributions or benefits for the current
year, the Compensation for such prior year is subject to the applicable
annual Compensation limit in effect for that prior year. For this
purpose, for years beginning before January 1, 1990, the applicable
annual Compensation limit is $200,000.
Unless otherwise indicated in the Adoption Agreement, where an Employee
enters the Plan (and thus becomes a Participant) on an Entry Date other
than the first Entry Date in a Plan Year, his Compensation will include
any such earnings paid to him during the whole of such Plan Year.
Where this Plan is being adopted as an amendment and restatement to
bring a Prior Plan into compliance with the Tax Reform Act of 1986,
such Prior Plan's definition of Compensation shall apply for Plan Years
beginning before January 1, 1989.
<PAGE>
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.
1.07 Custodian
Means an entity specified in the Adoption Agreement as Custodian or any
duly appointed successor as provided in Section 5.09.
1.08 Disability
Means the inability to engage in any substantial, gainful activity by
reason of any medically determinable physical or mental impairment that
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 12 months.
The permanence and degree of such impairment shall be supported by
medical evidence.
1.09 Earned Income
Means 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 by the Employer 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.
1.10 Effective Date
Means the date the Plan becomes effective as indicated in the Adoption
Agreement. However, where a separate date is stated in the Plan as of
which a particular Plan provision becomes effective, such date will
control with respect to that provision.
1.11 Eligibility Computation Period
An Employee's initial Eligibility Computation Period shall be the 12
consecutive month period commencing with the date such Employee first
performs an Hour of Service (employment commencement date). His
subsequent Eligibility Computation Periods shall be the 12 consecutive
month periods commencing on the anniversaries of his employment
commencement date; provided, however, if pursuant to the Adoption
Agreement, an Employee is required to complete one or less Years of
Eligibility Service to become a Participant, then his subsequent
Eligibility Computation Periods shall be the Plan Years commencing with
the Plan Year beginning during his initial Eligibility Computation
Period.
1.12 Employee
Means any person employed by the Employer maintaining the Plan or of
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 in the previous paragraph as
provided in Sections 414(n) or (o) of the Code.
1.13 Employer
Means any corporation, partnership, sole-proprietorship or other entity
named in the Adoption Agreement and any successor who by merger,
consolidation, purchase or otherwise assumes the obligations of the
Plan. A partnership is considered to be the Employer of each of the
partners and a sole-proprietorship is considered to be the Employer of
a sole proprietor.
1.14 Employer Contribution
Means the amount contributed by the Employer each year as determined
under this Plan.
1.15 Entry Dates Means the first day of the Plan Year and the first day of
the seventh month of the Plan Year, unless the Employer has specified
more frequent dates in the Adoption Agreement.
1.16 ERISA
Means the Employee Retirement Income Security Act of 1974 as amended
from time-to-time.
<PAGE>
1.17 Forfeiture
Means that portion of a Participant's Individual Account as derived
from Employer Contributions which he or she is not entitled to receive
(i.e., the nonvested portion).
1.18 Fund
Means the Plan assets held by the Trustee or Custodian for the
Participants' exclusive benefit.
1.19 Highly Compensated Employee
The term Highly Compensated Employee includes highly compensated active
employees and highly compensated former employees.
A highly compensated active employee includes any Employee who performs
service for the Employer during the determination year and who, during
the look-back year: (a) received Compensation from the Employer in
excess of $75,000 (as adjusted pursuant to Section 415(d) of the Code);
(b) received Compensation from the Employer in excess of $50,000 (as
adjusted pursuant to Section 415(d) of the Code) and was a member of
the top-paid group for such year; or (c) was an officer of the Employer
and received Compensation during such year that is greater than 50% of
the dollar limitation in effect under Section 415(b)(1)(A) of the Code.
The term Highly Compensated Employee also includes: (a) Employees who
are both described in the preceding sentence if the term "determination
year" is substituted for the term "look-back year" and the Employee is
one of the 100 Employees who received the most Compensation from the
Employer during the determination year; and (b) Employees who are 5%
owners at any time during the look-back year or determination year.
If no officer has satisfied the Compensation requirement of (c) above
during either a determination year or look-back year, the highest paid
officer for such year shall be treated as a Highly Compensated
Employee.
For this purpose, the determination year shall be the Plan Year. The
look-back year shall be the 12 month period immediately preceding the
determination year.
A highly compensated former employee includes any Employee who
separated from service (or was deemed to have separated) prior to the
determination year, performs no service for the Employer during the
determination year, and was a highly compensated active employee for
either the separation year or any determination year ending on or after
the Employee's 55th birthday.
If an Employee is, during a determination year or look-back year, a
family member of either a 5% owner who is an active or former Employee
or a Highly Compensated Employee who is one of the 10 most Highly
Compensated Employees ranked on the basis of Compensation paid by the
Employer during such year, then the family member and the 5% owner or
top 10 Highly Compensated Employee shall be aggregated. In such case,
the family member and 5% owner or top 10 Highly Compensated Employee
shall be treated as a single Employee receiving Compensation and Plan
contributions or benefits equal to the sum of such Compensation and
contributions or benefits of the family member and 5% owner or top 10
Highly Compensated Employee. For purposes of this Section, family
member includes the spouse, lineal ascendants and descendants of the
Employee or former Employee and the spouses of such lineal ascendants
and descendants.
The determination of who is a Highly Compensated Employee, including
the determinations of the number and identity of Employees in the
top-paid group, the top 100 Employees, the number of Employees treated
as officers and the Compensation that is considered, will be made in
accordance with Section 414(q) of the Code and the regulations
thereunder.
1.20 Hours of Service - Means
A. Each hour for which an Employee is paid, or entitled to payment,
for the performance of duties for the Employer. These hours
will be credited to the Employee for the computation period in
which the duties are performed; and
B. Each hour for which an Employee is paid, or entitled to payment,
by the Employer on account of a period of time during which no
duties are performed (irrespective of whether the employment
relationship has terminated) due to vacation, holiday, illness,
incapacity (including disability), layoff, jury duty, military
duty or leave of absence. No more than 501 Hours of Service will
be credited under this paragraph for any single continuous period
(whether or not such period occurs in a single computation
period). Hours under this paragraph shall be calculated and
credited pursuant to Section 2530.200b-2 of the Department of
Labor Regulations which is incorporated herein by this reference;
and
C. Each hour for which back pay, irrespective of mitigation of
damages, is either awarded or agreed to by the Employer. The same
Hours of Service will not be credited both under paragraph (A) or
paragraph (B), as the case may be, and under this paragraph (C).
These hours will be credited to the Employee for the computation
period or periods to which the award or agreement pertains rather
than the computation period in which the award, agreement, or
payment is made.
D. Solely for purposes of determining whether a Break in Eligibility
Service or a Break in Vesting Service has occurred in a
computation period (the computation period for purposes of
determining whether a Break in Vesting Service has occurred is the
Plan Year), an individual who is absent from work for maternity or
paternity reasons shall receive credit for the Hours of Service
which would otherwise have been credited to such individual but
for such absence, or in any case in which such hours cannot be
determined, 8 Hours of Service per day of such absence. For
purposes of this paragraph, an absence from work for maternity or
paternity reasons means an absence (1) by reason of the pregnancy
of the individual, (2) by reason of a birth of a child of the
individual, (3) by reason of the placement of a child with the
individual in connection with the adoption of such child by such
individual, or (4) for purposes of caring for such child for a
period beginning immediately following such birth or placement.
The Hours of Service credited under this paragraph shall be
credited (1) in the Eligibility Computation Period or Plan Year in
which the absence begins if the crediting is necessary to prevent
a Break in Eligibility Service or a Break in Vesting Service in
the applicable period, or (2) in all other cases, in the following
Eligibility Computation Period or Plan Year.
<PAGE>
E. Hours of Service will be credited for employment with other
members of an affiliated service group (under Section 414(m) of
the Code), a controlled group of corporations (under Section
414(b) of the Code), or a group of trades or businesses under
common control (under Section 414(c) of the Code) of which the
adopting Employer is a member, and any other entity required to be
aggregated with the Employer pursuant to Section 414(o) of the
Code and the regulations thereunder.
Hours of Service will also be credited for any individual
considered an Employee for purposes of this Plan under Code
Sections 414(n) or 414(o) and the regulations thereunder.
F. Where the Employer maintains the plan of a predecessor employer,
service for such predecessor employer shall be treated as
service for the Employer.
G. The above method for determining Hours of Service may be altered
as specified in the Adoption Agreement.
1.21 Individual Account
Means the account established and maintained under this Plan for each
Participant in accordance with Section 4.01.
1.22 Investment Fund
Means a subdivision of the Fund established pursuant to Section 5.05.
1.23 Key Employee
Means any person who is determined to be a Key Employee under Section
10.08.
1.24 Leased Employee
Means any person (other than an Employee of the recipient) who pursuant
to an agreement between the recipient and any other person ("leasing
organization") has performed services for the recipient (or for the
recipient and related persons determined in accordance with Section
414(n)(6) of the Code) on a substantially full time basis for a period
of at least one year, and such services are of a type historically
performed by Employees in the business field of the recipient Employer.
Contributions or benefits provided a Leased Employee by the leasing
organization which are attributable to services performed for the
recipient Employer shall be treated as provided by the recipient
Employer.
A Leased Employee shall not be considered an Employee of the recipient
if: (1) such employee is covered by a money purchase pension plan
providing: (a) a nonintegrated employer contribution rate of at least
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 excludible from the employee's gross income under Section
125, Section 402(a)(8), Section 402(h) or Section 403(b) of the Code,
(b) immediate participation, and (c) full and immediate vesting; and
(2) Leased Employees do not constitute more than 20% of the recipient's
nonhighly compensated work force.
1.25 Normal Retirement Age
Means the age specified in the Adoption Agreement. However, if the
Employer enforces a mandatory retirement age which is less than the
Normal Retirement Age, such mandatory age is deemed to be the Normal
Retirement Age. If no age is specified in the Adoption Agreement, the
Normal Retirement Age shall be age 59 1/2.
1.26 Owner-Employee
Means an individual who is a sole proprietor, or who is a partner
owning more than 10% of either the capital or profits interest of the
partnership.
1.27 Participant
Means any Employee or former Employee of the Employer who has met the
Plan's eligibility requirements, has entered the Plan and who is or may
become eligible to receive a benefit of any type from this Plan or
whose Beneficiary may be eligible to receive any such benefit.
1.28 Plan
Means the prototype defined contribution plan adopted by the Employer.
The Plan consists of this Basic Plan Document plus the corresponding
Adoption Agreement as completed and signed by the Employer.
1.29 Plan Administrator
Means the person or persons determined to be the Plan Administrator in
accordance with Section 8.01.
1.30 Plan Year
Means the 12 consecutive month period which coincides with the
Employer's tax year or such other 12 consecutive month period as is
designated in the Adoption Agreement.
1.31 Prior Plan
Means a plan which was amended or replaced by adoption of this Plan
document, as indicated in the Adoption Agreement.
1.32 Prototype Sponsor
Means the entity specified in the Adoption Agreement. Such entity must
meet the definition of a sponsoring organization set forth in Section
3.07 of Revenue Procedure 89-9.
<PAGE>
1.33 Self-Employed Individual
Means an individual who has Earned Income for the taxable year from the
trade or business for which the Plan is established; also, an
individual who would have had Earned Income but for the fact that the
trade or business had no net profits for the taxable year.
1.34 Separate Fund
Means a subdivision of the Fund held in the name of a particular
Participant representing certain assets held for that Participant. The
assets which comprise a Participant's Separate Fund are those assets
earmarked for him and those assets subject to the Participant's
individual direction pursuant to Section 5.14.
1.35 Taxable Wage Base
Means, with respect to any taxable year, the maximum amount of earnings
which may be considered wages for such year under Section 3121(a)(1) of
the Code.
1.36 Termination of Employment
A Termination of Employment of an Employee of an Employer shall occur
whenever his status as an Employee of such Employer ceases for any
reason other than his death. An Employee who does not return to work
for the Employer on or before the expiration of an authorized leave of
absence from such Employer shall be deemed to have incurred a
Termination of Employment when such leave ends.
1.37 Top-Heavy Plan
This Plan is a Top-Heavy Plan for any Plan Year if it is determined to
be such pursuant to Section 10.08.
1.38 Trustee
Means an individual, individuals or corporation specified in the
Adoption Agreement as Trustee or any duly appointed successor as
provided in Section 5.09. Trustee shall mean Custodian in the event the
financial organization named as Trustee does not have full trust
powers.
1.39 Valuation Date
Means the last day of the Plan Year and each other date designated by
the Plan Administrator which is selected in a uniform and
nondiscriminatory manner when the assets of the Fund are valued at
their then fair market value.
1.40 Vested
Means nonforfeitable, that is, a claim which is unconditional and
legally enforceable against the Plan obtained by a Participant or his
Beneficiary to that part of an immediate or deferred benefit under the
Plan which arises from a Participant's Years of Vesting Service.
1.41 Year of Eligibility Service
Means a 12-consecutive month period which coincides with an Eligibility
Computation period during which an Employee completes at least 1,000
Hours of Service (or such lesser number of Hours of Service specified
in the Adoption Agreement for this purpose).
1.42 Year of Vesting Service
Means a Plan Year during which an Employee completes at least 1,000
Hours of Service (or such lesser number of Hours of Service specified
in the Adoption Agreement for this purpose).
In the case of a Participant who has 5 or more consecutive Breaks in
Vesting Service, all Years of Vesting Service after such Breaks in
Vesting Service will be disregarded for the purpose of determining the
Vested portion of his Individual Account derived from Employer
Contributions that accrued before such breaks. Such Participant's
prebreak service will count in vesting the postbreak Individual Account
derived from Employer Contributions only if either:
(A) such Participant had any Vested right to any portion of his
Individual Account derived from Employer Contributions at the time
of his Termination of Employment; or
(B) upon returning to service, the number of consecutive Breaks in
Vesting Service is less than his number of Years of Vesting
Service before such breaks.
Separate subaccounts will be maintained for the Participant's
prebreak and postbreak portions of his Individual Account derived
from Employer Contributions. Both subaccounts will share in the
gains and losses of the Fund.
Years of Vesting Service shall not include any period of time
excluded from Years of Vesting Service in the Adoption Agreement.
In the event the Plan Year is changed to a new 12-month period,
Employees shall receive credit for Years of Vesting Service, in
accordance with the preceding provisions of this definition, for
each of the Plan Years (the old and new Plan Years) which overlap
as a result of such change.
SECTION TWO ELIGIBILITY AND PARTICIPATION
2.01 Eligibility to Participate
Each Employee of the Employer, except those Employees who belong to a
class of Employees which is excluded from participation as indicated in
the Adoption Agreement, shall be eligible to participate in this Plan
upon the satisfaction of the age and Years of Eligibility Service
requirements specified in the Adoption Agreement.
<PAGE>
2.02 Plan Entry
A. If this Plan is a replacement of a Prior Plan by amendment or
restatement, each Employee of the Employer who was a Participant
in said Prior Plan before the Effective Date shall continue to be
a Participant in this Plan.
B. An Employee will become a Participant in the Plan as of the
Effective Date if he has met the eligibility requirements of
Section 2.01 as of such date. After the Effective Date, each
Employee shall become a Participant on the first Entry Date
following the date the Employee satisfies the eligibility
requirements of Section 2.01.
C. The Plan Administrator shall notify each Employee who becomes
eligible to be a Participant under this Plan and shall furnish him
with the application form, enrollment forms or other documents
which are required of Participants. The eligible Employee shall
execute such forms or documents and make available such
information as may be required in the administration of the Plan.
2.03 Transfer to or From Ineligible Class
If an Employee who had been a Participant becomes ineligible to
participate because he is no longer a member of an eligible class of
Employees, but has not incurred a Break in Eligibility Service, such
Employee shall participate immediately upon his return to an eligible
class of Employees. If such Employee incurs a Break in Eligibility
Service, his eligibility to participate shall be determined by Section
2.04.
An Employee who is not a member of the eligible class of Employees will
become a Participant immediately upon becoming a member of the eligible
class provided such Employee has satisfied the age and Years of
Eligibility Service requirements. If such Employee has not satisfied
the age and Years of Eligibility Service requirements as of the date he
becomes a member of the eligible class, he shall become a Participant
on the first Entry Date following the date he satisfies said
requirements.
2.04 Return as a Participant After Break in Eligibility Service
A. Employee Not Participant Before Break - If an Employee incurs a
Break in Eligibility Service before satisfying the Plan's
eligibility requirements, such Employee's Years of Eligibility
Service before such Break in Eligibility Service will not be taken
into account.
B. Nonvested Participants - In the case of a Participant who does not
have a Vested interest in his Individual Account derived from
Employer Contributions, Years of Eligibility Service before a
period of consecutive Breaks in Eligibility Service will not be
taken into account for eligibility purposes if the number of
consecutive Breaks in Eligibility Service in such period equals or
exceeds the greater of 5 or the aggregate number of Years of
Eligibility Service before such break. Such aggregate number of
Years of Eligibility Service will not include any Years of
Eligibility Service disregarded under the preceding sentence by
reason of prior breaks.
If a Participant's Years of Eligibility Service are disregarded
pursuant to the preceding paragraph, such Participant will be
treated as a new Employee for eligibility purposes. If a
Participant's Years of Eligibility Service may not be disregarded
pursuant to the preceding paragraph, such Participant shall
continue to participate in the Plan, or, if terminated, shall
participate immediately upon reemployment.
C. Vested Participants - A Participant who has sustained a Break in
Eligibility Service and who had a Vested interest in all or a
portion of his Individual Account derived from Employer
Contributions shall continue to participate in the Plan, or, if
terminated, shall participate immediately upon reemployment.
2.05 Determinations Under This Section
The Plan Administrator shall determine the eligibility of each Employee
to be a Participant. This determination shall be conclusive and binding
upon all persons except as otherwise provided herein or by law.
2.06 Terms of Employment
Neither the fact of the establishment of the Plan nor the fact that a
common law Employee has become a Participant shall give to that common
law Employee any right to continued employment; nor shall either fact
limit the right of the Employer to discharge or to deal otherwise with
a common law Employee without regard to the effect such treatment may
have upon the Employee's rights under the Plan.
SECTION THREE CONTRIBUTIONS
3.01 Employer Contributions
A. Obligation to Contribute - The Employer shall make contributions
to the Plan in accordance with the contribution formula specified
in the Adoption Agreement. If this Plan is a profit sharing plan,
the Employer shall, in its sole discretion, make contributions
without regard to current or accumulated earnings or profits.
B. Allocation Formula and the Right to Share in the Employer
Contribution -
1. General - The Employer Contribution for a Plan Year will be
allocated or contributed to the Individual Accounts of
qualifying Participants in accordance with the allocation or
contribution formula specified in the Adoption Agreement. The
Employer Contribution for any Plan Year will be allocated to
each Participant's Individual Account as of the last day of
that Plan Year.
Any Employer Contribution for a Plan Year must satisfy Section
401(a)(4) and the regulations thereunder for such Plan Year.
<PAGE>
2. Qualifying Participants - A Participant is a qualifying
Participant and is entitled to share in the Employer
Contribution for any Plan Year if (1) he was a Participant on
at least one day during the Plan Year, (2) if this Plan is a
nonstandardized plan, he completes a Year of Vesting Service
during the Plan Year and (3) where the Employer has selected
the "last day requirement" in the Adoption Agreement, he is an
Employee of the Employer on the last day of the Plan Year
(except that this last requirement (3) shall not apply if the
Participant has died during the Plan Year or incurred a
Termination of Employment during the Plan year after having
reached his Normal Retirement Age or having incurred a
Disability). Notwithstanding anything in this paragraph to the
contrary, a Participant will not be a qualifying Participant
for a Plan Year if he incurs a Termination of Employment during
such Plan Year with not more than 500 Hours of Service if he is
not an Employee on the last day of the Plan Year. The
determination of whether a Participant is entitled to share in
the Employer Contribution shall be made as of the last day of
each Plan Year.
3. Special Rules for Integrated Plans - If the Employer has
selected the integrated contribution or allocation formula in
the Adoption Agreement, then the maximum disparity rate shall
be determined in accordance with the following table.
MAXIMUM DISPARITY RATE
Integration Level Money Purchase Top-Heavy Nontop-Heavy
Profit Sharing Profit Sharing
Taxable Wage Base (TWB) 5.7% 2.7% 5.7%
More than $0 but not more than X* 5.7% 2.7% 5.7%
More than X* of TWB but not more
than 80% of TWB 4.3% 1.3% 4.3%
More than 80% of TWB but not
more than TWB 5.4% 2.4% 5.4%
* X means the greater of $10,000 or 20% of TWB.
C. Allocation of Forfeitures - Forfeitures for a Plan Year which
arise as a result of the application of Section 6.01(D) shall be
allocated as follows:
1. Profit Sharing Plan - If this is a profit sharing plan,
Forfeitures shall be allocated in the manner provided in
Section 3.01(B)(for Employer Contributions) to the Individual
Accounts of Participants who are entitled to share in the
Employer Contribution for such Plan Year.
2. Money Purchase Pension and Target Benefit Plan - If this Plan
is a money purchase pension plan or a target benefit plan,
Forfeitures shall be applied towards the reduction of Employer
Contributions to the Plan. However, if the Employer has
indicated in the Adoption Agreement that Forfeitures shall be
allocated to the Individual Accounts of Participants, then
Forfeitures shall be allocated in the manner provided in
Section 3.01(B) (for Employer Contributions) to the Individual
Accounts of Participants who are entitled to share in the
Employer Contributions for such Plan Year.
D. Timing of Employer Contribution - The Employer Contribution for
each Plan Year shall be delivered to the Trustee (or Custodian, if
applicable) not later than the due date for filing the Employer's
income tax return for its fiscal year in which the Plan Year ends,
including extensions thereof.
E. Minimum Allocation for Top-Heavy Plans - The contribution and
allocation provisions of this Section 3.01(E) shall apply for any
Plan Year with respect to which this Plan is a Top-Heavy Plan.
1. Except as otherwise provided in (3) and (4) below, 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 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 $200,000 (increased by any cost of
living adjustment made by the Secretary of Treasury or his
delegate) 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 (a) the
Participant's failure to complete 1,000 Hours of Service (or
any equivalent provided in the Plan), or (b) the Participant's
failure to make mandatory Employee Contributions to the Plan,
or (c) Compensation less than a stated amount.
2. For purposes of computing the minimum allocation, Compensation
shall mean Compensation as defined in Section 1.06 of the Plan.
3. The provision in (1) above shall not apply to any Participant
who was not employed by the Employer on the last day of the
Plan Year.
4. The provision in (1) above shall not apply to any Participant
to the extent the Participant is covered under any other plan
or plans of the Employer and the Employer has provided in the
Adoption Agreement that the minimum allocation or benefit
requirement applicable to Top-Heavy Plans will be met in the
other plan or plans.
<PAGE>
5. The minimum allocation required under this Section 3.01(E) and
Section 3.01(F)(1) (to the extent required to be
nonforfeitable under Code Section 416(b)) may not be forfeited
under Code Section 411(a)(3)(B) or 411(a)(3)(D).
F. Special Requirements for Paired Plans - The Employer maintains
paired plans if the Employer has adopted both a standardized
profit sharing plan and a standardized money purchase pension plan
using this Basic Plan Document.
1. Minimum Allocation - The mandatory minimum allocation
provision of Section 3.01(E) shall not apply to any
Participant if the Employer maintains paired plans. Rather,
for each Plan Year, the Employer will provide a minimum
contribution equal to 3% of Compensation for each non-Key
Employee who is entitled to a minimum contribution. Such
minimum contribution will only be made to one of the Plans. If
an Employee is a Participant in only one of the Plans, the
minimum contribution shall be made to that Plan. If the
Employee is a Participant in both Plans, the minimum
contribution shall be made to the money purchase plan.
2. Only One Plan can be Integrated - If the Employer maintains
paired plans, only one of the Plans may provide for the
disparity in contributions which is permitted under Section
401(l) of the Code. In the event that both Adoption Agreements
provide for such integration, only the money purchase pension
plan shall be deemed to be integrated.
G. Return of the Employer Contribution to the Employer Under Special
Circumstances - Any contribution made by the Employer because of a
mistake of fact must be returned to the Employer within one year
of the contribution.
In the event that the Commissioner of Internal Revenue determines
that the Plan is not initially qualified under the Code, any
contributions made incident to that initial qualification by the
Employer must be returned to the Employer within one year after
the date the initial qualification is denied, but only if the
application for qualification is made by the time prescribed by
law for filing the Employer's return for the taxable year in which
the Plan is adopted, or such later date as the Secretary of the
Treasury may prescribe.
In the event that a contribution made by the Employer under this
Plan is conditioned on deductibility and is not deductible under
Code Section 404, the contribution, to the extent of the amount
disallowed, must be returned to the Employer within one year
after the deduction is disallowed.
H. Omission of Participant
1. If the Plan is a money purchase plan or a target benefit plan
and, if in any Plan Year, any Employee who should be included
as a Participant is erroneously omitted and discovery of such
omission is not made until after a contribution by the
Employer for the year has been made and allocated, the
Employer shall make a subsequent contribution with respect to
the omitted Employee in the amount which the Employer would
have contributed with respect to that Employee had he not been
omitted.
2. If the Plan is a profit sharing plan, and if in any Plan Year,
any Employee who should be included as a Participant is
erroneously omitted and discovery of such omission is not made
until after the Employer Contribution has been made and
allocated, then the Plan Administrator must re-do the
allocation (if a correction can be made) and inform the
Employee. Alternatively, the Employer may choose to contribute
for the omitted Employee the amount which the Employer would
have contributed for him.
3.02 Employee Contributions
This Plan will not accept nondeductible employee contributions and
matching contributions for Plan Years beginning after the Plan Year in
which this Plan is adopted by the Employer. Employee contributions for
Plan Years beginning after December 31, 1986, together with any
matching contributions as defined in Section 401(m) of the Code, will
be limited so as to meet the nondiscrimination test of Section 401(m)
of the Code.
A separate account will be maintained by the Plan Administrator for the
nondeductible employee contributions of each Participant.
A Participant may, upon a written request submitted to the Plan
Administrator, withdraw the lesser of the portion of his Individual
Account attributable to his nondeductible employee contributions or the
amount he contributed as nondeductible employee contributions.
Employee contributions and earnings thereon will be nonforfeitable at
all times. No Forfeiture will occur solely as a result of an Employee's
withdrawal of employee contributions.
The Plan Administrator will not accept deductible employee
contributions which are made for a taxable year beginning after
December 31, 1986. Contributions made prior to that date will be
maintained in a separate account which will be nonforfeitable at all
times. The account will share in the gains and losses of the Fund in
the same manner as described in Section 4.03 of the Plan. No part of
the deductible employee contribution account will be used to purchase
life insurance. Subject to Section 6.05, joint and survivor annuity
requirements (if applicable), the Participant may withdraw any part of
the deductible employee contribution account by making a written
application to the Plan Administrator.
3.03 Rollover Contributions
If the Plan Administrator so permits in a uniform and nondiscriminatory
manner, an Employee may contribute a rollover contribution to the Plan;
provided that such Employee submits a written certification,
satisfactory to the Trustee (or Custodian), that the contribution
qualifies as a rollover contribution.
<PAGE>
A separate account shall be maintained by the Plan Administrator for
each Employee's rollover contributions which will be nonforfeitable at
all times. Such account will share in the income and gains and losses
of the Fund in the manner described in Section 4.03 and shall be
subject to the Plan's provisions governing distributions.
For purposes of this Section 3.03, "rollover contribution" means a
contribution described in Sections 402(a)(5), 403(a)(4) or 408(d)(3) of
the Code or in any other provision which may be added to the Code which
may authorize rollovers to the Plan.
3.04 Transfer Contributions
If the Plan Administrator so permits in a uniform and nondiscriminatory
manner, the Trustee (or Custodian, if applicable) may receive any
amounts transferred to it from the trustee or custodian of another plan
qualified under Code Section 401(a).
A separate account shall be maintained by the Plan Administrator for
each Employee's transfer contributions which will be nonforfeitable at
all times. Such account will share in the income and gains and losses
of the Fund in the manner described in Section 4.03 and shall be
subject to the Plan's provisions governing distributions.
3.05 Limitation on Allocations
A. If the Participant does not participate in, and has never
participated in another qualified plan maintained by the Employer
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
3.05(E)(1), the following rules shall apply:
1. The amount of annual additions which may be credited to the
Participant's Individual 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 Individual 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.
2. 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.
3. 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.
4. If pursuant to Section 3.05(A)(3) or as a result of the
allocation of Forfeitures there is an excess amount, the
excess will be disposed of as follows:
a. Any nondeductible voluntary employee contributions, to the
extent they would reduce the excess amount, will be
returned to the Participant;
b. If after the application of paragraph (a) an excess amount
still exists, and the Participant is covered by the Plan
at the end of the limitation year, the excess amount in
the Participant's Individual 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;
c. If after the application of paragraph (a) an excess amount
still exists, and the Participant is not covered by the
Plan at the end of a limitation year, the excess amount
will be held unallocated in a suspense account. The
suspense account will be applied to reduce future Employer
Contributions (including allocation of any Forfeitures)
for all remaining Participants in the next limitation
year, and each succeeding limitation year if necessary;
d. If a suspense account is in existence at any time during a
limitation year pursuant to this Section, it will not
participate in the allocation of the Fund'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' Individual Accounts before any Employer
Contributions 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.
B. 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 3.05(E)(1), during any limitation
year, the following rules apply:
1. The annual additions which may be credited to a Participant's
Individual 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 Individual 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
<PAGE>
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 Individual 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 Individual Account under this Plan for the
limitation year.
2. 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 3.05(A)(2).
3. 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.
4. If, pursuant to Section 3.05(B)(3) 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.
5. If an excess amount was allocated to a Participant on an
allocation date of this Plan which coincides with an
allocation date of another plan, the excess amount attributed
to this Plan will be the product of,
a. the total excess amount allocated as of such date, times
b. the ratio of (i) the annual additions allocated to the
Participant for the limitation year as of such date under
this Plan to (ii) the total annual additions allocated to
the Participant for the limitation year as of such date
under this and all the other qualified master or prototype
defined contribution plans.
6. Any excess amount attributed to this Plan will be disposed in
the manner described in Section 3.05(A)(4).
C. 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 Individual Account under this Plan for any
limitation year will be limited in accordance with Sections
3.05(B)(1) through 3.05(B)(6) as though the other plan were a
master or prototype plan unless the Employer provides other
limitations in the Section of the Adoption Agreement titled
"Limitation on Allocation - More Than One Plan."
D. 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 plan fraction and defined
contribution plan fraction will not exceed 1.0 in any limitation
year. The annual additions which may be credited to the
Participant's Individual Account under this Plan for any
limitation year will be limited in accordance with the Section of
the Adoption Agreement titled "Limitation on Allocation - More
Than One Plan."
E. The following terms shall have the following meanings when used
in this Section 3.05:
1. Annual additions: The sum of the following amounts credited
to a Participant's Individual Account for the limitation year:
a. Employer Contributions,
b. Employee contributions,
c. Forfeitures, and
d. 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 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 Section
3.05(A)(4) or 3.05(B)(6) in the limitation year to reduce
Employer Contributions will be considered annual additions
for such limitation year.
2. Compensation: As elected by the Employer in the Adoption
Agreement (and if no election is made, Section 3401(a) wages
will be deemed to have been selected), Compensation shall mean
all of a Participant's:
a. Section 3121 wages. Wages as defined in Section 3121(a) of
the Code, for purposes of calculating Social Security
taxes, but determined without regard to the wage base
limitation in Section 3121(a)(1), the special rules in
Section 3121(v), any rules that limit covered employment
based on the type or location of an Employee's Employer,
and any rules that limit the remuneration included in
wages based on familial relationship or based on the
nature or location of the employment or the services
performed (such as the exceptions to the definition of
employment in Section 3121(b)(1) through (20)).
<PAGE>
b. Section 3401(a) wages. Wages as defined in Section 3401(a)
of the Code, for the purposes of income tax withholding at
the source but determined without regard to any rules that
limit the remuneration included in wages based on the
nature or location of the employment or the services
performed (such as the exception for agricultural labor in
Section 3401(a)(2)).
c. 415 safe-harbor compensation. Wages, salaries, and fees
for professional services and other amounts received
(without regard to whether or not an amount is paid in
cash) for personal services actually rendered in the
course of employment with the Employer maintaining the
Plan to the extent that the amounts are includable in
gross income (including, but not limited to, commissions
paid salesmen, compensation for services on the basis of a
percentage of profits, commissions on insurance premiums,
tips, bonuses, fringe benefits, reimbursements, and
expense allowances), and excluding the following:
1. Employer contributions to a plan of deferred
compensation which are not includible 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 deductible by the Employee, or any
distributions from a plan of deferred
compensation;
2. 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;
3. Amounts realized from the sale, exchange or other
disposition of stock acquired under a qualified stock
option; and
4. 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
excludible from the gross income of the Employee).
For any Self-Employed Individual, Compensation will mean
Earned Income. For limitation years beginning after
December 31, 1991, for purposes of applying the
limitations of this Section 3.05, compensation for a
limitation year is the compensation actually paid or
includible in gross income during such limitation year.
Notwithstanding the preceding sentence, compensation for a
Participant in a defined contribution plan who is
permanently and totally disabled (as defined in 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.
3. 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 125% of the dollar limitation
determined for the limitation year under Section 415(b) and
(d) of the Code or 140% of the 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 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.
4. Defined contribution dollar limitation: $30,000 or if greater,
one-fourth of the defined benefit dollar limitation set forth
in Section 415(b)(1) of the Code as in effect for the
limitation year.
5. 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 employee
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 125% of the dollar
limitation determined under Section 415(b) and (d) of the Code
in effect under Section 415(c)(1)(A) of the Code or 35% of
the Participant's compensation for such year.
If the Employee was a participant as of the end of the first
day of the first limitation year beginning after December 31,
1986, in one or more defined contribution plans maintained by
the Employer which were in existence on May 6, 1986, the
numerator of this fraction will be adjusted if the sum of this
fraction and the defined benefit fraction would otherwise
exceed 1.0 under the terms of this Plan. Under the adjustment,
an amount equal to the product of (1) the excess of the sum of
the fractions over 1.0 times (2) the denominator of this
fraction, will be permanently subtracted from the numerator of
this fraction. The adjustment is calculated using the
fractions as they would be computed as of the end of the last
limitation year beginning before January 1, 1987, and
disregarding any changes in the terms and conditions of the
Plan made after May 5, 1986, but using the Section 415
limitation applicable to the first limitation year beginning
on or after January 1, 1987.
<PAGE>
The annual addition for any limitation year beginning before
January 1, 1987, shall not be recomputed to treat all employee
contributions as annual additions.
6. Employer: For purposes of this Section 3.05, 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)), all
commonly controlled trades or businesses (as defined in
Section 414(c) as modified by Section 415(h)) or affiliated
service groups (as defined in Section 414(m)) 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.
7. Excess amount: The excess of the Participant's annual
additions for the limitation year over the maximum permissible
amount.
8. Highest average compensation: The average compensation for
the three consecutive years of service with the Employer
that produces the highest average.
9. Limitation year: A calendar year, or the 12-consecutive month
period elected by the Employer in the Section of the Adoption
Agreement titled "Limitation on Allocation - More Than One
Plan." All qualified plans maintained by the Employer must use
the same limitation year. If the limitation year is amended to
a different 12-consecutive month period, the new limitation
year must begin on a date within the limitation year in which
the amendment is made.
10. Master or prototype plan: A plan the form of which is the
subject of a favorable opinion letter from the Internal
Revenue Service.
11. Maximum permissible amount: The maximum annual addition that
may be contributed or allocated to a Participant's Individual
Account under the Plan for any limitation year shall not
exceed the lesser of:
a. the defined contribution dollar limitation, or
b. 25% of the Participant's compensation for the limitation
year.
The compensation limitation referred to in (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 419A(d)(2) of the Code.
If a short limitation year is created because of an amendment
changing the limitation year to a different 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
12. 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:
a. the Participant will continue employment until normal
retirement age under the Plan (or current age, if later),
and
b. 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.
SECTION FOUR INDIVIDUAL ACCOUNTS OF PARTICIPANTS AND VALUATION
4.01 Individual Accounts
A. The Plan Administrator shall establish and maintain an Individual
Account in the name of each Participant to reflect the total value
of his interest in the Fund. Each Individual Account established
hereunder shall consist of such subaccounts as may be needed for
each Participant including:
1. a subaccount to reflect Employer Contributions and Forfeitures
allocated on behalf of a Participant;
2. a subaccount to reflect a Participant's rollover
contributions;
3. a subaccount to reflect a Participant's transfer
contributions;
4. a subaccount to reflect a Participant's nondeductible employee
contributions; and
5. a subaccount to reflect a Participant's deductible employee
contributions.
Such subaccounts are primarily for accounting purposes, and do not
necessarily require a segregation of the Fund.
<PAGE>
B. The Plan Administrator may establish additional accounts as it may
deem necessary for the proper administration of the Plan,
including, but not limited to, a suspense account for Forfeitures
as required pursuant to Section 6.01(D).
4.02 Valuation of Fund
The Fund will be valued each Valuation Date at fair market value.
4.03 Valuation of Individual Accounts
A. Where all or a portion of the assets of a Participant's Individual
Account are invested in a Separate Fund for the Participant, then
the value of that portion of such Participant's Individual Account
at any relevant time equals the sum of the fair market values of
the assets in such Separate Fund, less any applicable charges or
penalties.
B. The fair market value of the remainder of each Individual Account
is determined in the following manner:
1. First, the portion of the Individual Account invested in each
Investment Fund as of the previous Valuation Date is
determined. Each such portion is reduced by any withdrawal
made from the applicable Investment Fund to or for the benefit
of a Participant or his Beneficiary, further reduced by any
amounts forfeited by the Participant pursuant to Section
6.01(D) and further reduced by any transfer to another
Investment Fund since the previous Valuation Date and is
increased by any amount transferred from another Investment
Fund since the previous Valuation Date. The resulting amounts
are the net Individual Account portions invested in the
Investment Funds.
2. Secondly, the net Individual Account portions invested in each
Investment Fund are adjusted upwards or downwards, pro rata
(i.e., ratio of each net Individual Account portion to the sum
of all net Individual Account portions) so that the sum of all
the net Individual Account portions invested in an Investment
Fund will equal the then fair market value of the Investment
Fund. Notwithstanding the previous sentence, for the first
Plan Year only, the net Individual Account portions shall be
the sum of all contributions made to each Participant's
Individual Account during the first Plan Year.
3. Thirdly, any contributions to the Plan and Forfeitures are
allocated in accordance with the appropriate allocation
provisions of Section 3. For purposes of Section 4,
contributions made by the Employer for any Plan Year but after
that Plan Year will be considered to have been made on the
last day of that Plan Year regardless of when paid to the
Trustee (or Custodian, if applicable).
Amounts contributed between Valuation Dates will not be
credited with investment gains or losses until the next
following Valuation Date.
4. Finally, the portions of the Individual Account invested in
each Investment Fund (determined in accordance with (1), (2)
and (3) above) are added together.
4.04 Segregation of Assets
If a Participant elects a mode of distribution other than a lump sum,
the Plan Administrator may place that Participant's account balance
into a segregated Investment Fund for the purpose of maintaining the
necessary liquidity to provide benefit installments on a periodic
basis.
4.05 Statement of Individual Accounts
No later than 270 days after the close of each Plan Year, the Plan
Administrator shall furnish a statement to each Participant indicating
the Individual Account balances of such Participant as of the last
Valuation Date in such Plan Year.
4.06 Modification of Method for Valuing Individual Accounts
If necessary or appropriate, the Plan Administrator may establish
different or additional procedures (which shall be uniform and
nondiscriminatory) for determining the fair market value of the
Individual Accounts.
SECTION FIVE TRUSTEE OR CUSTODIAN
5.01 Creation of Fund
By adopting this Plan, the Employer establishes the Fund which shall
consist of the assets of the Plan held by the Trustee (or Custodian, if
applicable) pursuant to this Section 5. Assets within the Fund may be
pooled on behalf of all Participants, earmarked on behalf of each
Participant or be a combination of pooled and earmarked. To the extent
that assets are earmarked for a particular Participant, they will be
held in a Separate Fund for that Participant.
No part of the corpus or income of the Fund may be used for, or
diverted to, purposes other than for the exclusive benefit of
Participants or their Beneficiaries.
5.02 Investment Authority
Except as provided in Section 5.14 (relating to individual direction of
investments by Participants), the Employer, not the Trustee (or
Custodian, if applicable), shall have exclusive management and control
over the investment of the Fund into any permitted investment.
5.03 Financial Organization Custodian or Trustee Without Full Trust Powers
This Section 5.03 applies where a financial organization has indicated
in the Adoption Agreement that it will serve, with respect to this
Plan, as Custodian or as Trustee without full trust powers (under
applicable law). Hereinafter, a financial organization Trustee without
full trust powers (under applicable law) shall be referred to as a
Custodian.
<PAGE>
A. Permissible Investments - The assets of the Plan shall be
invested only in those investments listed as permissible
investments in the Adoption Agreement.
B. Responsibilities of the Custodian - The responsibilities of the
Custodian shall be limited to the following:
1. To receive Plan contributions and to hold, invest and reinvest
the Fund without distinction between principal and interest;
provided, however, that nothing in this Plan shall require the
Custodian to maintain physical custody of stock certificates
(or other indicia of ownership of any type of asset)
representing assets within the Fund;
2. To maintain accurate records of contributions, earnings,
withdrawals and other information the Custodian deems relevant
with respect to the Plan;
3. To make disbursements from the Fund to Participants or
Beneficiaries upon the proper authorization of the Plan
Administrator; and
4. To furnish to the Plan Administrator a statement which
reflects the value of the investments in the hands of the
Custodian as of the end of each Plan Year.
C. Powers of the Custodian - Except as otherwise provided in this
Plan, the Custodian shall have the power to take any action with
respect to the Fund which it deems necessary or advisable to
discharge its responsibilities under this Plan including, but not
limited to, the following powers:
1. To invest all or a portion of the Fund (including idle cash
balances) in time deposits, savings accounts, money market
accounts or similar investments bearing a reasonable rate of
interest in the Custodian's own savings department or the
savings department of another financial organization;
2. To vote upon any stocks, bonds, or other securities; to give
general or special proxies or powers of attorney with or
without power of substitution; to exercise any conversion
privileges or subscription rights and to make any payments
incidental thereto; to oppose, or to consent to, or otherwise
participate in, corporate reorganizations or other changes
affecting corporate securities, and to pay any assessments or
charges in connection therewith; and generally to exercise any
of the powers of an owner with respect to stocks, bonds,
securities or other property;
3. To hold securities or other property of the Fund in its own
name, in the name of its nominee or in bearer form; and
4. 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.
5.04 [INTENTIONALLY OMITTED]
5.05 Division of Fund into investment funds
The Employer may direct the Trustee (or Custodian, if applicable) from
time-to-time to divide and redivide the Fund into one or more
Investment Funds. Such Investment Funds may include, but not be limited
to, Investment Funds representing the assets under the control of an
investment manager pursuant to Section 5.12 and Investment Funds
representing investment options available for individual direction by
Participants pursuant to Section 5.14. Upon each division or
redivision, the Employer may specify the part of the Fund to be
allocated to each such Investment Fund and the terms and conditions, if
any, under which the assets in such Investment Fund shall be invested.
5.06 Compensation and Expenses
The Trustee (or Custodian, if applicable) shall receive such reasonable
compensation as may be agreed upon by the Trustee (or Custodian) and
the Employer. The Trustee (or Custodian) shall be entitled to
reimbursement by the Employer for all proper expenses incurred in
carrying out his duties under this Plan, including reasonable legal,
accounting and actuarial expenses. If not paid by the Employer, such
compensation and expenses may be charged against the Fund.
All taxes of any kind that may be levied or assessed under existing or
future laws upon, or in respect of, the Fund or the income thereof
shall be paid from the Fund.
5.07 Not Obligated to Question Data
The Employer shall furnish the Trustee (or Custodian, if applicable)
and Plan Administrator the information which each party deems necessary
for the administration of the Plan including, but not limited to,
changes in a Participant's status, eligibility, mailing addresses and
other such data as may be required. The Trustee (or Custodian) and Plan
Administrator shall be entitled to act on such information as is
supplied them and shall have no duty or responsibility to further
verify or question such information.
5.08 Liability for Withholding on Distributions
The Plan Administrator shall be responsible for withholding federal
income taxes from distributions from the Plan, unless the Participant
(or Beneficiary, where applicable) elects not to have such taxes
withheld. However, the Trustee (or Custodian, if applicable) shall act
as agent for the Plan Administrator to withhold such taxes and to make
the appropriate distribution reports, subject to the Plan
Administrator's obligation to furnish all the necessary information to
so withhold to the Trustee (or Custodian).
<PAGE>
5.09 Resignation or Removal of Trustee (or Custodian)
The Trustee (or Custodian, if applicable) may resign at any time by
giving 30 days advance written notice to the Employer. The resignation
shall become effective 30 days after receipt of such notice unless a
shorter period is agreed upon.
The Employer may remove any Trustee (or Custodian) at any time by
giving written notice to such Trustee (or Custodian) and such removal
shall be effective 30 days after receipt of such notice unless a
shorter period is agreed upon. The Employer shall have the power to
appoint a successor Trustee (or Custodian).
Upon such resignation or removal, if the resigning or removed Trustee
(or Custodian) is the sole Trustee (or Custodian), he shall transfer
all of the assets of the Fund then held by him as expeditiously as
possible to the successor Trustee (or Custodian) after paying or
reserving such reasonable amount as he shall deem necessary to provide
for the expense in the settlement of the accounts and the amount of any
compensation due him and any sums chargeable against the Fund for which
he may be liable. If the Funds as reserved are not sufficient for such
purpose, then he shall be entitled to reimbursement from the successor
Trustee (or Custodian) out of the assets in the successor Trustee's (or
Custodian's) hands under this Plan. If the amount reserved shall be in
excess of the amount actually needed, the former Trustee (or Custodian)
shall return such excess to the successor Trustee (or Custodian).
Upon receipt of such assets, the successor Trustee (or Custodian) shall
thereupon succeed to all of the powers and responsibilities given to
the Trustee (or Custodian) by this Plan.
The resigning or removed Trustee (or Custodian) shall render an
accounting to the Employer and unless objected to by the Employer
within 30 days of its receipt, the accounting shall be deemed to have
been approved and the resigning or removed Trustee (or Custodian) shall
be released and discharged as to all matters set forth in the
accounting. Where a financial organization is serving as Trustee (or
Custodian) and it is merged with or bought by another organization (or
comes under the control of any federal or state agency), that
organization shall serve as the successor Trustee (or Custodian) of
this Plan, but only if it is the type of organization that can so serve
under applicable law.
Where the Trustee or Custodian is serving as a nonbank trustee or
custodian pursuant to Section 1.401-12(n) of the Income Tax
Regulations, the Employer will appoint a successor Trustee (or
Custodian) upon notification by the Commissioner of Internal Revenue
that such substitution is required because the Trustee (or Custodian)
has failed to comply with the requirements of Section 1.401-12(n) or is
not keeping such records or making such returns or rendering such
statements as are required by forms or regulations.
5.10 Degree of Care
Limitations of Liability - The Trustee (or Custodian, if applicable)
shall not be liable for any losses incurred by the Fund by any lawful
direction to invest communicated by the Employer, Plan Administrator or
any Participant or Beneficiary. The Trustee (or Custodian) shall be
under no liability for distributions made or other action taken or not
taken at the written direction of the Plan Administrator. It is
specifically understood that the Trustee (or Custodian) shall have no
duty or responsibility with respect to the determination of matters
pertaining to the eligibility of any Employee to become a Participant
or remain a Participant hereunder, the amount of benefit to which a
Participant or Beneficiary shall be entitled to receive hereunder,
whether a distribution to Participant or Beneficiary is appropriate
under the terms of the Plan or the size and type of any policy to be
purchased from any insurer for any Participant hereunder or similar
matters; it being understood that all such responsibilities under the
Plan are vested in the Plan Administrator.
5.11 Indemnification of Prototype Sponsor and Trustee (or Custodian)
Notwithstanding any other provision herein, and except as may be
otherwise provided by ERISA, the Employer shall indemnify and hold
harmless the Trustee (or Custodian, if applicable) and the Prototype
Sponsor, their officers, directors, employees, agents, their heirs,
executors, successors and assigns, from and against any and all
liabilities, damages, judgments, settlements, losses, costs, charges,
or expenses (including legal expenses) at any time arising out of or
incurred in connection with any action taken by such parties in the
performance of their duties with respect to this Plan, unless there has
been a final adjudication of gross negligence or willful misconduct in
the performance of such duties.
Further, except as may be otherwise provided by ERISA, the Employer
will indemnify the Trustee (or Custodian) and Prototype Sponsor from
any liability, claim or expense (including legal expense) which the
Trustee (or Custodian) and Prototype Sponsor shall incur by reason of
or which results, in whole or in part, from the Trustee's (or
Custodian's) or Prototype Sponsor's reliance on the facts and other
directions and elections the Employer communicates or fails to
communicate.
5.12 Investment Managers
A. Definition of Investment Manager - The Employer may appoint one or
more investment managers to make investment decisions with respect
to all or a portion of the Fund. The investment manager shall be
any firm or individual registered as an investment adviser under
the Investment Advisers Act of 1940, a bank as defined in said Act
or an insurance company qualified under the laws of more than one
state to perform services consisting of the management,
acquisition or disposition of any assets of the Plan.
B. Investment Manager's Authority - A separate Investment Fund shall
be established representing the assets of the Fund invested at the
direction of the investment manager. The investment manager so
appointed shall direct the Trustee (or Custodian, if applicable)
with respect to the investment of such Investment Fund. The
investments which may be acquired at the direction of the
investment manager are limited to those described in Section
5.03(A) (for Custodians) or Section 5.04(A) (for Trustees).
C. Written Agreement - The appointment of any investment manager
shall be by written agreement between the Employer and the
investment manager and a copy of such agreement (and any
modification or termination thereof) must be given to the Trustee
(or Custodian).
<PAGE>
The agreement shall set forth, among other matters, the effective
date of the investment manager's appointment and an acknowledgment
by the investment manager that it is a fiduciary of the Plan under
ERISA.
D. Concerning the Trustee (or Custodian) - Written notice of each
appointment of an investment manager shall be given to the Trustee
(or Custodian) in advance of the effective date of such
appointment. Such notice shall specify which portion of the Fund
will constitute the Investment Fund subject to the investment
manager's direction. The Trustee (or Custodian) shall comply with
the investment direction given to it by the investment manager and
will not be liable for any loss which may result by reason of any
action (or inaction) it takes at the direction of the investment
manager.
5.13 [INTENTIONALLY OMITTED]
5.14 Direction of Investments by Participant
If so indicated in the Adoption Agreement, each Participant may
individually direct the Trustee (or Custodian, if applicable) regarding
the investment of part or all of his Individual Account. To the extent
so directed, the Employer, Plan Administrator, Trustee (or Custodian)
and all other fiduciaries are relieved of their fiduciary
responsibility under Section 404 of ERISA.
The Plan Administrator shall direct that a Separate Fund be established
in the name of each Participant who directs the investment of part or
all of his Individual Account. Each Separate Fund shall be charged or
credited (as appropriate) with the earnings, gains, losses or expenses
attributable to such Separate Fund. No fiduciary shall be liable for
any loss which results from a Participant's individual direction. The
assets subject to individual direction shall not be invested in
collectibles as that term is defined in Section 408(m) of the Code.
The Plan Administrator shall establish such uniform and
nondiscriminatory rules relating to individual direction as it deems
necessary or advisable including, but not limited to, rules describing
(1) which portions of Participant's Individual Account can be
individually directed; (2) the frequency of investment changes; (3) the
forms and procedures for making investment changes; and (4) the effect
of a Participant's failure to make a valid direction.
Subject to the approval of the Prototype Sponsor, the Plan
Administrator may, in a uniform and nondiscriminatory manner, limit the
available investments for Participants' individual direction to certain
specified investment options (including, but not limited to, certain
mutual funds, investment contracts, deposit accounts and group trusts).
The Plan Administrator may permit, in a uniform and nondiscriminatory
manner, a Beneficiary of a deceased Participant to individually direct
in accordance with this Section.
SECTION SIX VESTING AND DISTRIBUTION
6.01 Distribution to Participant
A. When Distributable
1. Entitlement to Distribution - The Vested portion of a
Participant's Individual Account shall be distributable to the
Participant upon the occurrence of any of the following
events:
a. the Participant's Termination of Employment;
b. the Participant's attainment of Normal Retirement Age;
c. the Participant's Disability; or
d. the termination of the Plan.
2. Written Request: When Distributed - A Participant entitled to
distribution who wishes to receive a distribution must
submit a written request to the Plan Administrator. Such
request shall be made upon a form provided by the Plan
Administrator. Upon a valid request, the Plan Administrator
shall direct the Trustee (or Custodian, if applicable) to
commence distribution no later than 90 days following the
later of:
a. the close of the Plan Year within which the event occurs
which entitles the Participant to distribution; or
b. the close of the Plan Year in which the request is
received.
3. Special Rules For Withdrawals During Service - If this is a
profit sharing plan and the Adoption Agreement so provides, a
Participant who is not otherwise entitled to a distribution
under Section 6.01(A)(1) may elect to receive a distribution
of all or a part of the Vested portion of his Individual
Account, subject to the requirements of Section 6.05 and
further subject to the following limits:
a. Participant for 5 or more years. An Employee who has been
a Participant in the Plan for 5 or more years may withdraw
up to his entire Vested portion of his Individual Account.
b. Participant for less than 5 years. An Employee who has
been a Participant in the Plan for less than 5 years may
withdraw only the amount which has been in his Vested
Individual Account attributable to Employer Contributions
for at least 2 full Plan Years.
<PAGE>
However, if the distribution is on account of hardship, the
Participant may withdraw up to his entire Vested portion of
his Individual Account. For purposes of the preceding
sentence, hardship is defined as an immediate and heavy
financial need of the Participant where such Participant lacks
other available resources. The following are the only
financial needs considered immediate and heavy: expenses
incurred or necessary for medical care, described in Section
213(d) of the Code, of the Employee, the Employee's spouse or
dependents; the purchase (excluding mortgage payments) of a
principal residence for the Employee; payment of tuition and
related educational fees for the next 12 months of
post-secondary education for the Employee, the Employee's
spouse, children or dependents; or the need to prevent the
eviction of the Employee from, or a foreclosure on the
mortgage of, the Employee's principal residence.
A distribution will be considered as necessary to satisfy an
immediate and heavy financial need of the Employee only if:
1) The employee has obtained all distributions, other than
hardship distributions, and all nontaxable loans under all
plans maintained by the Employer;
2) The distribution is not in excess of the amount of an
immediate and heavy financial need (including amounts
necessary to pay any federal, state or local income taxes
or penalties reasonably anticipated to result from the
distribution).
4. Commencement of Benefits - Notwithstanding any other
provision, 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:
a. the Participant attains Normal Retirement Age;
b. occurs the 10th anniversary of the year in which the
Participant commenced participation in the Plan; or
c. the Participant incurs a Termination of Employment.
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
6.02(B), shall be deemed to be an election to defer
commencement of payment of any benefit sufficient to satisfy
this Section 6.01(A)(4).
B. Determining the Vested Portion - In determining the Vested portion
of a Participant's Individual Account, the following rules apply:
1. Employer Contributions and Forfeitures - The Vested portion of
a Participant's Individual Account derived from Employer
Contributions and Forfeitures is determined by applying the
vesting schedule selected in the Adoption Agreement (or the
vesting schedule described in Section 6.01(C) if the Plan is a
Top-Heavy Plan).
2. Rollover and Transfer Contributions - A Participant is fully
Vested in his rollover contributions and transfer
contributions.
3. Fully Vested Under Certain Circumstances - A Participant is
fully Vested in his Individual Account if any of the
following occurs:
a. the Participant reaches Normal Retirement Age;
b. the Participant incurs a Disability;
c. the Participant dies;
d. the Plan is terminated or partially terminated; or
e. there exists a complete discontinuance of contributions
under the Plan (if this Plan is a profit sharing plan).
4. Participants in a Prior Plan - If a Participant was a
participant in a Prior Plan on the Effective Date, his Vested
percentage shall not be less than it would have been under
such Prior Plan as computed on the Effective Date.
C. Minimum Vesting Schedule for Top-Heavy Plans - The following
vesting provisions apply for any Plan Year in which this Plan is
a Top-Heavy Plan.
Notwithstanding the other provisions of this Section 6.01 or the
vesting schedule selected in the Adoption Agreement (unless those
provisions or that schedule provide for more rapid vesting), a
Participant's Vested portion of his Individual Account
attributable to Employer Contributions and Forfeitures shall be
determined in accordance with the following minimum vesting
schedule:
Years of Vesting Service Vested Percentage
1 0
2 20
3 40
4 60
5 80
6 100
<PAGE>
This minimum vesting schedule applies to all benefits within the
meaning of Section 411(a)(7) of the Code, except those
attributable to employee contributions including benefits accrued
before the effective date of Section 416 of the Code and benefits
accrued before the Plan became a Top-Heavy Plan. Further, no
decrease in a Participant's Vested percentage may occur in the
event the Plan's status as a Top-Heavy Plan changes for any Plan
Year. However, this Section 6.01(C) does not apply to the
Individual Account of any Employee who does not have an Hour of
Service after the Plan has initially become a Top-Heavy Plan and
such Employee's Individual Account attributable to Employer
Contributions and Forfeitures will be determined without regard to
this Section.
If this Plan ceases to be a Top-Heavy Plan, then in accordance
with the above restrictions, the vesting schedule as selected in
the Adoption Agreement will govern. If the vesting schedule under
the Plan shifts in or out of top-heavy status, such shift is an
amendment to the vesting schedule and the election in Section 9.04
applies.
D. Break in Vesting Service and Forfeitures - If a Participant incurs
a Termination of Employment, any portion of his Individual Account
which is not Vested shall be held in a suspense account. Such
suspense account shall share in any increase or decrease in the
fair market value of the assets of the Fund in accordance with
Section 4 of the Plan. The disposition of such suspense account
shall be as follows:
1. No Breaks in Vesting Service - If a Participant neither
receives nor is deemed to receive a distribution pursuant to
Section 6.01(D)(2) or (3) and the Participant returns to the
service of the Employer before incurring 5 consecutive Breaks
in Vesting Service, there shall be no Forfeiture and the
amount in such suspense account shall be recredited to such
Participant's Individual Account.
2. Cash-out of Certain Participants - If the value of the Vested
portion of such Participant's Individual Account derived from
Employee and Employer Contributions does not exceed $3,500,
the Participant shall receive a distribution of the entire
Vested portion of such Individual Account and the portion
which is not Vested shall be treated as a Forfeiture. For
purposes of this Section, if the value of the Vested portion
of a Participant's Individual Account is zero, the Participant
shall be deemed to have received a distribution of such Vested
Individual Account. A Participant's Vested Individual 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.
3. Participants Who Elect to Receive Distributions - If such
Participant elects to receive a distribution, in accordance
with Section 6.02(B), of the value of the Vested portion of
his Individual Account derived from Employee and Employer
Contributions, the portion which is not Vested shall be
treated as a Forfeiture.
4. Re-employed Participants - If a Participant receives or is
deemed to receive a distribution pursuant to Section
6.01(D)(2) or (3) above and the Participant resumes employment
covered under this Plan, the Participant's Employer-derived
Individual Account balance will be restored to the amount on
the date of distribution if the Participant repays to the Plan
the full amount of the distribution attributable to Employer
Contributions before the earlier of 5 years after the first
date on which the Participant is subsequently re-employed by
the Employer, or the date the Participant incurs 5 consecutive
Breaks in Vesting Service following the date of the
distribution.
Amounts forfeited under Section 6.01(D) shall be allocated in
accordance with Section 3.01(C) as of the last day of the Plan
Year during which the Forfeiture arises. Any restoration of a
Participant's Individual Account pursuant to Section
6.01(D)(4) shall be made from other Forfeitures, income or
gain to the Fund or contributions made by the Employer.
E. Distribution Prior to Full Vesting - If a distribution is made to
a Participant who was not then fully Vested in his Individual
Account derived from Employer Contributions and the Participant
may increase his Vested percentage in his Individual Account, then
the following rules shall apply:
1. a separate account will be established for the Participant's
interest in the Plan as of the time of the distribution, and
2. at any relevant time the Participant's Vested portion of the
separate account will be equal to an amount ("X") determined
by the formula: X=P (AB + (R x D)) - (R x D) where "P" is the
Vested percentage at the relevant time, "AB" is the separate
account balance at the relevant time; "D" is the amount of the
distribution; and "R" is the ratio of the separate account
balance at the relevant time to the separate account balance
after distribution.
6.02 Form of Distribution to a Participant
A. Value of Individual Account Does Not Exceed $3,500 - If the value
of the Vested portion of a Participant's Individual Account
derived from Employee and Employer Contributions does not exceed
$3,500, distribution from the Plan shall be made to the
Participant in a single lump sum in lieu of all other forms of
distribution from the Plan.
B. Value of Individual Account Exceeds $3,500
<PAGE>
1. If the value of the Vested portion of a Participant's
Individual Account derived from Employee and Employer
Contributions exceeds (or at the time of any prior
distribution exceeded) $3,500, and the Individual Account is
immediately distributable, the Participant and the
Participant's spouse (or where either the Participant or the
spouse died, the survivor) must consent to any distribution of
such Individual Account. The consent of the Participant and
the Participant's spouse shall be obtained in writing within
the 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 Individual Account 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) of the
Code, and shall be provided no less than 30 days and no more
than 90 days prior to the annuity starting date. If a
distribution is one to which Sections 401(a)(11) and 417 of
the Internal Revenue Code do not apply, such distribution may
commence less than 30 days after the notice required under
Section 1.411(a)-11(c) of the Income Tax Regulations is given,
provided that:
a. the Plan Administrator clearly informs the Participant
that the Participant has a right to a period of at least
30 days after receiving the notice to consider the
decision of whether or not to elect a distribution (and,
if applicable, a particular distribution option), and
b. the Participant, after receiving the notice, affirmatively
elects a distribution.
Notwithstanding the foregoing, only the Participant need
consent to the commencement of a distribution in the form of a
qualified joint and survivor annuity while the Individual
Account 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 Individual Account 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.
An Individual Account is immediately distributable if any part
of the Individual Account 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 62.
2. 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 Vested portion of a Participant's Individual Account shall
not include amounts attributable to accumulated deductible
employee contributions within the meaning of Section
72(o)(5)(B) of the Code.
C. Other Forms of Distribution to Participant - If the value of the
Vested portion of a Participant's Individual Account exceeds
$3,500 and the Participant has properly waived the joint and
survivor annuity, as described in Section 6.05, the Participant
may request in writing that the Vested portion of his Individual
Account be paid to him in one or more of the following forms
of payment: (1) in a lump sum; (2) in installment
payments over a period not to exceed the life expectancy of the
Participant or the joint and last survivor life expectancy of the
Participant and his designated Beneficiary; or (3) applied to the
purchase of an annuity contract.
Notwithstanding anything in this Section 6.02 to the contrary, a
Participant cannot elect payments in the form of an annuity if the
safe harbor rules of Section 6.05(F) apply.
6.03 Distributions Upon the Death of a Participant
A. Designation of Beneficiary - Spousal Consent - Each Participant
may designate, upon a form provided by and delivered to the Plan
Administrator, one or more primary and contingent Beneficiaries to
receive all or a specified portion of his Individual Account in
the event of his death. A Participant may change or revoke such
Beneficiary designation from time to time by completing and
delivering the proper form to the Plan Administrator.
In the event that a Participant wishes to designate a primary
Beneficiary who is not his spouse, his spouse must consent in
writing to such designation, and the spouse's consent must
acknowledge the effect of such designation and be witnessed by a
notary public. Notwithstanding this consent requirement, if the
Participant establishes to the satisfaction of the Plan
Administrator that such written consent may not be obtained
because there is no spouse or the spouse cannot be located, no
consent shall be required. Any change of Beneficiary will require
a new spousal consent.
B. Payment to Beneficiary - If a Participant dies before his entire
Individual Account has been paid to him, such deceased
Participant's Individual Account shall be payable to any surviving
Beneficiary designated by the Participant, or, if no Beneficiary
survives the Participant, to the Participant's estate.
C. Written Request: When Distributed - A Beneficiary of a deceased
Participant entitled to a distribution who wishes to receive a
distribution must submit a written request to the Plan
Administrator. Such request shall be made upon a form provided by
the Plan Administrator. Upon a valid request, the Plan
Administrator shall direct the Trustee (or Custodian) to commence
distribution no later than 90 days following the later of:
1. the close of the Plan Year within which the Participant dies;
or
2. the close of the Plan Year in which the request is received.
<PAGE>
D. Location of Participant or Beneficiary Unknown - In the event
that all, or any portion, of the distribution payable to a
Participant or his Beneficiary hereunder shall, at the
expiration of 5 years after it becomes payable, remain unpaid
solely by reason of the inability of the Plan Administrator,
after sending a registered letter, return receipt requested,
to the last known address, and after further diligent effort,
to ascertain the whereabouts of such Participant or his
Beneficiary, the amount so distributable shall be forfeited
and allocated in accordance with the terms of the Plan. In the
event a Participant or Beneficiary is located subsequent to
his benefit being forfeited, such benefit shall be restored;
provided, however, if all or a portion of such amount has been
lost by reason of escheat under state law, the Participant or
Beneficiary shall cease to be entitled to the portion so lost.
6.04 Form of Distribution to Beneficiary
A. Value of Individual Account Does Not Exceed $3,500 - If the value
of the Participant's Individual Account derived from Employee and
Employer Contributions does not exceed $3,500, the Plan
Administrator shall direct the Trustee (or Custodian, if
applicable) to make a distribution to the Beneficiary in a single
lump sum in lieu of all other forms of distribution from the Plan.
B. Value of Individual Account Exceeds $3,500 - If the value of a
Participant's Individual Account derived from Employee and
Employer Contributions exceeds $3,500 the preretirement survivor
annuity requirements of Section 6.05 shall apply unless waived in
accordance with that Section or unless the safe harbor rules of
Section 6.05(F) apply.
C. Other Forms of Distribution to Beneficiary - If the value of a
Participant's Individual Account exceeds $3,500 and the
Participant has properly waived the preretirement survivor
annuity, as described in Section 6.05 (if applicable), the
Beneficiary may, subject to the requirements of Section 6.06,
request in writing that the Participant's Individual Account be
paid to him as follows: (1) in a lump sum; or (2) in installment
payments over a period not to exceed the life expectancy of such
Beneficiary.
6.05 Joint and Survivor Annuity Requirements
A. The provisions of this Section shall apply to any Participant who
is credited with at least one Hour of Eligibility Service with the
Employer on or after August 23, 1984, and such other participants
as provided in Section 6.05(G).
B. Qualified Joint and Survivor Annuity - Unless an optional form of
benefit is selected pursuant to a qualified election within the
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.
C. 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.
D. Definitions
1. Election Period - The period which begins on the first day of
the Plan Year in which the Participant attains age 35 and ends
on the date of the Participant's death. If a Participant
separates from service prior to the first day of the Plan year
in which age 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.
Pre-age 35 waiver - A Participant who will not yet attain age
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 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
6.05(E)(1). Qualified preretirement survivor annuity coverage
will be automatically reinstated as of the first day of the
Plan Year in which the Participant attains age 35. Any new
waiver on or after such date shall be subject to the full
requirements of this Section 6.05.
2. Earliest Retirement Age - The earliest date on which, under
the Plan, the Participant could elect to receive retirement
benefits.
3. Qualified Election - 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: (a) the Participant's spouse consents in
writing to the election, (b) the election designates a
specific Beneficiary, including any class of beneficiaries or
any contingent beneficiaries, which may not be changed without
spousal consent (or the spouse expressly permits designations
by the Participant without any further spousal consent); (c)
the spouse's consent acknowledges the effect of the election;
and (d) the spouse's consent is witnessed by a plan
representative or notary public. Additionally, a Participant's
waiver of the 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.
Any consent by a spouse obtained under this provision (or
establishment that the consent of a spouse may not be
obtained) shall be effective only with respect to such spouse.
A consent that permits designations by the Participant without
any requirement of further consent by such spouse must
acknowledge that the spouse has the right to limit consent to
a specific Beneficiary, and a specific form of benefit where
applicable, and that the spouse voluntarily elects to
relinquish either or both of such rights. A revocation of a
prior 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 6.05(E)
below.
<PAGE>
4. 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 is not less than 50% and not more
than 100% of the amount of the annuity which is payable during
the joint lives of the Participant and the spouse and which is
the amount of benefit which can be purchased with the
Participant's vested account balance. The percentage of the
survivor annuity under the Plan shall be 50% (unless a
different percentage is elected by the Employer in the
Adoption Agreement).
5. 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.
6. Annuity Starting Date - The first day of the first period for
which an amount is paid as an annuity or any other form.
7. Vested Account Balance - The aggregate value of the
Participant's Vested account balances derived from Employer
and Employee contributions (including rollovers), whether
Vested before or upon death, including the proceeds of
insurance contracts, if any, on the Participant's life. The
provisions of this Section 6.05 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.
E. Notice Requirements
1. In the case of a qualified joint and survivor annuity, the
Plan Administrator shall no less than 30 days and not more
than 90 days prior to the annuity starting date provide each
Participant a written explanation of: (a) the terms and
conditions of a qualified joint and survivor annuity; (b) the
Participant's right to make and the effect of an election to
waive the qualified joint and survivor annuity form of
benefit; (c) the rights of a Participant's spouse; and (d) the
right to make, and the effect of, a revocation of a previous
election to waive the qualified joint and survivor annuity.
2. In the case of a qualified preretirement survivor annuity as
described in Section 6.05(C), 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 Section 6.05(E)(1) applicable to a
qualified joint and survivor annuity.
The applicable period for a Participant is whichever of the
following periods ends last: (a) the period beginning with the
first day of the Plan Year in which the Participant attains
age 32 and ending with the close of the Plan Year preceding
the Plan Year in which the Participant attains age 35; (b) a
reasonable period ending after the individual becomes a
Participant; (c) a reasonable period ending after Section
6.05(E)(3) ceases to apply to the Participant; (d) a
reasonable period ending after this Section 6.05 first applies
to the Participant. Notwithstanding the foregoing, notice must
be provided within a reasonable period ending after separation
from service in the case of a Participant who separates from
service before attaining age 35.
For purposes of applying the preceding paragraph, a reasonable
period ending after the enumerated events described in (b),
(c) and (d) is the end of the two-year period beginning one
year prior to the date the applicable event occurs, and ending
one year after that date. In the case of a Participant who
separates from service before the Plan Year in which age 35 is
attained, notice shall be provided within the two-year period
beginning one year prior to separation and ending one year
after separation. If such a Participant thereafter returns to
employment with the Employer, the applicable period for such
Participant shall be redetermined.
3. Notwithstanding the other requirements of this Section
6.05(E), the respective notices prescribed by this Section
6.05(E), need not be given to a Participant if (a) the Plan
"fully subsidizes" the costs of a qualified joint and survivor
annuity or qualified preretirement survivor annuity, and (b)
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 Section
6.05(E)(3), 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.
F. Safe Harbor Rules
1. If the Employer so indicates in the Adoption Agreement, this
Section 6.05(F) shall apply to a Participant in a profit
sharing plan, and shall always apply 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:
a. the Participant does not or cannot elect payments in the
form of a life annuity; and
b. 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. The surviving spouse may elect to have
distribution of the Vested account balance commence within
the 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. This Section 6.05(F) 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 Section 401(a)(11) and
Section 417 of the Code. If this Section 6.05(F) is
operative, then the provisions of this Section 6.05 other
than Section 6.05(G) shall be inoperative.
<PAGE>
2. The Participant may waive the spousal death benefit described
in this Section 6.05(F) at any time provided that no such
waiver shall be effective unless it satisfies the conditions
of Section 6.05(D)(3) (other than the notification requirement
referred to therein) that would apply to the Participant's
waiver of the qualified preretirement survivor annuity.
3. For purposes of this Section 6.05(F), 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
6.05(D)(7).
G. Transitional Rules
1. Any living Participant not receiving benefits on August 23,
1984, who would otherwise not receive the benefits prescribed
by the previous subsections of this Section 6.05 must be given
the opportunity to elect to have the prior subsections of this
Section apply if such Participant is credited with at least
one 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 10 Years of Vesting Service when he
or she separated from service.
2. Any living Participant not receiving benefits on August 23,
1984, who was credited with at least one 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 Section 6.05(G)(4).
3. The respective opportunities to elect (as described in Section
6.05(G)(1) and (2) 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.
4. Any Participant who has elected pursuant to Section 6.05(G)(2)
and any Participant who does not elect under Section
6.05(G)(1) or who meets the requirements of Section 6.05(G)(1)
except that such Participant does not have at least 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:
a. 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 6 months
before the Participant attains qualified early retirement
age and ends not more than 90 days before the commencement
of benefits. Any election hereunder will be in writing and
may be changed by the Participant at any time.
b. 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.
c. For purposes of Section 6.05(G)(4):
1. Qualified early retirement age is the latest of:
a. the earliest date, under the Plan, on which the
Participant may elect to receive retirement
benefits,
<PAGE>
b. the first day of the 120th month beginning before
the Participant reaches Normal Retirement Age, or
c. the date the Participant begins participation.
2. Qualified joint and survivor annuity is an annuity
for the life of the Participant with a survivor
annuity for the life of the spouse as described in
Section 6.05 (D)(4) of this Plan.
6.06 Distribution Requirements
A. General Rules
1. Subject to Section 6.05, Joint and Survivor Annuity
Requirements, the requirements of this Section 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 Section
6.06 apply to calendar years beginning after December 31,
1984.
2. All distributions required under this Section 6.06 shall be
determined and made in accordance with the Income Tax
Regulations under Section 401(a)(9), including the minimum
distribution incidental benefit requirement of Section
1.401(a)(9)-2 of the regulations.
B. 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.
C. 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):
1. the life of the Participant,
2. the life of the Participant and a designated Beneficiary,
3. a period certain not extending beyond the life expectancy of
the Participant, or
4. a period certain not extending beyond the joint and last
survivor expectancy of the Participant and a designated
Beneficiary.
D. Determination of Amount to be Distributed Each Year - If the
Participant's interest is to be distributed in other than a single
sum, the following minimum distribution rules shall apply on or
after the required beginning date:
1. Individual Account
a. 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.
b. For calendar years beginning before January 1, 1989, if
the Participant's spouse is not the designated
Beneficiary, the method of distribution selected must
assure that at least 50% of the present value of the
amount available for distribution is paid within the life
expectancy of the Participant.
c. 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 Income Tax Regulations.
Distributions after the death of the Participant shall be
distributed using the applicable life expectancy in
Section 6.06(D)(1)(a) above as the relevant divisor
without regard to regulations 1.401(a)(9)-2.
d. 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.
2. 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
regulations thereunder.
<PAGE>
E. Death Distribution Provisions
1. 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.
2. 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 (a) or (b) below:
a. if any portion of the Participant's interest is payable to
a designated Beneficiary, distributions may be made over
the life or over a period certain not greater than the
life expectancy of the designated Beneficiary commencing
on or before December 31 of the calendar year immediately
following the calendar year in which the Participant died;
b. if the designated Beneficiary is the Participant's
surviving spouse, the date distributions are required to
begin in accordance with (a) above shall not be earlier
than the later of (1) December 31 of the calendar year
immediately following the calendar year in which the
Participant dies or (2) December 31 of the calendar year
in which the Participant would have attained age 70 1/2.
If the Participant has not made an election pursuant to this
Section 6.06(E)(2) 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 6.06(E)(2), 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.
3. For purposes of Section 6.06(E)(2) above, if the surviving
spouse dies after the Participant, but before payments to such
spouse begin, the provisions of Section 6.06(E)(2), with the
exception of paragraph (b) therein, shall be applied as if the
surviving spouse were the Participant.
4. For purposes of this Section 6.06(E), 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.
5. For purposes of this Section 6.06(E), distribution of a
Participant's interest is considered to begin on the
Participant's required beginning date (or, if Section
6.06(E)(3) above is applicable, the date distribution is
required to begin to the surviving spouse pursuant to Section
6.06(E)(2) above). If distribution in the form of an annuity
irrevocably commences to the Participant before the required
beginning date, the date distribution is considered to begin
is the date distribution actually commences.
F. Definitions
1. Applicable Life Expectancy - The life expectancy (or joint and
last survivor expectancy) calculated using the attained age of
the Participant (or designated Beneficiary) as of the
Participant's (or designated Beneficiary's) birthday in the
applicable calendar year reduced by one for each calendar year
which has elapsed since the date life expectancy was first
calculated. If life expectancy is being recalculated, the
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.
2. Designated Beneficiary - The individual who is designated as
the Beneficiary under the Plan in accordance with Section
401(a)(9) of the Code and the regulations thereunder.
3. 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 6.06(E) above.
4. Life Expectancy - 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.
Unless otherwise elected by the Participant (or spouse, in the
case of distributions described in Section 6.06(E)(2)(b)
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
nonspouse Beneficiary may not be recalculated.
<PAGE>
5. Participant's Benefit
a. The account balance as of the last valuation date in the
valuation calendar year (the calendar year immediately
preceding the distribution 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.
b. Exception for second distribution calendar year. For
purposes of paragraph (a) 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.
6. Required Beginning Date
a. 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 70 1/2.
b. Transitional Rules - The required beginning date of a
Participant who attains age 70 1/2 before January 1, 1988,
shall be determined in accordance with (1) or (2) below:
1. Non 5% Owners - The required beginning date of a
Participant who is not a 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 70 1/2 occurs.
2. 5% Owners - The required beginning date of a
Participant who is a 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 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 5% owner, or the calendar year in which
the Participant retires.
The required beginning date of a Participant who
is not a 5% owner who attains age 70 1/2 during
1988 and who has not retired as of January 1,
1989, is April 1, 1990.
c. 5% Owner - A Participant is treated as a 5% owner
for purposes of this Section 6.06(F)(6) if such
Participant is a 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 66 1/2 or any
subsequent Plan Year.
d. Once distributions have begun to a 5% owner under
this Section 6.06(F)(6) they must continue to be
distributed, even if the Participant ceases to be
a 5% owner in a subsequent year.
G. Transitional Rule
1. Notwithstanding the other requirements of this Section 6.06
and subject to the requirements of Section 6.05, Joint and
Survivor Annuity Requirements, distribution on behalf of any
Employee, including a 5% owner, may be made in accordance with
all of the following requirements (regardless of when such
distribution commences):
a. The distribution by the Fund is one which would not have
disqualified such Fund under Section 401(a)(9) of the Code
as in effect prior to amendment by the Deficit Reduction
Act of 1984.
b. The distribution is in accordance with a method of
distribution designated by the Employee whose interest in
the Fund is being distributed or, if the Employee is
deceased, by a Beneficiary of such Employee.
c. Such designation was in writing, was signed by the
Employee or the Beneficiary, and was made before
January 1, 1984.
d. The Employee had accrued a benefit under the Plan as of
December 31, 1983.
e. The method of distribution designated by the Employee or
the Beneficiary specifies the time at which distribution
will commence, the period over 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.
2. 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.
<PAGE>
3. 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 Sections 6.06(G)(1)(a) and (e).
4. If a designation is revoked, any subsequent distribution must
satisfy the requirements of Section 401(a)(9) of the Code and
the regulations thereunder. If a designation is revoked
subsequent to the date distributions are required to begin,
the Plan must distribute by the end of the calendar year
following the calendar year in which the revocation occurs the
total amount not yet distributed which would have been
required to have been distributed to satisfy 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 Income Tax Regulations. Any changes in
the designation will be considered to be a revocation of the
designation. However, the mere substitution or addition of
another Beneficiary (one not named in the designation) under
the designation will not be considered to be a revocation of
the designation, so long as such substitution or addition does
not alter the period over which distributions are to be made
under the designation, directly or indirectly (for example, by
altering the relevant measuring life). 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.
6.07 Annuity Contracts
Any annuity contract distributed under the Plan (if permitted or
required by this Section 6) must be nontransferable. The terms of any
annuity contract purchased and distributed by the Plan to a Participant
or spouse shall comply with the requirements of the Plan.
6.08 [INTENTIONALLY OMITTED]
6.09 Distribution in Kind
The Plan Administrator may cause any distribution under this Plan to be
made either in a form actually held in the Fund, or in cash by
converting assets other than cash into cash, or in any combination of
the two foregoing ways.
6.10 Direct Rollovers of Eligible Rollover Distributions
A. Direct Rollover Option - This Section applies to distributions
made on or after January 1, 1993. Notwithstanding any provision of
the Plan to the contrary that would otherwise limit a
distributee's election under this Section, a distributee may
elect, at the time and in the manner prescribed by the Plan
Administrator, to have any portion of an eligible rollover
distribution paid directly to an eligible retirement plan
specified by the distributee in a direct rollover.
B. Definitions
1. 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:
a. any distribution that is one of a series of substantially
equal periodic payments (not less frequently than
annually) made for the life (or life expectancy) of the
distributee or the joint lives (or joint life
expectancies) of the distributee and the distributee's
designated beneficiary, or for a specified period of ten
years or more;
b. any distribution to the extent such distribution is
required under Section 401(a)(9) of the Code; and
c. the portion of any distribution that is not includible in
gross income (determined without regard to the exclusion
for net unrealized appreciation with respect to
employer securities).
2. 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.
3. 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.
4. Direct rollover - A direct rollover is a payment by the Plan
to the eligible retirement plan specified by the distributee.
SECTION SEVEN CLAIMS PROCEDURE
7.01 Filing a Claim for Plan Distributions
<PAGE>
A Participant or Beneficiary who desires to make a claim for the Vested
portion of the Participant's Individual Account shall file a written
request with the Plan Administrator on a form to be furnished to him by
the Plan Administrator for such purpose. The request shall set forth
the basis of the claim. The Plan Administrator is authorized to conduct
such examinations as may be necessary to facilitate the payment of any
benefits to which the Participant or Beneficiary may be entitled under
the terms of the Plan.
7.02 Denial of Claim
Whenever a claim for a Plan distribution by any Participant or
Beneficiary has been wholly or partially denied, the Plan Administrator
must furnish such Participant or Beneficiary written notice of the
denial within 60 days of the date the original claim was filed. This
notice shall set forth the specific reasons for the denial, specific
reference to pertinent Plan provisions on which the denial is based, a
description of any additional information or material needed to perfect
the claim, an explanation of why such additional information or
material is necessary and an explanation of the procedures for appeal.
7.03 Remedies Available
The Participant or Beneficiary shall have 60 days from receipt of the
denial notice in which to make written application for review by the
Plan Administrator. The Participant or Beneficiary may request that the
review be in the nature of a hearing. The Participant or Beneficiary
shall have the right to representation, to review pertinent documents
and to submit comments in writing. The Plan Administrator shall issue a
decision on such review within 60 days after receipt of an application
for review as provided for in Section 7.02. Upon a decision unfavorable
to the Participant or Beneficiary, such Participant or Beneficiary
shall be entitled to bring such actions in law or equity as may be
necessary or appropriate to protect or clarify his right to benefits
under this Plan.
SECTION EIGHT PLAN ADMINISTRATOR
8.01 Employer is Plan Administrator
A. The Employer shall be the Plan Administrator unless the managing
body of the Employer designates a person or persons other than the
Employer as the Plan Administrator and so notifies the Prototype
Sponsor and the Trustee (or Custodian, if applicable). The
Employer shall also be the Plan Administrator if the person or
persons so designated cease to be the Plan Administrator.
B. If the managing body of the Employer designates a person or
persons other than the Employer as Plan Administrator, such person
or persons shall serve at the pleasure of the Employer and shall
serve pursuant to such procedures as such managing body may
provide. Each such person shall be bonded as may be required by
law.
8.02 Powers and Duties of the Plan Administrator
A. The Plan Administrator may, by appointment, allocate the duties of
the Plan Administrator among several individuals or entities. Such
appointments shall not be effective until the party designated
accepts such appointment in writing.
B. The Plan Administrator shall have the authority to control and
manage the operation and administration of the Plan. The Plan
Administrator shall administer the Plan for the exclusive benefit
of the Participants and their Beneficiaries in accordance with the
specific terms of the Plan.
C. The Plan Administrator shall be charged with the duties of the
general administration of the Plan, including, but not limited to,
the following:
1. To determine all questions of interpretation or policy in a
manner consistent with the Plan's documents and the Plan
Administrator's construction or determination in good faith
shall be conclusive and binding on all persons except as
otherwise provided herein or by law. Any interpretation or
construction shall be done in a nondiscriminatory manner and
shall be consistent with the intent that the Plan shall
continue to be deemed a qualified plan under the terms of
Section 401(a) of the Code, as amended from time-to-time, and
shall comply with the terms of ERISA, as amended from
time-to-time;
2. To determine all questions relating to the eligibility of
Employees to become or remain Participants hereunder;
3. To compute the amounts necessary or desirable to be
contributed to the Plan;
4. To compute the amount and kind of benefits to which a
Participant or Beneficiary shall be entitled under the Plan
and to direct the Trustee (or Custodian, if applicable) with
respect to all disbursements under the Plan, and, when
requested by the Trustee (or Custodian), to furnish the
Trustee (or Custodian) with instructions, in writing, on
matters pertaining to the Plan and the Trustee (or Custodian)
may rely and act thereon;
5. To maintain all records necessary for the administration of
the Plan;
6. To be responsible for preparing and filing such disclosure and
tax forms as may be required from time-to-time by the
Secretary of Labor or the Secretary of the Treasury; and
7. To furnish each Employee, Participant or Beneficiary such
notices, information and reports under such circumstances as
may be required by law.
D. The Plan Administrator shall have all of the powers necessary or
appropriate to accomplish his duties under the Plan, including,
but not limited to, the following:
<PAGE>
1. To appoint and retain such persons as may be necessary to
carry out the functions of the Plan Administrator;
2. To appoint and retain counsel, specialists or other persons
as the Plan Administrator deems necessary or advisable in the
administration of the Plan;
3. To resolve all questions of administration of the Plan;
4. To establish such uniform and nondiscriminatory rules which it
deems necessary to carry out the terms of the Plan;
5. To make any adjustments in a uniform and nondiscriminatory
manner which it deems necessary to correct any arithmetical or
accounting errors which may have been made for any Plan Year;
and
6. To correct any defect, supply any omission or reconcile any
inconsistency in such manner and to such extent as shall be
deemed necessary or advisable to carry out the purpose of the
Plan.
8.03 Expenses and Compensation
All reasonable expenses of administration including, but not limited
to, those involved in retaining necessary professional assistance may
be paid from the assets of the Fund. Alternatively, the Employer may,
in its discretion, pay such expenses. The Employer shall furnish the
Plan Administrator with such clerical and other assistance as the Plan
Administrator may need in the performance of his duties.
8.04 Information From Employer
To enable the Plan Administrator to perform his duties, the Employer
shall supply full and timely information to the Plan Administrator (or
his designated agents) on all matters relating to the Compensation of
all Participants, their regular employment, retirement, death,
Disability or Termination of Employment, and such other pertinent facts
as the Plan Administrator (or his agents) may require. The Plan
Administrator shall advise the Trustee (or Custodian, if applicable) of
such of the foregoing facts as may be pertinent to the Trustee's (or
Custodian's) duties under the Plan. The Plan Administrator (or his
agents) is entitled to rely on such information as is supplied by the
Employer and shall have no duty or responsibility to verify such
information.
SECTION NINE AMENDMENT AND TERMINATION
9.01 Right of Prototype Sponsor to Amend the Plan
A. The Employer, by adopting the Plan, expressly delegates to the
Prototype Sponsor the power, but not the duty, to amend the Plan
without any further action or consent of the Employer as the
Prototype Sponsor deems necessary for the purpose of adjusting the
Plan to comply with all laws and regulations governing pension or
profit sharing plans. Specifically, it is understood that the
amendments may be made unilaterally by the Prototype Sponsor.
However, it shall also be understood that the Prototype
Sponsor shall be under no obligation to amend the Plan documents
and the Employer expressly waives any rights or claims against the
Prototype Sponsor for not exercising this power to amend. For
purposes of Prototype Sponsor amendments, the mass submitter shall
be recognized as the agent of the Prototype Sponsor. If the
Prototype 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.
B. An amendment by the Prototype Sponsor shall be accomplished by
giving written notice to the Employer of the amendment to be made.
The notice shall set forth the text of such amendment and the date
such amendment is to be effective. Such amendment shall take
effect unless within the 30 day period after such notice is
provided, or within such shorter period as the notice may specify,
the Employer gives the Prototype Sponsor written notice of refusal
to consent to the amendment. Such written notice of refusal shall
have the effect of withdrawing the Plan as a prototype plan and
shall cause the Plan to be considered an individually designed
plan. The right of the Prototype Sponsor to cause the Plan to be
amended shall terminate should the Plan cease to conform as a
prototype plan as provided in this or any other section.
9.02 Right of Employer to Amend the Plan
The Employer may (1) change the choice of options in the Adoption
Agreement, (2) 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 (3) add
certain model amendments published by the Internal Revenue Service
which specifically provide that their adoption will not cause the Plan
to be treated as individually designed. An Employer that amends the
Plan for any other reason, including a waiver of the minimum funding
requirement under Section 412(d) of the Code, will no longer
participate in this prototype plan and will be considered to have an
individually designed plan.
An Employer who wishes to amend the Plan to change the options it has
chosen in the Adoption Agreement must complete and deliver a new
Adoption Agreement to the Prototype Sponsor and Trustee (or Custodian,
if applicable). Such amendment shall become effective upon execution by
the Employer and Trustee (or Custodian).
The Employer further reserves the right to replace the Plan in its
entirety by adopting another retirement plan which the Employer
designates as a replacement plan.
9.03 Limitation on Power to Amend
No amendment to the Plan shall be effective to the extent that it has
the effect of decreasing a Participant's accrued benefit.
<PAGE>
Notwithstanding the preceding sentence, a Participant's Individual
Account 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 Individual Account 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 Vested percentage (determined as of such date) of such
Employee's Individual Account derived from Employer Contributions will
not be less than the percentage computed under the Plan without regard
to such amendment.
9.04 Amendment of Vesting Schedule
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 Vested 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 3 Years of Vesting Service with the Employer
may elect, within the time set forth below, to have the Vested
percentage computed under the Plan without regard to such amendment.
For Participants who do not have at least 1 Hour of Service in any Plan
Year beginning after December 31, 1988, the preceding sentence shall be
applied by substituting "5 Years of Vesting Service" for "3 Years of
Vesting Service" where such language appears.
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
the later of:
A. 60 days after the amendment is adopted;
<PAGE>
B. 60 days after the amendment becomes effective; or
C. 60 days after the Participant is issued written notice of the
amendment by the Employer or Plan Administrator.
9.05 Permanency
The Employer expects to continue this Plan and make the necessary
contributions thereto indefinitely, but such continuance and payment is
not assumed as a contractual obligation. Neither the Adoption Agreement
nor the Plan nor any amendment or modification thereof nor the making
of contributions hereunder shall be construed as giving any Participant
or any person whomsoever any legal or equitable right against the
Employer, the Trustee (or Custodian, if applicable), the Plan
Administrator or the Prototype Sponsor except as specifically provided
herein, or as provided by law.
9.06 Method and Procedure for Termination
The Plan may be terminated by the Employer at any time by appropriate
action of its managing body. Such termination shall be effective on the
date specified by the Employer. The Plan shall terminate if the
Employer shall be dissolved, terminated, or declared bankrupt. Written
notice of the termination and effective date thereof shall be given to
the Trustee (or Custodian, if applicable), Plan Administrator,
Prototype Sponsor, Participants and Beneficiaries of deceased
Participants, and the required filings (such as the Form 5500 series
and others) must be made with the Internal Revenue Service and any
other regulatory body as required by current laws and regulations.
Until all of the assets have been distributed from the Fund, the
Employer must keep the Plan in compliance with current laws and
regulations by (a) making appropriate amendments to the Plan and (b)
taking such other measures as may be required.
9.07 Continuance of Plan by Successor Employer
Notwithstanding the preceding Section 9.06, a successor of the Employer
may continue the Plan and be substituted in the place of the present
Employer. The successor and the present Employer (or, if deceased, the
executor of the estate of a deceased Self-Employed Individual who was
the Employer) must execute a written instrument authorizing such
substitution and the successor must complete and sign a new Adoption
Agreement.
9.08 Failure of Plan Qualification
If the Plan fails to attain or retain its qualified status, the Plan
will no longer be considered to be part of a prototype plan, and such
Employer can no longer participate under this prototype. In such event,
the Plan will be considered an individually designed plan.
SECTION TEN MISCELLANEOUS
10.01 State Community Property Laws
The terms and conditions of this Plan shall be applicable without
regard to the community property laws of any state.
10.02 Headings
The headings of the Plan have been inserted for convenience of
reference only and are to be ignored in any construction of the
provisions hereof.
10.03 Gender and Number
Whenever any words are used herein in the masculine gender they shall
be construed as though they were also used in the feminine gender in
all cases where they would so apply, and whenever any words are used
herein in the singular form they shall be construed as though they were
also used in the plural form in all cases where they would so apply.
10.04 Plan Merger or Consolidation
In the case of any merger or consolidation of the Plan with, or
transfer of assets or liabilities of such Plan to, any other plan, each
Participant shall be entitled to receive benefits immediately after the
merger, consolidation, or transfer (if the Plan had then terminated)
which are equal to or greater than the benefits he would have been
entitled to receive immediately before the merger, consolidation, or
transfer (if the Plan had then terminated). The Trustee (or Custodian,
if applicable) has the authority to enter into merger agreements or
agreements to directly transfer the assets of this Plan but only if
such agreements are made with trustees or custodians of other
retirement plans described in Section 401(a) of the Code.
10.05 Standard of Fiduciary Conduct
The Employer, Plan Administrator, Trustee and any other fiduciary under
this Plan shall discharge their duties with respect to this Plan solely
in the interests of Participants and their Beneficiaries and with the
care, skill, prudence and diligence under the circumstances then
prevailing that a prudent man acting in like capacity and familiar with
such matters would use in the conduct of an enterprise of a like
character and with like aims. No fiduciary shall cause the Plan to
engage in any transaction known as a "prohibited transaction" under
ERISA.
10.06 General Undertaking of All Parties
All parties to this Plan 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 this Plan and any of its provisions.
10.07 Agreement Binds Heirs, etc.
This Plan shall be binding upon the heirs, executors, administrators,
successors and assigns, as those terms shall apply to any and all
parties hereto, present and future.
10.08 Determination of Top-Heavy Status
A. For any Plan Year beginning after December 31, 1983, this Plan is
a Top-Heavy Plan if any of the following conditions exist:
1. If the top-heavy ratio for this Plan exceeds 60% and this Plan
is not part of any required aggregation group or permissive
aggregation group of plans;
2. If this Plan is part of a required aggregation group of plans
but not part of a permissive aggregation group and the
top-heavy ratio for the group of plans exceeds 60%;
3. If this Plan is a part of a required aggregation group and
part of a permissive aggregation group of plans and the
top-heavy ratio for the permissive aggregation group exceeds
60%.
For purposes of this Section 10.08, the following terms shall have the
meanings indicated below:
B. Key Employee - Any Employee or former Employee (and the
beneficiaries of such Employee) who at any time during the
determination period was an officer of the Employer if such
individual's annual compensation exceeds 50% of the dollar
limitation under Section 415(b)(1)(A) of the Code, an owner (or
considered an owner under Section 318 of the Code) of one of the
10 largest interests in the Employer if such individual's
compensation exceeds 100% of the dollar limitation under Section
415(c)(1)(A) of the Code, a 5% owner of the Employer, or a 1%
owner of the Employer who has an annual compensation of more than
$150,000. 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
excludible from the Employee's gross income under Section 125,
Section 402(a)(8), Section 402(h) or Section 403(b) of the Code.
The determination period is the Plan Year containing the
determination date and the 4 preceding Plan Years.
The determination of who is a Key Employee will be made in
accordance with Section 416(i)(1) of the Code and the regulations
thereunder.
C. Top-heavy ratio
1. If the Employer maintains one or more defined contribution
plans (including any simplified employee pension plan) and the
Employer has not maintained any defined benefit plan which
during the 5-year period ending on the determination date(s)
has or has had accrued benefits, the top-heavy ratio for this
Plan alone or for the required or permissive aggregation group
as appropriate is a fraction, the numerator of which is the
sum of the account balances of all Key Employees as of the
determination date(s) (including any part of any account
balance distributed in the 5-year period ending on the
determination date(s)), and the denominator of which is the
sum of all account balances (including any part of any account
balance distributed in the 5-year period ending on the
determination date(s)), both computed in accordance with
Section 416 of the Code and the regulations thereunder. Both
the numerator and the denominator of the top-heavy ratio
are increased to reflect any contribution not actually made
as of the determination date, but which is required to be
taken into account on that date under Section 416 of the Code
and the regulations thereunder.
2. If the Employer maintains one or more defined contribution
plans (including any simplified employee pension plan) and the
Employer maintains or has maintained one or more defined
benefit plans which during the 5-year period ending on the
determination date(s) has or has had any accrued benefits, the
top-heavy ratio for any required or permissive aggregation
group as appropriate is a fraction, the numerator of which is
the sum of account balances under the aggregated defined
contribution plan or plans for all Key Employees, determined
in accordance with (1) above, and the present value of accrued
benefits under the aggregated defined benefit plan or plans
for all Key Employees as of the determination date(s), and the
denominator of which is the sum of the account balances under
the aggregated defined contribution plan or plans for all
Participants, determined in accordance with (1) above, and the
present value of accrued benefits under the defined benefit
plan or plans for all Participants as of the determination
date(s), all determined in accordance with Section 416 of the
Code and the regulations thereunder. The accrued benefits
under a defined benefit plan in both the numerator and
denominator of the top-heavy ratio are increased for any
distribution of an accrued benefit made in the 5-year period
ending on the determination date.
<PAGE>
3. For purposes of (1) and (2) above, the value of account
balances and the present value of accrued benefits will be
determined as of the most recent valuation date that falls
within or ends with the 12-month period ending on the
determination date, except as provided in Section 416 of the
Code and the regulations thereunder for the first and second
plan years of a defined benefit plan. The account balances and
accrued benefits of a Participant (a) who is not a Key
Employee but who was a Key Employee in a Prior Year, or (b)
who has not been credited with at least one Hour of Service
with any employer maintaining the plan at any time during the
5-year period ending on the determination date will be
disregarded. The calculation of the top-heavy ratio, and the
extent to which distributions, rollovers, and transfers are
taken into account will be made in accordance with Section 416
of the Code and the regulations thereunder. Deductible
employee contributions will not be taken into account for
purposes of computing the top-heavy ratio. When aggregating
plans the value of account balances and accrued benefits will
be calculated with reference to the determination dates that
fall within the same calendar year.
The accrued benefit of a Participant other than a Key Employee
shall be determined under (a) the method, if any, that
uniformly applies for accrual purposes under all defined
benefit plans maintained by the Employer, or (b) if there is
no such method, as if such benefit accrued not more rapidly
than the slowest accrual rate permitted under the fractional
rule of Section 411(b)(1)(C) of the Code.
4. Permissive aggregation group: The required aggregation group
of plans plus any other plan or plans of the Employer which,
when considered as a group with the required aggregation
group, would continue to satisfy the requirements of Sections
401(a)(4) and 410 of the Code.
5. Required aggregation group: (a) Each qualified plan of the
Employer in which at least one Key Employee participates or
participated at any time during the determination period
(regardless of whether the Plan has terminated), and (b) any
other qualified plan of the Employer which enables a plan
described in (a) to meet the requirements of Sections
401(a)(4) or 410 of the Code.
6. Determination date: For any Plan Year subsequent to the first
Plan Year, the last day of the preceding Plan Year. For the
first Plan Year of the Plan, the last day of that year.
7. Valuation date: For purposes of calculating the top-heavy
ratio, the valuation date shall be the last day of each Plan
Year.
8. Present value: For purposes of establishing the "present
value" of benefits under a defined benefit plan to compute
the top-heavy ratio, any benefit shall be discounted only for
mortality and interest based on the interest rate and
mortality table specified for this purpose in the defined
benefit plan.
10.09 Special Limitations for Owner-Employees
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 those trades or businesses.
If the Plan provides contributions or benefits for one or more
Owner-Employees who control one or more other trades or businesses, the
employees of the other trades or businesses must be included in a plan
which satisfies 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.
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 trade or business which
is controlled must be as favorable as those provided for him under the
most favorable plan of the trade or business which is not controlled.
For purposes of the preceding paragraphs, an Owner-Employee, or two or
more Owner-Employees, will be considered to control a trade or business
if the Owner-Employee, or two or more Owner-Employees, together:
A. own the entire interest in a unincorporated trade or business, or
B. in the case of a partnership, own more than 50% of either the
capital interest or the profit interest in the partnership.
For purposes of the preceding sentence, an Owner-Employee, or two or
more Owner-Employees, shall be treated as owning any interest in a
partnership which is owned, directly or indirectly, by a partnership
which such Owner-Employee, or such two or more Owner-Employees, are
considered to control within the meaning of the preceding sentence.
<PAGE>
10.10 Inalienability 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.
Generally, a domestic relations order cannot be a qualified domestic
relations order until January 1, 1985. However, in the case of a
domestic relations order entered before such date, the Plan
Administrator:
(1) shall treat such order as a qualified domestic relations order if
such Plan Administrator is paying benefits pursuant to such order
on such date, and
(2) may treat any other such order entered before such date as a
qualified domestic relations order even if such order does not
meet the requirements of Section 414(p) of the Code.
<PAGE>
NEW ENGLAND FUNDS SIMPLIFIED EMPLOYEE PENSION PLAN
UNIVERSAL SIMPLIFIED EMPLOYEE PENSION PLAN
Basic Plan Document
- -------------------------------------------------------------------------------
SECTION ONE ESTABLISHMENT AND PURPOSE OF PLAN
1.01 PURPOSE: The purpose of this Plan is to provide, in
accordance with its provisions, a Simplified Employee
Pension Plan providing benefits upon retirement for the
individuals who are eligible to participate hereunder.
1.02 INTENT TO QUALIFY: It is the intent of the Employer that
this Plan shall be for the exclusive benefit of its
Employees and shall qualify for approval under Section
408(k) of the Internal Revenue Code, as amended from time
to time (or corresponding provisions of any subsequent
Federal law at that time in effect). In case of any
ambiguity, it shall be interpreted to accomplish such
result. It is further intended that it comply with the
provisions of the Employee Retirement Income Security Act
of 1974 (ERISA) as amended from time to time.
1.03 WHO MAY ADOPT An employer who has ever maintained a
defined benefit plan which is now terminated may not
participate in this prototype Simplified Employee Pension
Plan. If, subsequent to adopting this Plan, any defined
benefit plan of the Employer terminates, the employer will
no longer participate in this prototype plan and will be
considered to have an individually designed plan.
1.04 USE WITH IRA This prototype Simplified Employee Pension
Plan must be used with an Internal Revenue Service model
IRA (Form 5305 or Form 5305-A) or an Internal Revenue
Service approved master or prototype IRA.
1.05 FOR MORE INFORMATION To obtain more information concerning
the rules governing this Plan, contact the Prototype
Sponsor listed in Section 5 of the Adoption Agreement.
SECTION TWO DEFINITIONS
2.01 ADOPTION AGREEMENT Means the document executed by the
Employer through which it adopts the Plan and thereby
agrees to be bound by all terms and conditions of the
Plan.
2.02 CODE Means the Internal Revenue Code of 1986 as amended.
2.03 COMPENSATION Compensation for the purposes of the $300
limit of Section 408(k)(2)(C) of the Code shall be
defined as Section 414(q)(7) Compensation.
For all other purposes, Compensation shall mean all of a
Participant's wages as defined in Section 3401(a) of the
Code for the purposes of income tax withholding at the
source (that is, W-2 wages) but determined without regard
to any rules that limit the remuneration included in wages
based on the nature or location of the employment or the
services performed (such as the exception for agricultural
labor in Section 3401(a)(2) of the Code).
For any Self-Employed Individual covered under the Plan,
Compensation will mean Earned Income.
Compensation shall include only that Compensation which is
actually paid to the Participant during the Plan Year.
Compensation shall include any amount which is contributed
by the Employer pursuant to a salary reduction agreement
and which is not includible in the gross income of the
Employee under Sections 125, 402(a)(8), 402(h) or 403(b)
of the Code.
The annual Compensation of each Participant taken into
account under the Plan for any year shall not exceed
$200,000. This limitation shall be adjusted by the
Secretary at the same time and in the same manner as under
Section 415(d) of the Code, except the dollar increase in
effect on January 1 of any calendar year is effective for
years beginning in such calendar year and the first
adjustment to the $200,000
<PAGE>
limitation is effected on January 1, 1990. If a Plan
determines Compensation on a period of time that contains
fewer than 12 calendar months, then the annual
Compensation limit is an amount equal to the annual
Compensation limit for the calendar year in which the
compensation period begins multiplied by the ratio
obtained by dividing the number of full months in the
period by 12.
In determining the Compensation of a Participant the rules
of Section 414(q)(6) of the Code shall apply, except in
applying such rules, the term "family" shall include only
the spouse of the Participant and any lineal descendants
of the Participant who have not attained age 19 before the
close of the year. If, as a result of the application of
such rules the adjusted $200,000 limitation is exceeded,
then (except for purposes of determining the portion of
Compensation up to the integration level if 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.
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.
2.04 EARNED INCOME Means 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 by the Employer
to a qualified plan or to a Simplified Employee Pension
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.
2.05 EFFECTIVE DATE Means the date the Plan becomes effective
as indicated in the Adoption Agreement.
2.06 EMPLOYEE Means any person who is a natural person employed
by the Employer as a common law employee and if the
Employer is a sole proprietorship or partnership, any
Self-Employed Individual who performs services with
respect to the trade or business of the Employer. Further,
any employee of any other employer required to be
aggregated under Section 414(b), (c), (m), or (o) of the
Code and any leased employee required to be treated as an
employee of the Employer under Section 414(n) of the Code
shall also be considered an Employee.
2.07 EMPLOYER Means any corporation, partnership or sole
proprietorship named in the Adoption Agreement and any
successor who by merger, consolidation, purchase or
otherwise assumes the obligations of the Plan. A
partnership is considered to be the Employer of each of
the partners and a sole proprietorship is considered to be
the Employer of the sole proprietor.
2.08 EMPLOYER CONTRIBUTION Means the amount contributed by the
Employer to this Plan.
2.09 IRA Means the designated Individual Retirement Account or
Individual Retirement Annuity, which satisfies the
requirements of Section 408 of the Code, and which is
maintained by a Participant with the Prototype Sponsor
(unless the Prototype Sponsor allows Participants to
maintain their IRAs with other organizations).
2.10 PARTICIPANT Means any Employee who has met the
participation requirements of Section 3.01 and who is or
may become eligible to receive an Employer Contribution.
2.11 PLAN Means this plan document plus the corresponding
Adoption Agreement as completed and signed by the
Employer.
<PAGE>
2.12 PLAN YEAR Means the calendar year or the 12 consecutive
month period which coincides with the Employer's taxable
year.
2.13 PRIOR PLAN Means a plan which was amended or replaced by
adoption of this plan document, as indicated in the
Adoption Agreement.
2.14 PROTOTYPE SPONSOR Means the entity specified in the
Adoption Agreement which sponsors this prototype Plan.
2.15 SELF-EMPLOYED INDIVIDUAL Means an individual who has
Earned Income for a Plan Year from the trade or business
for which the Plan is established; also, an individual who
would have had Earned Income but for the fact that the
trade or business had no net profits for the Plan Year.
2.16 SERVICE Means the performance of duties by an Employee for
the Employer, for any period of time, however short, for
which the Employee is paid or entitled to payment. When
the Employer maintains the Plan of a predecessor employer,
an Employee's Service will include his or her service for
such predecessor employer.
2.17 TAXABLE WAGE BASE Means 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.
SECTION THREE ELIGIBILITY AND PARTICIPATION
3.01 ELIGIBILITY REQUIREMENTS Except for those Employees
excluded pursuant to Section 3.02, each Employee of the
Employer who fulfills the eligibility requirements
specified in the Adoption Agreement shall, as a condition
for further employment, become a Participant. Each
Participant must establish an IRA with the Prototype
Sponsor to which Employer Contributions under this Plan
will be made.
3.02 EXCLUSION OF CERTAIN EMPLOYEES If the Employer has so
indicated in the Adoption Agreement, the following
Employees shall not be eligible to become a
participant in the Plan: (a) Those Employees
included in a unit of Employees covered by the terms of a
collective bargaining agreement, provided retirement
benefits were the subject of good faith bargaining; and
(b) those Employees who are nonresident aliens, who have
received no earned income from the Employer which
constitutes earned income from sources within the United
States.
3.03 ADMITTANCE AS A PARTICIPANT
A. Prior Plan - If this Plan is an amendment or
continuation of a Prior Plan, each Employee of the
Employer who immediately before the Effective Date
was a participant in said Prior Plan shall be a
Participant in this Plan as of said date.
B. Notification of Eligibility - The Employer shall
notify each Employee who becomes a Participant of his
or her status as a Participant in the Plan and of his
or her duty to establish an IRA with the Prototype
Sponsor to which Employer Contributions may be made.
C. Establishment of an IRA - If a Participant fails to
establish an IRA for whatever reason, the Employer
may execute any necessary documents to establish an
IRA on behalf of the Participant.
3.04 DETERMINATIONS UNDER THIS SECTION The Employer shall
determine the eligibility of each Employee to be a
Participant. This determination shall be
conclusive and binding upon all persons except as
otherwise provided herein or by law.
3.05 LIMITATION RESPECTING EMPLOYMENT Neither the fact of the
establishment of the Plan nor the fact that a common-law
employee has become a Participant shall give to that
common-law employee any right to continued employment; nor
shall either fact limit the right of the Employer to
discharge or to deal otherwise with a common-law employee
without regard to the effect such treatment may have upon
the Employee's rights under the Plan.
SECTION FOUR CONTRIBUTIONS AND ALLOCATIONS
4.01 EMPLOYER CONTRIBUTIONS
<PAGE>
A. Allocation Formula - Employer Contributions shall be
allocated in accordance with the allocation formula
selected in the Adoption Agreement. Each Employee who
has satisfied the eligibility requirements pursuant
to Section 3.01 (thereby becoming a Participant) will
share in such allocation.
If the Employer has selected the pro rata allocation
formula in the Adoption Agreement, then Employer
Contributions for each Plan Year shall be allocated
to the IRA of each Participant in the same proportion
as such Participant's Compensation (not in excess of
$200,000, indexed for cost of living increases in
accordance with Section 408(k)(8) of the Code) for
the Plan Year bears to the total Compensation of all
Participants for such year.
Employer Contributions made for a Plan Year on behalf
of any Participant shall not exceed the lesser of 15%
of Compensation or the limitation in effect under
Code Section 415(c)(1)(A) (indexed for cost of living
increases in accordance with Code Section 415(d)).
B. Integrated Allocation Formula - If the Employer has
selected the integrated allocation formula in the
Adoption Agreement, then Employer Contributions for
the Plan Year will be allocated to Participants' IRA
as follows:
Step 1 Employer Contributions will be allocated to
each Participant's IRA in the ratio that each
Participant's total Compensation bears to all
Participants' total Compensation, but not in
excess of 3% of each Participant's
Compensation.
Step 2 Any Employer Contributions remaining after
the allocation in Step 1 will be allocated to
each Participant's IRA in the ratio that each
Participant's Compensation for the Plan Year
in excess of the integration level bears to
the Compensation of all Participants in excess
of the integration level, but not in excess of
3%.
Step 3 Any Employer Contributions remaining after
the allocation in Step 2 will be allocated to
each Participant's IRA in the ratio that the
sum of each Participant's total Compensation
and Compensation in excess of the integration
level bears to the sum of all Participants'
total Compensation and Compensation in excess
of the integration level, but not in excess of
the maximum disparity rate described in the
table below.
Step 4 Any Employer Contributions remaining after
the allocation in Step 3 will be allocated to
each Participant's IRA in the ratio that each
Participant's total Compensation for the Plan
Year bears to all Participants' total
Compensation for that Plan Year.
The integration level shall be equal to the Taxable
Wage Base or such lesser amount elected by the
Employer in the Adoption Agreement.
<TABLE>
<CAPTION>
Integration Level Maximum Disparity Rate
----------------- ----------------------
<S> <C>
Taxable Wage Base (TWB) 2.7%
More than $0 but not more than X* 2.7%
More than X* of TWB but not more than 80% of TWB 1.3%
More than 80% of TWB but not more than TWB 2.4%
</TABLE>
*X mean the greater of $10,000 or 20% of TWB.
C. Timing of Employer Contribution - Employer
Contributions, if any, made on behalf of Participants
for a Plan Year shall be allocated and deposited to
the IRA of each Participant no later than the due
date for filing the Employer's tax return (including
extensions).
4.02 DEDUCTIBILITY OF CONTRIBUTIONS Contributions to the Plan
are deductible by the Employer for the taxable year with
or within which the Plan Year of the Plan ends.
Contributions made for a particular taxable year and
contributed by the due date of the Employer's income tax
return, including extensions, are deemed made in that
taxable year.
4.03 VESTING, WITHDRAWAL RIGHTS TO CONTRIBUTIONS All Employer
Contributions made under the Plan on behalf of Employees
shall be fully vested and nonforfeitable at all
times. Each Employee shall have an unrestricted
right to withdraw at any time all or a portion of
the Employer Contributions made on his or her behalf.
However, withdrawals taken are subject to the same
taxation and penalty provisions of
<PAGE>
the Code which are applicable to IRA distributions.
4.04 SIMPLIFIED EMPLOYER REPORTS The Employer shall furnish
reports, relating to contributions made under the Plan, in
the time and manner and containing the information
prescribed by the Secretary of the Treasury, to
Participants. Such reports shall be furnished at least
annually and shall disclose the amount of the contribution
made under the Plan to the Participant's IRA.
SECTION FIVE AMENDMENT OR TERMINATION OF PLAN
5.01 AMENDMENT BY EMPLOYER The Employer reserves the right to
amend the elections made or not made on the Adoption
Agreement by executing a new Adoption Agreement and
delivering a copy of the same to the Prototype Sponsor.
The Employer shall not have the right to amend any
nonelective provision of the Adoption Agreement nor the
right to amend provisions of this plan document. If the
Employer adopts an amendment to the Adoption Agreement or
plan document in violation of the preceding sentence, the
Plan will be deemed to be an individually designed plan
and may no longer participate in this prototype Plan.
5.02 AMENDMENT BY PROTOTYPE SPONSOR By adopting this Plan, the
Employer delegates to the Prototype Sponsor the power to
amend or replace the Adoption Agreement of the Plan to
conform them to the provisions of any law, regulations or
administrative rulings pertaining to Simplified Employee
Pensions and to make such other changes to the Plan,
which, in the judgement of the Prototype Sponsor, are
necessary or appropriate. The Employer shall be deemed to
have consented to all such amendments; provided however,
that no changes may be made without the consent of the
Employer if the effect would be to substantially change
the costs or benefits under the Plan. The Prototype
Sponsor shall not have the obligation to exercise or not
to exercise the power delegated to it nor shall the
Prototype Sponsor incur liability of any nature for any
act done or failed to be done by the Prototype Sponsor in
good faith in the exercise or nonexercise of the power
delegated hereunder. The Prototype Sponsor shall notify
the Employer should it discontinue sponsorship of the
Plan.
5.03 LIMITATIONS ON POWER TO AMEND No amendment by either the
Employer or the Prototype Sponsor shall reduce or
otherwise adversely affect any benefits of a
Participant or Beneficiary acquired prior to
such amendment unless it is required to maintain
compliance with any law, regulation or administrative
ruling pertaining to Simplified Employee Pensions.
5.04 TERMINATION While the Employer expects to continue the
Plan indefinitely, the Employer shall not be under any
obligation or liability to continue contributions or to
maintain the Plan for any given length of time. The
Employer may terminate this Plan at any time by
appropriate action of its managing body. This Plan shall
terminate on the occurrence of any of the following
events:
A. Delivery to the Prototype Sponsor of a notice of
termination executed by the Employer specifying the
effective date of the Plan's termination.
B. Adjudication of the Employer as bankrupt or the
liquidation or dissolution of the Employer.
5.05 NOTICE OF AMENDMENT, TERMINATION Any amendment or
termination shall be communicated by the Employer to all
appropriate parties as required by law. Amendments made by
the Prototype Sponsor shall be furnished to the Employer
and communicated by the Employer to all appropriate
parties as required by law. Any filings required by the
Internal Revenue Service or any other regulatory body
relating to the amendment or termination of the Plan shall
be made by the Employer.
5.06 CONTINUANCE OF PLAN BY SUCCESSOR EMPLOYER A successor of
the Employer may continue the Plan and be substituted in
the place of the present Employer. The successor and
present Employer (or if deceased, the executor of the
estate of a deceased Self-Employed Individual who was the
Employer) must execute a written instrument authorizing
such substitution and the successor must complete and sign
a new Adoption Agreement.
SECTION SIX SALARY DEFERRAL SEP PROVISIONS
In addition to Sections 1 through 5, the provisions of this Section
6 shall apply if the Employer is an Eligible Employer and has
adopted a salary deferral Simplified Employee Pension Plan by
indicating in the Adoption
<PAGE>
Agreement that Retirement Savings Contributions are permitted.
If the Employer has so indicated in the Adoption Agreement, the
Employer agrees to permit Retirement Savings Contributions to be
made which will be contributed by the Employer to the IRA
established by or on behalf of each Contributing Participant. This
arrangement is intended to qualify as a salary reduction simplified
employee pension ("SARSEP") under Section 408(k)(6) of the Code and
the regulations thereunder.
The SARSEP portion of this Plan shall be effective upon adoption.
No Retirement Savings Contributions may be based on Compensation an
Employee could have received before adoption of the SARSEP and
execution by the Employee of a Retirement Savings Agreement.
6.100 DEFINITIONS
6.101 COMPENSATION Means Compensation as defined in Section 2.03
of the Plan and shall include any amount which is
contributed by the Employer as a Retirement Savings
Contribution pursuant to a Retirement Savings Agreement
which is not includible in the gross income of the
Employee under Section 402(h) of the Code.
6.102 CONTRIBUTING PARTICIPANT Means a person who has met the
participation requirements and who has enrolled as a
Contributing Participant pursuant to Section 6.201 and on
whose behalf the Employer is contributing Retirement
Savings Contributions.
6.103 ELIGIBLE EMPLOYER Means an Employer which: (a) has no more
than 25 Employees who are eligible to participate in the
Plan (or would have been eligible to participate if this
Plan had been maintained) at any time during the preceding
Plan Year; (b) has no leased employees within the meaning
of Section 414(n)(2) of the Code; (c) is not a state or
local government or political subdivision thereof, or any
agency or instrumentality thereof, or an organization
exempt from tax under Subtitle A of the Code; and (d) does
not currently maintain or has not maintained a defined
benefit plan, even if now terminated.
6.104 ENROLLMENT DATE Means the first day of any Plan Year, the
first day of the seventh month of any Plan Year and any
more frequent dates as the Employer may designate in a
uniform and nondiscriminatory manner.
6.105 EXCESS CONTRIBUTION Means the amount of each Highly
Compensated Employee's Retirement Savings Contributions
that exceeds the actual deferral percentage test limits
described in Section 6.303(B) of the Plan for a Plan Year.
6.106 HIGHLY COMPENSATED EMPLOYEE Means a Participant described
in Section 414(q) of the Code who during the current or
preceding year: (a) was a 5% owner of the Employer as
defined in Section 416(i)(1)(B)(i) of the Code; (b)
received Compensation in excess of $50,000, as adjusted
pursuant to Section 415(d), and was in the top-paid group
(the top 20% of Employees, by Compensation); (c) received
Compensation in excess of $75,000, as adjusted pursuant to
section 415(d); or (d) was an officer and received
Compensation in excess of 50% of the dollar limit under
Section 415 of the Code for defined benefit plans.
6.107 KEY EMPLOYEE Means any Employee or former Employee or
beneficiaries of these Employees who at any time during
the Plan Year or the four preceding Plan Years is or was:
(a) an officer of the Employer (if the Employee's annual
Compensation exceeds 50% of the dollar limitation under
Section 415(b)(1)(A) of the Code); (b) an owner of one of
the 10 largest interests in the Employer (if the
Employee's annual Compensation exceeds 100% of the dollar
limitation under Section 415(c)(1)(A) of the Code); (c) a
5% owner of the Employer as defined in Section
416(i)(1)(B)(i) of the Code; or (d) a 1% owner of Employer
(if the Employee has annual Compensation in excess of
$150,000).
6.108 RETIREMENT SAVINGS AGREEMENT Means an agreement, on a form
provided by the Employer, pursuant to which a Contributing
Participant may elect to have his or her Compensation
reduced and paid as a Retirement Savings Contribution to
his or her IRA by the Employer.
6.109 RETIREMENT SAVINGS CONTRIBUTIONS Means contributions made
by the Employer on behalf of a Contributing Participant
pursuant to Section 6.301. Retirement Savings
Contributions shall be deemed to be Employer Contributions
for purposes of (a) the contribution limits described in
Section 4.01(A) of the Plan; (b) the vesting and
withdrawal rights described in Section 4.03 of the Plan;
and (c) determining
<PAGE>
whether this Plan is a Top-Heavy Plan.
6.110 TOP-HEAVY PLAN This Plan is a Top-Heavy Plan for any Plan
Year if, as of the last day of the previous Plan Year (or
current Plan Year if this is the first year of the Plan)
the total of the Employer Contributions made on behalf of
Key Employees for all the years this Plan has been in
existence exceeds 60% of such contributions for all
Employees. If the Employer maintains (or maintained within
the prior five years) any other SEP or defined
contribution plan in which a Key Employee participates (or
participated), the contributions or account balances,
whichever is applicable, must be aggregated with the
contributions made to the Plan. The contributions (and
account balances, if applicable) of an Employee who ceases
to be a Key Employee or of an individual who has not been
in the employ of the Employer for the previous five years
shall be disregarded. The identification of Key Employees
and the top-heavy calculation shall be determined in
accordance with Section 416 of the Code and the
regulations thereunder.
6.200 CONTRIBUTING PARTICIPANT
6.201 REQUIREMENTS TO ENROLL AS A CONTRIBUTING PARTICIPANT
A. Enrollment - Each Employee who becomes a Participant
may enroll as a Contributing Participant. A
Participant shall be eligible to enroll as a
Contributing Participant on any Enrollment Date.
B. Initial Enrollment - Notwithstanding the time set
forth in Section 6.201(A) as of which a Participant
may enroll as a Contributing Participant, the
Employer shall have the authority to designate, in a
uniform and nondiscriminatory manner, additional
Enrollment Dates during the twelve month period
beginning on the Effective Date in order that an
orderly first enrollment might be completed.
6.202 MODIFICATION OF RETIREMENT SAVINGS AGREEMENT A
Contributing Participant may modify his or her Retirement
Savings Agreement to increase or decrease (within the
limits placed on Retirement Savings Contributions in the
Adoption Agreement) the amount of his or her Compensation
deferred into his or her IRA under the Plan. Such
modification may only be prospectively made effective as
of an Enrollment Date, or as of any other more frequent
date(s) if the Employer so permits in a uniform and
nondiscriminatory manner. A Contributing Participant who
desires to make such a modification shall complete, sign
and file a new Retirement Savings Agreement with the
Employer at least 30 days (or such lesser period of days
as the Employer shall permit in a uniform and
nondiscriminatory manner) before the modification is to
become effective.
6.203 WITHDRAWAL AS A CONTRIBUTING PARTICIPANT A Participant may
withdraw as a Contributing Participant as of the last date
preceding any Enrollment Date (or as of any other date if
the Employer so permits in a uniform and nondiscriminatory
manner) by revoking his or her authorization to the
Employer to make Retirement Savings Contributions on his
or her behalf. A Participant who desires to withdraw as a
Contributing Participant shall give written notice of
withdrawal to the Employer at least 30 days (or such
lesser period of days as the Employer shall permit in a
uniform and nondiscriminatory manner) before the effective
date of withdrawal. A Participant shall cease to be a
Contributing Participant upon his or her termination of
employment, or on account of termination of the Plan.
6.204 RETURN AS CONTRIBUTING PARTICIPANT AFTER WITHDRAWAL
A Participant who has withdrawn as a Contributing
Participant under Section 6.203 may not again become a
Contributing Participant until the first day of the first
Plan Year following the effective date of his or her
withdrawal as Contributing Participant.
6.300 RETIREMENT SAVINGS CONTRIBUTIONS
6.301 SALARY DEFERRAL ARRANGEMENT The Employer shall contribute
Retirement Savings Contributions on behalf of all
Contributing Participants for each Plan Year that the
following requirements are satisfied:
A. The Employer is an Eligible Employer; and
B. Not less than 50% of the Employees eligible to
participate elect to have Retirement Savings
Contributions contributed to the Plan on their
behalf.
Subject to the limits described in Section 6.303, the
amount of Retirement Savings Contributions so contributed
shall be the amount required by the Retirement Savings
Agreements of Contributing Participants.
<PAGE>
No Retirement Savings Contribution may be based on
Compensation a Participant received, or had a right to
receive, before execution of a Retirement Savings
Agreement by the Participant.
6.302 FAILURE TO SATISFY 50% PARTICIPATION REQUIREMENT If the
50% participation requirement described in Section
6.301(B)is not satisfied as of the end of any Plan Year,
all the Retirement Savings Contributions made by Employees
for the Plan Year shall be considered "Disallowed
Deferrals", i.e., IRA contributions that are not SEP-IRA
contributions. The Employer shall notify each affected
Employee, within 2 1/2 months after the end of the Plan
Year to which the Disallowed Deferrals relate, that the
deferrals are no longer considered SEP-IRA contributions.
Such notification shall specify the amount of the
Disallowed Deferrals and the calendar year of the Employee
in which they are includible in income and must provide an
explanation of applicable penalties if the Disallowed
Deferrals are not withdrawn in a timely fashion.
The notice to each affected Employee must state
specifically: (a) the amount of the Disallowed Deferrals;
(b) that the Disallowed Deferrals are includible in the
Employee's gross income for the calendar year or years in
which the amounts deferred would have been received by the
Employee in cash had he or she not made an election to
defer and that the income allocable to such Disallowed
Deferrals is includible in the year withdrawn from the
IRA; and (c) that the Employee must withdraw the
Disallowed Deferrals (and allocable income) from the
SEP-IRA by April 15 following the calendar year of
notification by the Employer. Those Disallowed Deferrals
not withdrawn by April 15 following the year of
notification will be subject to the IRA contribution
limitations of Sections 219 and 408 of the Code and thus
may be considered an excess contribution to the Employee's
IRA. Disallowed Deferrals may be subject to the 6% tax on
excess contributions under Section 4973 of the Code. If
income allocable to a Disallowed Deferral is not withdrawn
by April 15 following the year of notification by the
Employer, the income may be subject to the 10% tax on
early distributions under Section 72(t) of the Code when
withdrawn.
Disallowed Deferrals are reported in the same manner as
are Excess Contributions.
6.303 LIMITS ON RETIREMENT SAVINGS CONTRIBUTIONS
A. Maximum Amount - No Contributing Participant shall be
permitted to have Retirement Savings Contributions
made under this Plan during any calendar year in
excess of $7,000 (as indexed pursuant to Code Section
402(g)(5)). The $7,000 (indexed) limit applies to the
total elective deferrals the Contributing Participant
makes for the calendar year under this Plan and under
any cash or deferred arrangement described in Section
401(k) of the Code and any salary reduction
arrangement described in Section 403(b) of the Code.
The limit may be increased to $9,500 if the
Contributing Participant makes elective deferrals to
a salary reduction arrangement under Section 403(b)
of the Code.
Under no circumstances may an Employee=s Retirement
Savings Contributions in any calendar year exceed the
lesser of: (1) the limitation under Section 402(g) of
the Code based on all of the plans of the Employer;
or (2) 15% of his or her Compensation (less any
amount contributed by the Employer as a Retirement
Savings Contribution). Compute the amount of this 15%
limit by using the following formula:
Compensation (before subtracting Retirement
Savings Contributions) x 13.0435%.
If an Employer maintains any other SEP plan to which
non-elective SEP Employer Contributions are made for
a Plan Year, or any qualified plan to which
contributions are made for such Plan Year, then an
Employee's Retirement Savings Contribution may be
limited to the extent necessary to satisfy the
maximum contribution limitation under Section
415(c)(1)(A) of the Code.
In addition to the dollar limitation of Section
415(c)(1)(A), which is $30,000 in 1991, Employer
Contributions to this Plan, when aggregated with
contributions to all other SEP plans and qualified
plans of the Employer, generally may not exceed 15%
of Compensation (less any amount contributed by the
Employer as a Retirement Savings Contribution) for
any Employee. If these limits are exceeded on behalf
of any Employee for a particular Plan Year, that
Employee's Retirement Savings Contributions for that
year must be reduced to the extent of the excess.
B. Actual Deferral Percentage (ADP) Test Limits -
Retirement Savings Contributions by a Highly
Compensated Employee must satisfy the actual deferral
percentage (hereinafter "ADP") limitation under
Section 408(k)(6) of the Code. Amounts in excess of
the ADP limitation will be deemed Excess
<PAGE>
Contributions on behalf of the affected Highly
Compensated Employee or Employees. The ADP of any
Highly Compensated Employee who is eligible to be a
Contributing Participant shall not be more than the
product obtained by multiplying the average of the
ADPs of all non-Highly Compensated Employees who are
eligible to be Contributing Participants by 1.25. For
purposes of this Section 6.303, an Employee's ADP is
the ratio (expressed as a percentage) of his or her
Retirement Savings Contributions for the Plan Year to
his or her Compensation for the Plan Year. The ADP of
an Employee who is eligible to be a Contributing
Participant, but who does not make Retirement Savings
Contributions during the Plan Year is zero. The
determination of the ADP for any Employee is to be
made in accordance with Section 408(k)(6) of the Code
and should satisfy such other requirements as may be
provided by the Secretary of the Treasury.
C. Special Rule for Family Members - For purposes of
determining the ADP of a Highly Compensated Employee,
the Retirement Savings Contributions and Compensation
of the Employee will also include the Retirement
Savings Contributions and Compensation of any family
member. This special rule applies only if the Highly
Compensated Employee is in one of the following
groups: (a) a more than 5% owner of the Employer; or
(b) one of a group of the 10 most Highly Compensated
Employees.
The Retirement Savings Contributions and Compensation
of family members used in this special rule do not
count in computing the average of the ADPs of
non-Highly Compensated Employees.
For purposes of this special rule, a family member is
an individual who is related to a Highly Compensated
Employee as a spouse, or as a lineal ascendant or
descendant or the spouses of such lineal ascendants
or descendants in accordance with Section 414(q) of
the Code and the regulations thereunder.
6.304 DISTRIBUTION OF EXCESS RETIREMENT SAVINGS CONTRIBUTIONS To
the extent that a Contributing Participant's Retirement
Savings Contributions for a calendar year exceed the limit
described in Section 6.303(A) (i.e., the $7,000 (indexed)
limit), the Contributing Participant must withdraw the
excess Retirement Savings Contributions (and any income
allocable to such amount) by April 15 following the year
of the deferral.
6.305 DISTRIBUTION OF EXCESS CONTRIBUTIONS The Employer shall
notify each Employee, no later than 2 1/2 months following
the close of the Plan Year of the amount, if any, of any
Excess Contribution to that Employee's IRA for such Plan
Year. If the Employer does not so notify Employees by such
date, the Employer must pay a tax equal to 10% of the
Excess Contributions for the Plan Year pursuant to Section
4979 of the Code. If the Employer fails to notify
Employees by the end of the Plan Year following the Plan
Year of the Excess Contributions, the SEP no longer will
be considered to meet the requirements of Section
408(k)(6) of the Code. This means that the earnings on the
SEP are subject to tax immediately, that no more
Retirement Savings Contributions may be made under the
SEP, and that Retirement Savings Contributions of all
Employees with uncorrected Excess Contributions must be
included in their income in that year. If the SEP no
longer meets the requirements of Section 408(k)(6), then
any contribution to an Employee's IRA will be subject to
the IRA contribution limitations of Section 219 and 408 of
the Code and thus may be considered an excess contribution
to the Employee's IRA.
The Employer's notification to each affected Employee of
the Excess Contributions must specifically state in a
manner calculated to be understood by the average Plan
Participant: (a) the amount of the Excess Contributions
attributable to that Employee's Retirement Savings
Contributions; (b) the Plan Year for which the Excess
Contributions were made; (c) that the Excess Contributions
are includible in the affected Employee's gross income for
the calendar year in which such Excess Contributions were
made; and (d) that the Employee must withdraw the Excess
Contributions (and allocable income) from the IRA by April
15 following the year of notification by the Employer.
Those Excess Contributions not withdrawn by April 15
following the year of notification will be subject to the
IRA contribution limitations of Sections 219 and 408 of
the Code for the preceding calendar year and thus may be
considered an excess contribution to the Employee's IRA.
Such excess contributions may be subject to the 6% tax on
excess contributions under Section 4973 of the Code. If
income allocable to an Excess Contribution is not
withdrawn by April 15 following the year of notification
by the Employer, the income may be subject to the 10% tax
on early distributions under Section 72(t) of the Code
when withdrawn. However, if the Excess Contributions (not
including allocable income) total less than $100, then the
Excess Contributions are includible in the Employee's
gross income in the year of notification. Income allocable
to the Excess Contributions is includible in the year of
withdrawal from the IRA.
<PAGE>
6.306 DETERMINATION OF INCOME For purposes of Sections 6.302,
6.304 and 6.305, the income allocable to Disallowed
Deferrals, excess Retirement Savings Contributions or
Excess Contributions for a year shall be determined by
multiplying the income earned on the IRA for the period
which begins on the first day of such year and ends on the
date of distribution from the IRA by a fraction, the
numerator of which is the Disallowed Deferral, excess
Retirement Savings Contribution or Excess Contribution for
such year and the denominator of which is the sum of the
account balance of the IRA as of the beginning of such
year and the total contributions made to the IRA for such
year.
6.307 RESTRICTION ON TRANSFERS AND WITHDRAWALS The Employer
shall notify each Contributing Participant that, until the
earlier of 2 1/2 months after the end of a particular Plan
Year or the date the Employer notifies its employees that
the actual deferral percentage limitations have been
calculated, any transfer or distribution from the
Contributing Participant's IRA of Retirement Savings
Contributions (or income on these contributions)
attributable to Retirement Savings Contributions made
during that Plan Year will be includible in income for
purposes of Sections 72(t) and 408(d)(1) of the Code.
6.308 ALLOCATION OF RETIREMENT SAVINGS CONTRIBUTIONS Retirement
Savings Contributions made on behalf of Contributing
Participants for a Plan Year shall be allocated and
deposited to the IRA of each Contributing Participant by
the Employer as soon as is administratively feasible.
6.400 SPECIAL RULES FOR TOP-HEAVY PLANS
6.401 MINIMUM ALLOCATION The following mandatory minimum
allocation applies when this Plan is a Top-Heavy Plan:
Unless another plan of the Employer is designated in the
space below to satisfy the top-heavy requirements of
Section 416 of the Code, each year this Plan is a
Top-Heavy Plan, the Employer will make a minimum
contribution to the IRA of each Participant who is not a
Key Employee, which, in combination with other
non-elective contributions, if any, is equal to the lesser
of 3% of such Participant's Compensation or a percentage
of Compensation equal to the percentage of Compensation at
which elective and non-elective contributions are made
under the Plan for the Plan Year for the Key Employee for
whom such percentage is the largest.
The top-heavy minimum will be met in the following plan:
--------------------------------------------------------
--------------------------------------------------------
(If applicable, name the plan other than this Plan in
which the minimum top-heavy contribution will be made.)
6.402 RETIREMENT SAVINGS CONTRIBUTIONS CANNOT BE USED FOR
MINIMUM ALLOCATION For purposes of satisfying the minimum
allocation requirement of Section 416 of the Code,
Retirement Savings Contributions contributed for the
benefit of Employees who are not Key Employees may not be
used to satisfy the minimum allocation requirement.
#409 (1/94)A92 1995 Universal Pensions, Inc., Brainerd, MN 56401
<PAGE>
[Logo]
NEW ENGLAND FUNDS
Where The Best Minds Meet(TM)
INDIVIDUAL
- -------------------
RETIREMENT
- -------------------
ACCOUNT
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PLAN AND DISCLOSURE
STATEMENT
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WHAT'S INSIDE . . . .
* SUMMARY QUESTIONS & ANSWERS ....................................... P. 1
* CUSTODIAL ACCOUNT AGREEMENT ....................................... P. 2
* INFORMATION ON YOUR INDIVIDUAL RETIREMENT ACCOUNT ................. P. 8
* INTERNAL REVENUE SERVICE LETTER ................................... P.13
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Q. HOW MUCH CAN I CONTRIBUTE TO MY IRA?
A. The Tax Reform Act of 1986 ("TRA-86") did not change the IRA contribution
limits. For each year prior to the year in which you attain age seventy and
one-half (70 1/2), you can still contribute up to the lesser of $2,000 or
100% of your compensation (earned income, if you are self-employed). However,
as a result of the new limits on deductibility, all or a portion of your
contribution may not be deductible.
Q. WHEN CAN I MAKE A CONTRIBUTION TO AN IRA?
A. You may make a contribution to your existing IRA or establish a new IRA for
a taxable year up to April 15th of the following year.
Q. CAN I MAKE A CONTRIBUTION TO A SEPARATE IRA FOR MY SPOUSE?
A. TRA-86 liberalized the requirements for making contributions to a separate
spousal IRA. For each year prior to the year in which your spouse attains age
seventy and one-half (70 1/2), you can now make a contribution to a separate
IRA for your spouse, regardless of whether your spouse had any compensation
or earned income in that year. To make an IRA contribution for your spouse
you must file a joint tax return and your spouse must elect on the return to
be treated as having no compensation or earned income for that year. The
limits of the amount you can contribute have not changed. The aggregate
amount of your contribution to both IRA's cannot exceed the lesser of $2,250,
or 100% of your compensation (earned income, if you are self-employed). You
must set up a separate IRA for your spouse and no more than the lesser of
$2,000, or 100% of joint earned income may be deposited in any one account.
Q. HOW DO I KNOW IF MY CONTRIBUTION IS TAX DEDUCTIBLE?
A. The deductibility of your contribution depends upon whether you, or, if
applicable, your spouse, is an active participant in an employer-sponsored
retirement plan. If neither you nor your spouse are an active participant,
the entire contribution to your IRA and, if applicable, your spouse's IRA is
deductible.
Q. WHAT PORTION OF MY CONTRIBUTION IS DEDUCTIBLE IF EITHER MY SPOUSE OR I AM
AN ACTIVE PARTICIPANT IN AN EMPLOYER-SPONSORED RETIREMENT PLAN?
A. The portion of your contribution that is deductible depends upon your filing
status and the amount of your Adjusted Gross Income ("AGI"). If you are
single and your AGI does not exceed $25,000; or if you are married, filing
jointly and your AGI does not exceed $40,000; the entire contribution to your
IRA and, if applicable, your spouse's IRA will be deductible. If you are
single and your AGI exceeds $35,000; or if you are married, filing jointly
and your AGI exceeds $50,000, the entire contribution to your IRA and, if
applicable, your spouse's IRA will be nondeductible. If you are married but
live apart from your spouse, filing separately and your spouse is an active
participant but you are not, the entire contribution to your IRA will be
deductible. If you are an active participant with an AGI of $10,000 or more
and you are married, filing separately, the entire contribution to your IRA
will be nondeductible.
Q. WHAT HAPPENS IF I CONTRIBUTE MORE THAN I'M ALLOWED TO MY IRA?
A. The maximum allowable contribution you can make to an IRA is $2,000 or 100%
of earned income, whichever is less. Any amounts contributed to the IRA in
excess of the maximum allowable contribution will be considered an "excess
contribution." An excess contribution is subject to a nondeductible excise
tax of 6% for each year it remains in the IRA. This is true whether the
excess contribution is deductible or nondeductible.
Q. HOW CAN I CORRECT AN EXCESS CONTRIBUTION?
A. Excess contributions may be corrected without paying a 6% penalty, provided
you withdraw the excess and any earnings on the excess before the due date
(including extensions) for filing your tax return for the year for which you
made the excess contribution. A deduction should not be taken for any excess
contributions. Earnings on any excess contribution withdrawn by this method
must be withdrawn along with the amount of the contribution. These earnings
must be included in your income for the tax year in which the contribution
was made.
Q. HOW ARE AMOUNTS DISTRIBUTED FROM MY IRA GOING TO BE TAXED?
A. Amounts distributed to you are includible in your gross income in the
taxable year that you receive them unless considered a return of
nondeductible contributions, and are then taxable as ordinary income. Since
the purpose of the IRA is to accumulate funds for retirement, your receipt or
use of any portion of this IRA before you attain age 59 1/2 generally will be
considered as an early withdrawal and subject to a 10% penalty tax unless the
distribution was a result of death or disability. TRA-86 has added an
additional exception to the early withdrawal rule. The 10% penalty tax for
early withdrawal will not apply if the distribution is part of a scheduled
series of substantially equal periodic payments for your life (or the joint
lives of you and your beneficiary) or your life expectancy (or the joint life
expectancy of you and your beneficiary). If there is an adjustment to the
scheduled series of payments, the 10% penalty tax may apply. For example, if
you begin receiving payments at age 50 under a distribution method which
provides for substantially equal payments over your life expectancy, and at
age 58 you elect to receive the remaining amount in a lump sum, the 10%
penalty tax will apply to the lump sum and to the amounts previously
distributed to you prior to age 59 1/2.
Q. HOW ARE MY DISTRIBUTIONS FROM MY IRA REPORTED?
A. The custodian will report all distributions to the IRS on a form 1099R.
This report will include a description of the type of distribution (e.g.
premature, regular, rollover, etc.) For reporting purposes, a direct
transfer of assets to a successor custodian or trustee shall not be
considered a distribution.
Q. CAN I ROLL OVER A DISTRIBUTION I RECEIVE FROM MY EMPLOYER'S RETIREMENT PLAN
INTO AN IRA?
A. If you receive an eligible distribution from a tax-qualified retirement plan
as a result of termination of employment, plan discontinuance or retirement,
it may be deposited into your IRA. Distributions from qualified plans (other
than the return of Non-deductible Employee Contributions) must be "rolled
over" into an IRA within 60 days of receipt from the other qualifed plan in
order to continue their tax-deferred status.
Q. WHAT ARE THE WITHHOLDING REQUIREMENTS WHICH APPLY TO DISTRIBUTIONS MADE
AFTER JANUARY 1, 1993?
A. Generally, a plan making a distribution after January 1, 1993 may be required
to withhold 20% of the "eligible rollover amount." For most kinds of
distributions, that means that unless the distribution is made directly from
the distributing plan to the new plan or IRA, or is paid to you in a check
made payable to the new plan or IRA, the distributing plan will be required
to withhold 20% of the total amount of the distribution.
Q. CAN I ROLL OVER A PART OF A DISTRIBUTION I RECEIVE FROM MY EMPLOYER'S PLAN?
A. Yes it is possible to roll over, tax free, any portion of a distribution
from an employer plan without rolling over the entire amount distributed.
Amounts you receive which are not paid directly from an employer plan to a
new plan or IRA may be subject to tax and withholding, as noted above.
Q. ONCE I HAVE ROLLED OVER THIS DISTRIBUTION INTO AN IRA, CAN I SUBSEQUENTLY
ROLL OVER THESE AMOUNTS INTO ANOTHER QUALIFIED RETIREMENT PLAN?
A. Yes. Part or all of a qualifed total distribution received from a qualified
plan may be transferred to another qualifed plan through the medium of an
IRA. However, the IRA must have no assets other than those which were
previously distributed to you from the qualified plan. Specifically, the IRA
cannot contain any regular annual IRA contributions. Also, the new qualified
plan must provide for the acceptance of these amounts.
Q. HOW FREQUENTLY CAN I ROLL OVER ASSETS FROM MY IRA TO ANOTHER IRA?
A. You may "roll over" distributions from an IRA only once in any 365-day
period. This rule applies to each individual IRA. Further, if you roll over
assets from a qualified plan to an IRA you may subsequently roll over to
another IRA.
PLEASE REFER TO IRS PUBLICATION 590 FOR MORE INFORMATION ABOUT YOUR IRA
NEW ENGLAND FUNDS, L.P.
INDIVIDUAL RETIREMENT ACCOUNT
PROTOTYPE
The Custodial Account Agreement ("Agreement") including the Adoption Agreement
executed by the Custodian and the Depositor constitutes a Custodial Account for
the purpose of qualifying as an Individual Retirement Account under section
408(a) of the Internal Revenue Code of 1986.
ARTICLE I
GENERAL
1.01 INTERPRETATION AND ADMINISTRATION. The Agreement is intended to meet the
requirements of the Internal Revenue Code ("IRC") relating to individual
retirement accounts and shall be interpreted and administered in a manner
consistent with such requirements.
1.02 AGREEMENT FOR EXCLUSIVE BENEFIT OF DEPOSITOR. In no circumstances shall any
part of the corpus or income of the Agreement be used for or diverted to
purposes other than for the exclusive benefit of the Depositor or his
Beneficiary.
1.03 DEPOSITOR'S RIGHTS TO CONTRIBUTIONS NONFORFEITABLE. The right of the
Depositor to or derived from contributions made shall be nonforfeitable at
the time such contribution is paid to the Agreement.
1.04 GOVERNING STATE. The Agreement established hereunder shall be governed by
the law of the State in which the Custodian is located.
1.05 SPONSOR. New England Funds, L.P. is the sponsoring organization of this
Individual Retirement Account. New England Funds, L.P. shall mean the
broker-dealer subsidiary of New England Investment Companies, L.P.
ARTICLE II
CONTRIBUTIONS AND ROLLOVERS
2.01 CONTRIBUTION REQUIREMENTS.
A. If an individual retirement account is established, whether alone or as
part of a Simplified Employee Pension ("SEP"), the total contribution to
such account by the Depositor for his taxable year must be in cash and
shall not exceed the lesser of $2,000 or 100% of the Depositor's
compensation for such year.
B. If individual retirement accounts are established for the benefit of an
individual who receives compensation and his non-employed spouse, the
total contribution by the Depositors to both accounts for their taxable
year must be in cash and shall not exceed the lesser of $2,250 or 100%
of the compensation of the employed Depositor for such year. Provided,
however, that no contribution made to the separate account of either
spouse may exceed $2,000 for the taxable year.
C. If an individual retirement account is established for the investment of
contributions to a Simplified Employee Pension (SEP) described in
section 408(k) of the Internal Revenue Code, the total contribution by
the Depositor's employer to such account for the Depositor's taxable
year shall not exceed the lesser of $22,500 or 15% of the Depositor's
compensation (not in excess of the first $150,000), or such larger
amount as may be prescribed by law for such year.
D. If an individual retirement account is established for the investment of
contributions to a Salary Reduction Simplified Employee Pension (SARSEP)
described in section 408(k) of the IRC, the total contribution to the
Depositor's account for the taxable year shall not exceed the employer
contribution described in subsection C. increased by an employee
elective deferral amount not to exceed $9,240 (as adjusted annually per
IRC section 415(d)).
"Compensation" means wages, salaries, professional fees, or other amounts
derived from or received for personal services actually rendered
(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 includes earned income, as defined in
section 401(c)(2) (reduced by the deduction the self employed individual
takes for contributions made to a Keogh plan). Compensation does not
include amounts derived from or received as earnings or profits from
property (including but not limited to interest and dividends) or amounts
not includible in gross income. Compensation also does not include any
amount received as a pension or annuity or as deferred compensation. The
term "compensation" shall include any amount includible in the individual's
gross income under section 71 with respect to a divorce or separation
instrument described in subparagraph (A) of section 71(b)(2).
2.02 ROLLOVERS. The provisions of Section 2.01 notwithstanding, a Depositor may
make a contribution which exceeds such limits provided that the Depositor
warrants that the amount contributed is a rollover contribution described
in Internal Revenue Code section 402(a)(5), 402(a)(7), 403(a)(4), 403(b)
(8), or 408(d)(3) relating to qualified plans, individual retirement
accounts and individual retirement annuities and is contributed hereto
within sixty (60) days of receipt by the Depositor.
In the event that the Depositor elects to make a rollover contribution
attributable to a distribution from an employer plan qualified under Code
section 401(a), the Depositor shall have full discretion as to (a) whether
such a contribution shall be made to an IRA containing regular annual
contributions made pursuant to Section 2.01, (b) whether to make subsequent
regular annual contributions to an IRA originally funded solely with
rollover contributions attributable to distributions from a plan qualified
under Code section 401(a), or (c) whether to maintain an IRA established
with a rollover contribution attributable to a distribution from a plan
qualified under section 401(a) as a separate IRA, not commingled with
regular annual contributions pursuant to Section 2.01. The Custodian shall
be under no duty to question any direction of the Depositor regarding any
order to commingle rollover and regular annual contributions, nor shall the
Custodian be liable for any loss or damage which may arise from any
subsequent loss of portability of such an employer plan rollover
contribution to another employer plan qualified under Code section 401(a).
ARTICLE III
DEPOSITOR'S ACCOUNT AND INVESTMENTS
3.01 As used in this Agreement, the following terms shall have the following
meanings:
"Securities Account" shall mean an account consisting of shares of New
England Funds which are distributed by New England Funds, L.P.
"Insurer" shall mean the New England Mutual Life Insurance Company of
Boston, Massachusetts.
"Policy" shall mean an annuity contract issued by the Insurer. Such
policies shall not provide for fixed premiums. No portion of a Depositor's
Account shall be invested in life insurance contracts.
"Savings Account" shall mean an interest bearing deposit in the Custodian's
banking department of a type made available by the Custodian from time to
time for investment hereunder, and which is intended by the Depositor as
either (i) a relatively permanent investment, or (ii) an interim investment
pending use of the deposit to invest in Policies or a Securities Account.
3.02 DEPOSITOR'S ACCOUNT. For each type of account designated in the Adoption
Agreement, the Custodian shall establish an account to which shall be
credited all contributions made for the Depositor according to the
direction of the Depositor under Section 3.03. When the term "Depositor's
Account" is used in the Agreement, it shall refer to all the accounts
maintained for the Depositor under the Agreement.
The Depositor's Account shall include all assets held by the Custodian or
by the Insurer on behalf of the Depositor, including Securities Accounts,
Policies, Savings Accounts, and uninvested funds.
When the Adoption Agreement is checked for spousal accounts, a separate
Depositor Account will be opened and maintained in each spouse's name.
Contributions made on behalf of each spouse will be credited to that
spouse's separate account. A spouse for whom the Agreement is established
shall be the sole owner of all amounts in his Depositor's Account and shall
have the right to direct the investments in his Depositor's Account in
accordance with Sections 3.03 and 3.05. When any provision of the Agreement
gives the Depositor a right, option or privilege, such provision shall
extend to the spouse when the Agreement is established for a spouse.
3.03 INVESTMENT OF FUNDS. The Custodian shall receive and invest contributions
made by or on behalf of the Depositor and shall invest and reinvest thereto
without distinction between principal and income. No portion of the
Agreement assets shall be invested in life insurance contracts or
collectibles within the meaning of Code section 408(m), nor may the assets
of the Agreement be commingled with other property except in a common trust
fund or a common investment fund. The Custodian shall invest only in
Securities Accounts, Policies, and Savings Accounts and may hold amounts
uninvested without liability for interest thereon pursuant to Section
5.02(D).
A. All investments acquired by the Custodian under any Securities Account
or Savings Account shall be registered in the name of Custodian (with or
without identifying Depositor) or of its nominee (and the same nominee
may be used with respect to assets of other investors whether or not
held under agreements similar to this one or in any fiduciary capacity
whatsoever); provided, however, that the Custodian may hold any security
in bearer form or by or through a central clearing corporation
maintained by institutions active in the national securities markets;
provided further, however, that (i) the books and records of the
Custodian shall show that all such investments are part of the Custodial
Account; (ii) each Custodial Account shall be separate and distinct;
(iii) a separate account thereof shall be maintained by the party having
actual custody of such assets; and (iv) the assets thereof shall be held
in individual or bulk segregation in such party's vaults or in
depositories approved by the Securities and Exchange Commission under
the Securities Exchange Act of 1934.
B. Policy Ownership. Each Policy shall be a contract between the Custodian
and the Insurer. The Policy shall name the Custodian as owner, reserving
to it all rights, options and benefits provided by the Policy or
permitted by the Insurer except the right to change the Beneficiary
shall be exercisable by the Depositor.
C. Supplemental Agreement. A Disability Benefit Agreement (waiver of
premium in the event of disability), if available from the Insurer, may
be added to a Policy, provided that the additional cost of such
Agreement together with the annual contribution for the Depositor shall
not exceed the amounts specified in Section 2.01. The payment of
benefits from such agreement shall in no sense or manner or for any
purpose be considered or deemed a distribution by or through the
Agreement.
3.04 DIVIDENDS AND GAINS. Dividends which may become payable under a Policy
shall be held in the Depositor's Account to provide additional benefits.
Dividends and capital gains or other distributions received under any
Securities Account held for a Depositor's Account shall be reinvested in
the Securities Account in accordance with the written direction by the
Depositor. The shares so received upon such reinvestment shall be credited
to such Depositor's Account. All interest earned on a Savings Account shall
be credited as a deposit thereto. Notwithstanding the foregoing, a
Depositor who has attained age 59 1/2 may request distribution of dividends
and gains in accordance with the provisions of Article IV.
3.05 DEPOSITOR TO DIRECT INVESTMENTS. The Depositor shall direct the Custodian
with respect to the investment of the Depositor's Account, except that such
investments shall be limited to Securities Accounts, Policies, and Savings
Accounts. The Custodian shall have no duty to look beyond instructions
received by it from the Depositor and shall in no event be responsible for
any loss incurred with respect to any investments made or retained in
accordance with the directions of the Depositor.
3.06 CHANGES IN INVESTMENT. The Depositor may direct the Custodian in writing to
change investments held by the Custodian, both with respect to investments
already made and with respect to investments to be made with contributions
currently due. The Custodian shall make such changes in investment as soon
as reasonably possible after receiving written direction from the
Depositor. The Custodian shall not be responsible for any investment gains
or losses in the interim.
3.07 INFORMATION TO DEPOSITOR. When any portion of the Depositor's Account is
invested in Securities Accounts or variable annuity Policies, the Custodian
shall in accordance with requirements of applicable law, deliver or cause
to be delivered to the Depositor copies of any notices of shareholders'
meetings, proxies and proxy-soliciting materials, prospectuses, and annual
and other reports to shareholders, which have been received by the
Custodian with respect to such investments.
3.08 VOTING POWERS. With respect to Securities Accounts and variable annuity
Policies each Depositor may direct the Custodian as to the manner in which
any shares (including fractional shares) or units held by the Custodian for
his Depositor's Account shall be voted with respect to any matters being
voted upon by the entity which issued such shares or units. All such
directions by the Depositor shall be in writing on a form approved by the
Custodian, signed by the Depositor and delivered to the Custodian within
the time prescribed by it. The Custodian shall not vote in the absence of
such directions.
ARTICLE IV
DISTRIBUTIONS
4.01 DISTRIBUTIONS AFTER AGE 59 1/2. A Depositor who has attained the age of 59
1/2 may receive a distribution of dividends and gains as they accrue or of
other amounts in the account by directing the Custodian in writing to make
such distributions and furnishing such proof of age as the Custodian may
require.
4.02 COMMENCEMENT OF REQUIRED DISTRIBUTIONS. The entire interest (value of the
account) of the Depositor will be distributed or commence to be
distributed, no later than the first day of April following the calendar
year in which such individual attains age 70 1/2 (required beginning date),
in equal or substantially equal amounts, over (a) the life of the
Depositor, or the lives of the Depositor and his or her designated
beneficiary, or (b) a period certain not extending beyond the life
expectancy of the Depositor, or the joint and last survivor expectancy of
the Depositor and his or her designated beneficiary.
4.03 MINIMUM AMOUNTS TO BE DISTRIBUTED. If the Depositor's entire interest is to
be distributed in other than a lump sum, then the amount to be distributed
each year (commencing with the required beginning date and each year
thereafter) must be at least equal to the quotient obtained by dividing the
Depositor's benefit by the applicable life expectancy.
For calendar years beginning before January 1, 1989, if the Depositor's
spouse is not the designated beneficiary, the method of distribution
selected must assure that at least 50% of the present value of the amount
available for distribution is paid within the life expectancy of the
Depositor.
For calendar years beginning after December 31, 1988, the amount to be
distributed each year, beginning with the first year for which
distributions are required and then for each succeeding calendar year,
shall not be less than the quotient obtained by dividing the Depositor's
benefit by the lesser of (1) the applicable life expectancy or (2) if the
Depositor'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 Income Tax Regulations. Distributions after the death
of the Depositor shall be calculated using the applicable life expectancy
as the relevant divisor without regard to proposed regulations section
1.401(a)(9)-2.
Life expectancy is computed by use of the expected return multiples in
Tables V and VI of section 1.72-9 of the Income Tax Regulations. Unless
otherwise elected by the participant by the time distributions are required
to begin, life expectancies shall be recalculated annually. Such election
shall be irrevocable as to the participant and shall apply to all
subsequent years. The life expectancy of a non-spouse beneficiary may not
be recalculated; instead, life expectancy will be calculated using the
attained age of such beneficiary during the calendar year in which
distributions are required to begin pursuant to this section, and payments
for subsequent years shall be calculated based on such life expectancy
reduced by one for each calendar year which has elapsed since the calendar
year life expectancy was first calculated.
If the individual retirement arrangement is an annuity, distributions shall
be made in accordance with the requirements of section 401(a)(9) of the
Code and the regulations thereunder.
4.04 DISTRIBUTION PROCEDURE. Shortly before the time benefits are to commence
under Section 4.02, the Depositor shall advise the Custodian or the Insurer
of the arrangements to be made effective for the payment of benefits. Such
benefits may be paid entirely by the Custodian or by the Insurer, or in
part by each of them, and the Custodian shall have full authority to carry
out the instructions of the Depositor for the payment of such benefits in a
fixed or variable amount. In order to perform the foregoing, the Custodian
shall have full authority to surrender a Policy or to transfer amounts held
by it to the Insurer for settlement under a Policy. Any interest in a
Securities Account shall be transferred to the Depositor or converted into
cash and the value distributed to the Depositor. Any credit balance in
Savings Account shall be distributable in a lump sum.
Before making any distribution upon the death of a Depositor, the Custodian
shall be furnished with any and all certificates, tax waivers and other
documents requested in its discretion by the Custodian.
4.05 DISTRIBUTIONS UPON DEATH OF DEPOSITOR.
A. Distributions beginning before death. If the Depositor 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 Depositor's
death.
B. Distributions beginning after death. If the Depositor dies before
distribution of his or her interest begins, the Depositor's entire
interest will be distributed in accordance with one of the following
four provisions:
(1) The Depositor's entire interest will be paid by December 31 of the
calendar year containing the fifth anniversary of the Depositor's
death.
(2) If the Depositor's interest is payable to a beneficiary designated
by the Depositor and the Depositor has not elected (1) above, then
the entire interest will be distributed 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
Depositor died. The designated beneficiary may elect at any time to
receive greater payments.
(3) If the designated beneficiary of the Depositor is the Depositor's
surviving spouse, the spouse may elect to receive equal or
substantially equal payments over the life or life expectancy of the
surviving spouse commencing at any date prior to the later of (1)
December 31 of the calendar year immediately following the calendar
year in which the Depositor died and (2) December 31 of the calendar
year in which the Depositor would have attained age 70 1/2. Such
election must be made no later than the earlier of December 31 of
the calendar year containing the fifth anniversary of the
Depositor's death or the date distributions are required to begin
pursuant to the preceding sentence. The surviving spouse may
accelerate these payments at any time, i.e., increase the frequency
or amount of such payments.
(4) If the designated beneficiary is the Depositor's surviving spouse,
the spouse may treat the account as his or her own individual
retirement arrangement (IRA). This election will be deemed to have
been made if such surviving spouse makes a regular IRA contribution
to the account, makes a rollover to or from such account, or fails
to elect any of the above three provisions.
C. Life expectancy is computed by use of the expected return multiples in
Tables V and VI of section 1.72-9 of the Income Tax Regulations. For
purposes of distributions beginning after the Depositor's death, unless
otherwise elected by the surviving spouse by the time distributions are
required to begin, life expectancies shall be recalculated annually.
Such election shall be irrevocable as to the surviving spouse and shall
apply to all subsequent years. In the case of any other designated
beneficiary, life expectancies shall be calculated using the attained
age of such beneficiary during the calendar year in which distributions
are required to begin pursuant to this section, and payments for any
subsequent calendar year shall be calculated based on such life
expectancy reduced by one for each calendar year which has based on such
life expectancy reduced by one for each calendar year which has elapsed
since the calendar year life expectancy was first calculated.
D. For purposes of this requirement, any amount paid to a child of the
Depositor will be treated as if it had been paid to the surviving spouse
if the remainder of the interest becomes payable to the surviving spouse
when the child reaches the age of majority.
4.06 BENEFICIARY DESIGNATION. The term "Beneficiary" means one or more
recipients designated to receive a payment upon the death of the Depositor.
With respect to any Policy on the life of a Depositor, the proceeds shall
be paid to the Beneficiary designated in the Policy. With respect to
Securities Accounts and Savings Accounts, the amount remaining in the
Depositor's Account shall be distributed to the Beneficiary last designated
by the Depositor in writing on a form acceptable to the Custodian. Such
designation shall not take effect until it is received by the Custodian.
However, in the event no such designation is made or, if made, to the
extent such designation does not effectively dispose of the Depositor's
Account, the term "Beneficiary" shall mean the Depositor's estate.
4.07 DISTRIBUTION UPON DISABILITY OF DEPOSITOR. If the Depositor shall become
disabled to the extent that he is unable to engage in any substantial
gainful activity by reason of any medically determinable physical or mental
impairment which can be expected to result in death or to be of long,
continued and indefinite duration as documented by a physician's statement,
the Depositor may direct the Custodian to transfer the Depositor's Account
to the disabled Depositor in such manner as directed by the Depositor
provided, however, such manner does not conflict with Section 4.02 and
4.03.
4.08 DISTRIBUTION IN PERIODIC PAYMENTS FOR LIFE. The Depositor may elect to
receive distributions at least annually as part of a series of
substantially equal periodic payments (if not less than $100) over the life
or life expectancy of the Depositor or the joint lives (or joint life
expectancies) of the Depositor and his or her Beneficiary.
4.09 DISTRIBUTION TO DEPOSITOR. Except in the case of the Depositor's death,
disability or attainment of age 59 1/2, the Custodian shall be notified by
the Depositor as to the disposition of the amount distributed. The
Depositor must direct the Custodian to commence distribution in accordance
with Section 4.02.
4.10 DISTRIBUTION OF EXCESS CONTRIBUTIONS. If the Depositor shall contribute, in
any calendar year, an amount greater than that which may be claimed as an
allowable deduction under the Code, the Depositor shall be entitled to
withdraw the excess, plus earnings thereon, before the date for filing of
the Depositor's federal income tax return, plus extensions.
ARTICLE V
CUSTODIAN
5.01 CUSTODIAN. "Custodian" shall mean the State Street Bank and Trust Company
or the Custodian named on the Adoption Agreement, and any successor
Custodian.
5.02 PROVISIONS REGARDING CUSTODIAN.
A. The Agreement shall take effect only when accepted and signed by the
Custodian and Depositor. As directed, the Custodian shall then open and
maintain a separate custodial account for the Depositor for each type of
individual retirement account designated in the Adoption Agreement and
invest the initial contribution hereunder as directed by the Depositor.
The Custodian shall not accept annual contributions in excess of the
amounts specified in Section 2.01 (or such other amounts as may be
permitted under the Internal Revenue Code of 1986 as amended), unless
the same is designated by the Depositor as a rollover contribution as
provided in Section 2.02.
B. The Depositor may direct the Custodian to establish another account for
him under the Agreement or may redesignate the account he had originally
designated in this adoption Agreement.
C. When there is more than one account under the Agreement the Depositor
shall direct the Custodian to which account each contribution shall be
credited.
D. The Custodian shall invest subsequent contributions as directed.
However, if any such written instructions are not received as required,
or if received, are in the opinion of Custodian unclear, the Custodian
may hold or return all or a portion of the contribution uninvested
without liability for loss of income or appreciation, and without
liability for interest, pending receipt of written instructions or
clarification. The Custodian does not undertake to render any investment
advice whatsoever to the Depositor.
E. The Custodian assumes (and shall have) no responsibility to make any
distribution unless and until such instructions specify the occasion for
such distribution, the elected manner of distribution, and any
declaration required by Section 4.08. Also, before making any such
distribution or before honoring any assignment of a Depositor's Account,
the Custodian shall be furnished with any and all applications,
certificates, tax waivers, signature guarantees, and other documents
(including proof of any legal representative's authority) deemed
necessary or advisable by the Custodian.
5.03 RECORDS OF TRANSACTIONS. The Custodian shall keep adequate records of
transactions it is required to perform hereunder. Not later than sixty (60)
days after the close of each calendar year or after the Custodian's
resignation or removal pursuant to Section 5.07(A), the Custodian shall
render to the Depositor a written report or reports reflecting the
transactions effected by it during such period and the assets of the
Agreement (other than Policies) at the close of the period, using such
information as is reasonably available to it. Sixty (60) days after
rendering such report(s), the Custodian shall be forever released and
discharged (to the extent permitted by law) from all liability and
accountability to anyone with respect to its acts and transactions shown in
or reflected by such report(s), except with respect to those as to which
the recipient of such report(s) shall have filed written objections with
the Custodian within the latter such sixty (60) day period.
5.04 DUTIES OF CUSTODIAN. Except as provided in Section 3.03, the Custodian
shall be an agent for the Depositor to receive and invest contributions
directed by the Depositor, hold and distribute such investments, and keep
adequate records and report thereon, all in accordance with this Agreement.
Custodian may perform any of its administrative duties through other
persons designated by the Custodian from time to time, except that the
ownership of the assets shall be as prescribed in Section 3.03 and 3.07 and
Custodian intends initially to delegate all such duties to its
partially-owned subsidiary Boston Financial Data Service, Inc., but no such
delegation or future change therein shall be considered as an amendment of
this Agreement. Custodian shall not be liable (and assumes no
responsibility) for the collection of contributions, the deductibility of
any contribution or its propriety under this Agreement, the purpose or
propriety of any distribution or the tax treatment of any distribution
ordered by the Depositor or the Depositor's failure to commence
distribution in accordance with Article IV, which matters are the
responsibility of the Depositor.
5.05 INDEMNIFICATION. To the extent permitted by law, the Depositor shall always
fully indemnify Custodian and save it harmless from any and all liability
whatsoever which may arise in connection with this Agreement and matters
which it contemplates, except that which arises due to Custodian's
negligence or willful misconduct. Custodian shall not be obligated or
expected to commence or defend any legal action or proceeding in connection
with Agreement or such matters unless agreed upon by Custodian and
Depositor and unless fully indemnified for so doing to Custodian's
satisfaction.
5.06 RELIANCE ON INSTRUCTIONS. Custodian may conclusively rely upon and shall
not be responsible for acting upon any written order from the Depositor or
any other notice, request, consent, certificate, or other instrument or
paper believed by it to be genuine and to have been properly executed, and
so long as it acts in good faith, in taking or omitting to take any other
action in reliance thereon, and shall have no further duty or inquiry.
5.07 RESIGNATION OR REMOVAL OF CUSTODIAN.
A. The Custodian may resign at any time upon at least thirty (30) days
prior notice in writing to the Depositor, and may be removed by the
Depositor at any time upon at least thirty (30) days prior notice in
writing to the Custodian. Upon such resignation or removal, the
Depositor shall appoint a successor Custodian to serve under this
Agreement. Upon receipt by the Custodian of written acceptance of such
appointment by the successor Custodian, the Custodian shall transfer to
such successor the assets of the Agreement and all necessary records (or
copies thereof) pertaining thereto, provided that (if so requested by
Custodian) any successor Custodian agrees not to dispose of any such
records without the Custodian's consent. The Custodian is authorized,
however, to reserve such a portion of such assets as it may deem
advisable for payment of all its fees, compensation, costs, and expense,
or for payment of any other liabilities constituting a charge on or
against the assets of the Agreement or on or against the Custodian, with
any balance of such reserve remaining after the payment of all such
items to be paid over to the successor Custodian.
B. If within thirty (30) days after Custodian's resignation or removal or
such longer time as Custodian may agree to, the Depositor has not
appointed a successor Custodian which has accepted such appointment, the
Custodian shall terminate the Agreement.
C. The Custodian shall not be liable for the acts or omissions of such
successor.
D. The Custodian, and every successor Custodian appointed to serve under
this Agreement, must be a bank as defined in Code section 408(n).
E. After the Custodian has transferred the Agreement assets (including any
reserve balance as contemplated above) to the successor Custodian, the
Custodian shall be relieved of all further liability with respect to
this Custodial Agreement, and the assets thereof.
5.08 FEES, EXPENSES, AND TAXES. The Depositor shall pay the fees and reasonable
expenses of the Custodian in connection with the operation of the
Agreement.
Upon thirty (30) days' prior notice, the Custodian may change such schedule
of fees. Custodian's fees, any income, gift, estate and inheritance taxes
and other taxes of any kind whatsoever, including transfer taxes incurred
in connection with the investment or reinvestment of the assets of the
Agreement, that may be levied or assessed in respect to such assets, and
all other administrative expenses incurred by the Custodian, may be charged
to a Depositor's Account, by sale or liquidation of the assets in such
Account, or (at the Custodian's election) may be charged to the Depositor.
ARTICLE VI
AMENDMENT AND TERMINATION OF AGREEMENT
6.01 AMENDMENT OF AGREEMENT. New England Funds, L.P. is the sponsoring
organization for the Agreement. New England Funds, L.P. reserves to itself,
and the Depositor by execution of an Adoption Agreement delegates to it,
powers to amend the plan as it deems necessary or advisable including
amendments in order to implement requirements of applicable law, provided
that notice of such amendment shall be given to the Custodian and to the
Depositor.
6.02 AMENDMENT OF AGREEMENT. A Depositor may amend his Adoption Agreement at any
time by an instrument in writing which shall take effect 60 days after
delivery to the Custodian (a copy of which amendment shall be sent to the
Insurer) provided that
A. no amendment shall deprive the Insurer of any of its exemptions and
immunities with respect to Policies which were issued by it prior to
receipt at its Home Office of notice of such amendment; and
B. no amendment shall expand or increase the duties or liabilities of the
Custodian without its consent.
6.03 TERMINATION OF AGREEMENT.
A. The Custodian shall terminate the Agreement if, within the time
specified in Section 5.07B, after the Custodian's resignation or
removal, the Depositor has not appointed a successor Custodian which has
accepted such appointment. Termination of this Agreement shall be
effected by distributing all assets thereof in a lump sum in cash or in
kind to the Depositor, subject to Custodian's right to reserve funds as
provided in Section 5.07A.
B. Upon termination of the Agreement, the Custodian shall be relieved from
all further liability with respect to this Agreement, and all assets
thereof so distributed.
6.04 WITHDRAWAL OF DEPOSITOR. The Depositor may terminate his Agreement at any
time by an instrument in writing delivered to the Custodian, and upon such
termination the Depositor shall be entitled to receive all values being
held for his benefit in a manner consistent with Section 4.04.
6.05 FAILURE OF QUALIFICATION OF AGREEMENT. In the event that an Agreement shall
fail to qualify initially under the applicable provisions of the Internal
Revenue Code, the Custodian shall upon direction of the Depositor return to
the Depositor the value of all assets of the Agreement and the Agreement
thereupon shall be of no effect.
ARTICLE VII
REPORTS; MISCELLANEOUS
7.01 ANNUAL INFORMATION. The Insurer and the Custodian shall supply annually
such information concerning Agreement transactions affecting the Depositor
as the Secretary of the Treasury or his delegate shall prescribe, and shall
otherwise conform to such reporting requirements as may be prescribed by
Federal or State regulatory authority.
7.02 INTERNAL REVENUE CODE. "Internal Revenue Code" or "Code" or "IRC" as used
herein shall mean the Internal Revenue Code of 1986, as amended from time
to time.
7.03 PROTECTION OF INSURER, SPONSOR. Neither the Custodian, the Sponsor nor the
Insurer shall be responsible for the validity of a Depositor's Agreement or
for the validity or tax compliance of any SEP or SARSEP whose contributions
may be held under this Agreement. To the extent permitted by law, neither
the Sponsor nor the Insurer shall owe the Depositor any responsibility for
action taken or not taken by the Custodian, for determining the propriety
of accepting premium payments or other contributions, for making payments
in accordance with directions of the Custodian, or for the application of
such payments. The Sponsor and the Insurer shall be fully protected in
dealing with any officer, partner or principal of the Custodian.
7.04 NO ALIENATION OR ASSIGNMENT BY DEPOSITOR. Neither the Depositor nor a
designated Beneficiary shall have the right to alienate or assign his
interests provided by this Agreement. No such interest shall be subject to
attachment, execution, garnishment, or any other legal or equitable
process.
7.05 DEPOSITOR'S BENEFITS LIMITED TO ASSETS. The Depositor by his participation
in the Agreement shall be conclusively deemed to have agreed to look solely
to the assets held in the Agreement for the payment of any benefit to which
he may be entitled by reason of his participation.
7.06 DEPOSITOR TO ENFORCE AGREEMENT. To the extent permitted by law, the
Depositor shall have the sole authority to enforce the Agreement, and no
person other than the Depositor shall institute or maintain any action or
proceeding against the Custodian or the Insurer.
7.07 WITHHOLDING. Income tax may be withheld from payments provided under the
Agreement unless the Depositor or the Depositor's Beneficiary effectively
elects in writing not to have income tax withholding apply.
<PAGE>
NEW ENGLAND FUNDS, L.P.
INFORMATION ON YOUR INDIVIDUAL RETIREMENT ACCOUNT
This summary highlights the general provisions of federal tax law concerning
your Individual Retirement Account Plan (IRA Plan) including certain provisions
of the Tax Reform Act of 1986 (Act). As discussed below, this Act made a number
of major changes to the law governing the deductibility of contributions to IRA
plans. Hopefully, this summary will answer many of your questions about how the
law now operates. Further information can be obtained from any district office
of the Internal Revenue Service, from IRS Publication 590, from your investment
dealer or New England Funds, L.P.
IRA PLAN MAY BE REVOKED
You have the right to revoke this IRA Plan for any reason within 7 days after it
is established by delivering or mailing written notification to New England
Funds, L.P. or your investment dealer. If mailed, the notification will be
deemed mailed on the date of the postmark if it is deposited in the U.S. mail
first class postage prepaid and properly addressed. The notification to New
England Funds, L.P. should be mailed or delivered to:
New England Funds, L.P.
P.O. Box 8551
Boston, Massachusetts 02266-8551
If you wish to mail your notification to your investment dealer, call your
investment dealer for further information.
Upon revocation, all amounts paid will be refunded to you without adjustment due
to sales commissions, administrative expenses, or change in market value.
INDIVIDUALS ELIGIBLE FOR IRA PLANS
If you had compensation or earned income during your taxable year, you are
eligible to establish and contribute to an IRA Plan for yourself during the
year. The term "compensation" includes alimony or separate maintenance payments
which are includable in an individual's gross income with respect to a divorce
or separation instrument. Under the Act, if you are eligible to establish an IRA
Plan for yourself you may contribute to a Spousal IRA even if your spouse has
earned some compensation during the year. Provided your spouse does not make a
contribution to an IRA, you may set up a Spousal IRA consisting of an account
for your spouse as well as an account for yourself. Note that an IRA Plan for
the benefit of your spouse may be established only if you file a joint return.
If both you and your spouse have compensation or earned income during the
taxable year, you may each establish and maintain separate IRA Plans.
DEDUCTIBLE CONTRIBUTIONS TO IRA PLANS
Under the Act, if neither you, nor your spouse, is an active participant (see A.
below) you may make a contribution of up to the lesser of $2,000 (or $2,250 in
the case of a Spousal IRA) or 100% of compensation and take a deduction for the
entire amount contributed. If you are an active participant but have an adjusted
gross income (AGI) below a certain level (see B. below), you may make a
deductible contribution as under old law. If, however, you or your spouse is an
active participant and your combined AGI is above the specified level, the
amount of the deductible contribution you may make to an IRA Plan is phased down
and eventually eliminated.
A. Active Participant
You are an "active participant" for a year if you are covered by a
retirement plan. You are covered by a "retirement plan" for a year if your
employer or union has a retirement plan under which money is added to your
account or you are eligible to earn retirement credits. For example, if you
are covered under a profit-sharing plan, certain government plans, a salary
reduction arrangement (such as a tax sheltered annuity arrangement or a 401
(k) plan), a simplified employee pension plan (SEP) or a plan which
promises you a retirement benefit which is based upon the number of years
of service you have with the employer, you are likely to be an active
participant. Your Form W-2 for the year should indicate your participation
status.
You are an active participant for a year even if you are not yet vested in
your retirement benefit. Also, if you make required contributions or
voluntary employee contributions to a retirement plan, you are an active
participant. In certain plans you may be an active participant even if you
were only with the employer for part of the year.
You are not considered an active participant if you are covered in a plan
only because of your service as 1) an Armed Forces Reservist, for 90 days
or less of active service, or 2) a volunteer firefighter covered for
firefighting service by a government plan if your accrued benefit is below
a threshold amount. Of course, if you are covered in any other plan, these
exceptions do not apply.
If you are married, living apart from your spouse, and file a separate tax
return, your spouse's active participation does not affect your ability to
make deductible contributions.
B. Adjusted Gross Income (AGI)
If you are an active participant, you must look at your AGI for the year
(if you and your spouse file a joint tax return you use your combined AGI)
to determine whether you can make a deductible IRA Plan contribution. Your
tax return will show you how to calculate your AGI for this purpose. If you
are at or below a certain AGI level, called the Threshold Level, you are
treated as if you were not an active participant and can make a deductible
contribution under the same rules as a person who is not an active
participant.
If you are single, your threshold AGI level is $25,000. The threshold level
if you are married and file a joint tax return is $40,000, and if you are
married but file a separate tax return, the threshold level is $0.
If your AGI is less than $10,000 above your threshold level, you will still
be able to make a deductible contribution but it will be limited in amount.
The amount by which your AGI exceeds your Threshold Level (AGI-Threshold
Level) is called your Excess AGI. The Maximum Allowable Deduction is $2,000
(or $2,250 for a Spousal IRA). You can estimate your deduction limit as
follows:
10,000 - Excess AGI
------------------- X Maximum Allowable Deduction = Deduction Limit
10,000
You must round up the result to the next highest $10 level (the next highest
number which ends in zero). For example, if the result is $1,525, you must round
it up to $1,530. If the final result is below $200 but above zero, your
Deduction Limit is $200. Your Deduction Limit cannot, in any event, exceed 100%
of your compensation.
EXAMPLE 1: Ms. Smith, a single person, is an active participant and has an AGI
of $31,619. She calculates her deductible IRA Plan contributions as follows:
Her AGI is $31,619
Her Threshold Level is $25,000
Her Excess AGI is (AGI - Threshold Level) or ($31,619 - $25,000) = $6,619
Her Maximum Allowable Deduction is $2,000
So, her IRA Plan deduction limit is:
$10,000 - $6,619
---------------- X $2,000 = $676 (rounded to $680).
$10,000
EXAMPLE 2: Mr. and Mrs. Young file a joint tax return. Each spouse earns more
than $2,000 and one is an active participant. They have a combined AGI of
$44,255. They may each contribute to an IRA Plan and calculate their
deductible contributions to each IRA Plan as follows:
Their AGI is $44,255
Their Threshold Level is $40,000
Their Excess AGI is (AGI - Threshold Level) or ($44,255 - $40,000) = $4,255
The Maximum Allowable Deduction for each spouse is $2,000
So, each spouse may compute his or her IRA Plan deduction limit as follows:
$10,000 - $4,255
---------------- X $2,000 = $1,149 (rounded to $1,150).
$10,000
EXAMPLE 3: If, in example 2, Mr. Young did not earn any compensation, or elected
to be treated as earning no compensation, Mrs. Young could establish a Spousal
IRA. The amount of deductible contributions which could be made to the two IRA
Plans is calculated using a Maximum Allowable Deduction of $2,250 rather than
$2,000.
$10,000 - $4,255
---------------- X $2,250 = $1,293 (rounded to $1,300).
$10,000
The $1,300 can be divided between the two accounts, but neither IRA Plan may
receive a deductible contribution of more than $1,150 (the limit in Example 2).
EXAMPLE 4: Mr. Jones, a married person, files a separate tax return and is
an active participant. He has $1,500 of compensation and wishes to make a
deductible contribution to an IRA.
His AGI is $1,500
His Threshold Level is $0
His Excess AGI is (AGI - Threshold Level) or ($1,500 - $0) = $1,500
His Maximum Allowable Deduction is $2,000
So, his IRA deduction limit is:
$10,000 - $1,500
---------------- X $2,000 = $1,700
$10,000
Even though his IRA Plan deduction limit under the formula is $1,700, Mr. Jones
may not deduct an amount in excess of his compensation, so his actual deduction
is limited to $1,500.
NONDEDUCTIBLE CONTRIBUTIONS TO IRA PLANS
Even if you are above the threshold level and thus may not make a deductible
contribution of $2,000 ($2,250 for Spousal IRA), you may still contribute up to
the lesser of 100% of compensation or $2,000 to an IRA Plan ($2,250 for a
Spousal IRA). The amount of your contribution which is not deductible will be a
nondeductible contribution to the IRA Plan. You may also choose to make a
contribution nondeductible even if you could have deducted part or all of the
contribution. Interest or other earnings on your IRA Plan contribution, whether
from deductible or nondeductible contribution, will not be taxed until taken out
of your IRA Plan and distributed to you.
If you make a nondeductible contribution to an IRA Plan you must report the
amount of the nondeductible contribution to the IRS as a part of your tax return
for the year.
You may make a $2,000 contribution at any time during the year, if your
compensation for the year will be at least $2,000, without having to know how
much will be deductible. When you fill out your tax return you may then figure
out how much is deductible.
According to the IRS, you may withdraw an IRA Plan contribution made for a year
any time before April 15 of the following year. If you do so, you must also
withdraw the earnings attributable to that portion and report the earnings as
income for the year for which the contribution was made. In addition, if you are
not 59 1/2 at the time of the withdrawal, you also may be required to pay the
premature distribution tax on these earnings. If some portion of your
contribution is not deductible, you may decide either to withdraw the
nondeductible amount, or to leave it in the IRA and designate that portion as a
nondeductible contribution on your tax return.
IRA PLAN DISTRIBUTIONS
Because nondeductible IRA Plan contributions are made using income which has
already been taxed (that is, they are not deductible contributions), the portion
of the IRA Plan distributions consisting of nondeductible contributions will not
be taxed again when received by you. If you make any nondeductible IRA Plan
contributions, each distribution from your IRA Plan will consist of a nontaxable
portion (return of nondeductible contributions) and a taxable portion (return of
deductible contributions, if any, and account earnings).
Thus, you may not take a distribution which is entirely tax-free. The following
formula is used to determine the nontaxable portion of your distributions for a
taxable year:
<TABLE>
<S> <C> <C>
Remaining Nondeductible contributions Total Nontaxable
-------------------------------------------------- X Distributions = distributions
Year-end total IRA Plan account balance (for the year) (for the year)
(plus distributions taken during the year).
</TABLE>
To Figure the year-end total IRA Plan account balance you treat all of your IRA
Plans as a single IRA. This includes all regular IRAs, as well as Simplified
Employer Pension (SEP) IRAs, and Rollover IRAs. You also add back the
distributions taken during the year.
EXAMPLE: An individual makes the following contributions to his or her IRA
Plans:
YEAR DEDUCTIBLE NONDEDUCTIBLE
1983 $2,000
1984 1,800 $1,000
1987 1,000 1,400
1989 600
----- -----
$5,400 $2,400
Deductible Contributions ......................................... $5,400
Nondeductible Contributions ...................................... 2,400
Earnings on IRA Plans ............................................ 1,200
-----
Total Account Balance of IRA Plans as of 12/31/91 ................ $9,000
(including distributions in 1991)
In 1991 the individual takes a distribution of $3,000. The total account balance
in the IRA Plans on 12/31/91 plus 1991 distributions is $9,000. The nontaxable
portion of the distributions for 1991 is figured as follows:
Total nondeductible contributions ........ $2,400 X $3,000
Total account balance in the IRA Plans --------------- = $800
plus distributions ..................... $9,000
Thus, $800 of the $3,000 distribution in 1991 will not be included in the
individual's taxable income. The remaining $2,200 will be taxable for 1991.
SIMPLIFIED EMPLOYEE PENSION (SEP) IRA PLANS
Your employer also may establish a SEP IRA Plan for you. If a SEP IRA Plan is
established by your employer, you are allowed an exclusion for federal income
tax purposes equal to the employer contributions made to your IRA Plan for the
least of the following amounts:
1. The actual amount of employer contributions made to your IRA Plan;
2. $22,500; or
3. 15% of your compensation (not in excess of the first $150,000) from such
employer.
If you are a participant in a SEP IRA Plan you also may make your own IRA Plan
contributions in accordance with the limitations described above.
A SARSEP is a Salary Reduction Simplified Employee Pension Plan. A salary
reduction contribution of no more than $9,500 annually (as adjusted by law) is
allowed. This salary reduction contribution is treated as an employer
contribution in applying the exclusion for federal income tax purposes described
above.
A SEP Plan may be established by completing IRS Form 5305-SEP. A SARSEP Plan may
be established by completing IRS Form 5305A-SEP. A nonmodel SEP/SARSEP document
may be required in some cases.
OTHER LIMITATIONS
The terms "compensation" and "earned income" do not include earnings from
property such as interest, rents and dividends. IRA contributions must be made
no later than the due date of your tax return (without regard to extensions) to
be deductible for that year. No contributions may be made to your IRA Plan
beginning with the taxable year in which you attain age 70 1/2. However, if you
contribute to a Spousal IRA, contributions may be made on behalf of your spouse
(who has not attained age 70 1/2) even if you are age 70 1/2 or older. Your
employer may continue to make excludible contributions for you under a SEP IRA
Plan after you have attained age 70 1/2. However, distribution must commence not
later than April 1 of the calendar year following the year in which you attain
age 70 1/2. The IRA Plan deduction is available whether or not you itemize
deductions.
REQUIREMENTS OF AN IRA PLAN
An IRA Plan is a trust or custodial agreement with a bank or other organization
approved by the Secretary of the Treasury which is for the exclusive benefit of
an individual or his beneficiaries and which meets the following requirements:
1. The interest of an individual in the IRA Plan must be non-forfeitable;
2. The contributions for any year must be in cash and cannot exceed $2,000,
except in the case of contributions to a SEP IRA Plan and a rollover
contribution (described later);
3. The assets of the IRA Plan cannot be commingled with other property
except in a common trust fund or common investment fund; and
4. Distribution of the assets of the IRA Plan must be made in the manner
described in the LATEST TIME FOR DISTRIBUTION Section.
EXCESS CONTRIBUTIONS
Contributions which exceed the limits in either the DEDUCTIBLE CONTRIBUTIONS TO
IRA PLANS or NONDEDUCTIBLE CONTRIBUTIONS TO IRA PLANS Sections are excess
contributions. No deduction is allowed for excess contributions to your IRA
Plan. If in any year you make an excess contribution to your IRA Plan, you may
correct your contribution by withdrawing the excess amount (and any income
earned by it) by the due date for filing your tax return (including extensions)
for that year. The earned income withdrawn is taxable and may be subject to a
10% penalty as described in the PREMATURE DISTRIBUTION Section. Excess
contributions which are not corrected are subject to a 6% nondeductible excise
tax.
If you do not withdraw your excess contribution (and any income earned by it),
you may withdraw the contribution in a later year or you may treat it as a
deductible or nondeductible contribution for that year to the extent allowable.
If you do not correct your contribution, the 6% nondeductible excise tax will be
applied for each year that the excess contribution is allowed to remain in your
IRA Plan. If an excess contribution is not withdrawn before the due date of your
tax return (including extensions), the return of the excess contribution in a
later year may be treated as a premature distribution which could result in an
additional penalty tax being imposed. This tax is explained in the PREMATURE
DISTRIBUTION Section. If, however, your total IRA contribution was not more than
$2,250 for a taxable year and you have not been allowed a deduction for the
excess contribution, you may withdraw the excess after the due date for your
return. The excess withdrawn is not included in income or subject to a premature
distribution tax, and you need not withdraw the related earnings.
PREMATURE DISTRIBUTION
If you receive a payment from your IRA Plan before you attain the age of 59 1/ 2
or become disabled, the payment will be considered a premature distribution. If
you receive a premature distribution, some or all of the amount received may be
included in your gross income in the taxable year of receipt. In addition, your
income tax for that tax year is increased by an amount equal to 10% of the
premature distribution includable in your gross income. However, the 10% penalty
will not be imposed on amounts distributed on account of your death prior to age
59 1/2, on amounts rolled over, or on amounts distributed as part of a series of
substantially equal periodic payments (made at least annually) over your life or
life expectancy or the joint lives (or life expectancies) of you and your
designated beneficiary.
LATEST TIME FOR DISTRIBUTION
Amounts contributed to an IRA Plan are intended to be paid out for retirement
purposes. Distribution must be made or commenced not later than April 1 of the
calendar year following the year in which you attain age 70 1/2, and the
distribution generally must not extend beyond the lives of you and your
designated beneficiary (or a period based on the life expectancies of you and
your designated beneficiary). If your designated beneficiary is your spouse, the
life expectancies of you and your spouse may be recomputed annually. If your
designated beneficiary is other than your spouse, the life expectancy of such
nonspouse beneficiary may be calculated only at the time distribution commences.
If sufficient payments are not made from your IRA Plan, you may be liable for an
excise tax of 50% of the amount of underdistribution. For example, if the payout
that you should receive is $1,000 for the taxable year and you only receive
$600, an excise tax of $200 (50% of the $400 underdistribution) must be paid by
you unless the IRS grants you a waiver of this tax (see Form 5329 for an
explanation of the procedures for applying for such a waiver). Detailed
information about amounts required to be distributed can be found in your IRA
Plan document.
ROLLOVERS
Rollover contributions permit you to withdraw all or a portion of your interest
in your IRA Plan and reinvest it in another IRA Plan or other qualified vehicle
without incurring any federal tax liability or penalty as a premature
distribution. There is no tax deduction for the amount transferred. Rollovers
between IRA Plans may be made once every year and the money and any other
property received from one IRA Plan must be reinvested within 60 days of the
date it was received into another IRA Plan. Some or all of the amount retained
by you may be included in your gross income in the year of receipt and may be
considered a premature distribution subject to an additional 10% tax if the
distribution occurs prior to age 59 1/2.
If you take a partial or total distribution from a qualified retirement plan
which is not transferred directly into an IRA or other qualified vehicle, you
may be subject to a mandatory 20% withholding requirement.
PROHIBITED TRANSACTIONS
If you or your beneficiary engages in a prohibited transaction with respect to
your IRA Plan, the IRA Plan will lose its exemption from tax, and the fair
market value of the IRA Plan may be includible in your gross income for that
year. In addition, if you have not attained age 59 1/2, there may be an
additional 10% penalty tax as a premature distribution. The term "prohibited
transaction" means any direct or indirect sale or exchange, or leasing, of any
property, lending of money or other extension of credit, or furnishing of goods,
services, or facilities between you or your beneficiary and the IRA Plan;
transfer to, or use by or for the benefit of you or your beneficiary of the
assets of the IRA Plan for your own interest; and receipt of any consideration
by you or your beneficiary from any party dealing with the IRA Plan in
connection with a transaction involving the income or assets of the IRA Plan.
SECURITY FOR LOAN
If you are participating in an IRA Plan and use any portion of the value as
security for a loan, the portion so used will be treated as a distribution and
may be includible in your gross income for that tax year. The transaction also
may be treated as a premature distribution subject to an additional 10% tax if
it occurs before age 59 1/2.
TAXABILITY OF IRA PLANS-FEDERAL INCOME TAX
Amounts which accumulate under your IRA Plan are exempt from federal income
taxation while they remain in the IRA Plan. When you or your beneficiary receive
distributions from your IRA Plan, the distributions may be taxed as ordinary
income for the year received. Distributions from any IRA Plan are not eligible
for the special averaging rules that apply to lump sum distributions from
qualified employer plans. As noted above, distributions which qualify as
rollovers will not incur tax liability, and there are penalties for premature
distributions, insufficient distributions, borrowing under the IRA Plan or using
the values as security for a loan.
TAXABILITY OF IRA PLANS -- FEDERAL ESTATE AND GIFT TAX
In the event of your death, distributions to the beneficiary of your IRA Plan
will be included for purposes of determining your federal estate tax liability
(if any). The designation by you of a beneficiary to receive payment under this
IRA Plan is not considered to be a transfer subject to federal gift tax
treatment.
TAXABILITY OF IRA PLANS -- STATE LAW
The treatment of IRA Plans varies under state income, estate or gift tax laws
(if any). Consult your state office of taxation or your tax advisor for
questions you may have concerning the effect of state law on your IRA Plan.
IRS FORM 5329 REQUIRED FOR SPECIAL SITUATIONS
IRS Form 5329, Additional Taxes Attributable to Qualified Retirement Plans
(Including IRAs), Annuities, and Modified Endowment Contracts is used to report
penalty taxes on your IRA Plan. The penalty taxes which must generally be
reported on Form 5329 include excess contribution taxes, premature distribution
taxes, and taxes imposed because an IRA Plan has not distributed a sufficient
amount to you under the distribution rules.
Form 5329 and Instructions for Form 5329 are available at your local IRS office.
Failure to file Form 5329 when required may be subject to penalty by the
Internal Revenue Service.
APPROVAL BY IRS
The Internal Revenue Service approved the overall form of this account as an IRA
plan. This does not represent a determination on the specific use of the account
by you.
FINANCIAL DISCLOSURE
Your contributions to this IRA Plan will be subject to custodial fees which are
described in the Individual Retirement Account booklet.
If the investment(s) you choose to fund this IRA Plan is (are) sold by
prospectus, consult the applicable prospectus(es) you have been furnished for
information concerning (i) the types and amounts of charges which are made
against your contributions, (ii) the method for computing and allocating annual
earnings, and (iii) the types of other charges which may be applied to your
interest in the investment(s) in determining the net amount of money available
to you and the method of computing each such charge. Growth in value of this IRA
Plan is neither guaranteed nor projected.
<PAGE>
INTERNAL REVENUE SERVICE
Plan Name: IRA Custodial Account
FFN: 50143000000-007 Case: 9070037 EIN: 04-1662730
Letter Serial No: D111853b
NEW ENGLAND MUTUAL LIFE INSURANCE CO.
501 BOYLSTON STREET
BOSTON, MA 02117
DEPARTMENT OF THE TREASURY
Washington, DC 20224
Person to Contact: Mr. Westry
Telephone Number: (202) 535-4972
Refer Reply to: E:EP:Q:4
Date: 04/30/90
Dear Applicant:
In our opinion, the amendment to the form of the prototype trust, custodial
account or annuity contract identified above does not adversely affect its
acceptability under section 408 of the Internal Revenue Code, as amended by the
Tax Reform Act of 1986.
Each individual who adopts this approved plan will be considered to have a
retirement savings program that satisfies the requirements of Code section 408,
provided they follow the terms of the program and do not engage in certain
transactions specified in Code section 408(e). Please provide a copy of this
letter to each person affected.
The Internal Revenue Service has not evaluated the merits of this savings
program and does not guarantee contributions or investments made under the
savings program. Furthermore, this letter does not express any opinion as to the
applicability of Code section 4975, regarding prohibited transactions.
Code section 408(i) and related regulations require that the trustee, custodian
or issuer of a contract provide a disclosure statement to each participant in
this program as specified in the regulations. Publication 590, Tax Information
on Individual Retirement Arrangements, gives information about the items to be
disclosed.
The trustee, custodian or issuer of a contract is also required to provide each
adopting individual with annual reports of savings program transactions.
Your program may have to be amended to include or revise provisions in order to
comply with future changes in the law or regulations.
If you have any questions concerning IRS processing of this case, call us at the
above telephone number. Please refer to the Letter Serial Number and File Folder
Number shown in the heading of this letter. Please provide those adopting this
plan with your phone number, and advise them to contact your office if they have
any questions about the operation of this plan.
You should keep this letter as a permanent record. Please notify us if you
terminate the form of this plan.
Sincerely yours,
/s/ John Swieca
John Swieca
Chief, Employee Plans
Qualifications Branch
<PAGE>
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NEW ENGLAND FUNDS
Where The Best Minds Meet(TM)
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TAX EXEMPT FUNDS MONEY MARKET FUNDS
Municipal Income Fund* Cash Management Trust
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Intermediate Term Tax Free Fund of California -U.S. Government Series
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TO LEARN MORE, AND FOR A FREE PROSPECTUS, CONTACT YOUR FINANCIAL REPRESENTATIVE.
*Formerly Tax Exempt Income Fund
399 Boylston Street, Boston, MA 02116
Toll Free 800-225-5478
Thismaterial is authorized for distribution to prospective investors when it is
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Investors are advised to read the prospectus carefully before investing. New
England Funds, L.P., distributor.
IR12
<PAGE>
Defined Contribution Plan and Trust Document Table of Contents
1.0 GENERAL............................................................Page 3
1.1 PURPOSE...................................................Page 3
1.2 NAME OF PLAN..............................................Page 3
1.3 APPROVAL OF INTERNAL REVENUE SERVICE......................Page 3
1.4 AMENDMENT OR TERMINATION..................................Page 3
2.0 DEFINITIONS........................................................Page 4
2.1 ACCRUED BENEFIT...........................................Page 4
2.2 ACTIVE PARTICIPANT........................................Page 4
2.3 ACTUARIAL EQUIVALENT......................................Page 4
2.4 ADMINISTRATOR.............................................Page 4
2.5 ADOPTION AGREEMENT........................................Page 5
2.6 ANNIVERSARY DATE..........................................Page 5
2.7 ANNUAL ADDITIONS..........................................Page 5
2.8 AVERAGE ANNUAL COMPENSATION...............................Page 5
2.9 BENEFICIARY...............................................Page 5
2.10 BOARD....................................................Page 5
2.11 COMPENSATION.............................................Page 5
2.12 COVERED YEARS OF SERVICE.................................Page 6
2.13 EARLY RETIREMENT DATE....................................Page 6
2.14 EARNED INCOME............................................Page 6
2.15 EFFECTIVE DATE...........................................Page 6
2.16 ELIGIBLE CLASS...........................................Page 6
2.17 EMPLOYEE..................................................Page 6
2.18 EMPLOYER.................................................Page 7
2.19 ENTRY DATE...............................................Page 7
2.20 ERISA....................................................Page 7
2.21 FORMER PARTICIPANT.......................................Page 7
2.22 FUTURE SERVICE...........................................Page 7
2.23 HIGHLY COMPENSATED EMPLOYEE..............................Page 7
2.24 HOUR OF SERVICE..........................................Page 8
2.25 INACTIVE PARTICIPANT.....................................Page 9
2.26 INSURER..................................................Page 9
2.27 INVESTMENT MANAGER.......................................Page 9
2.28 JOINT AND SURVIVOR ANNUITY...............................Page 9
2.29 LATE RETIREMENT DATE.....................................Page 9
2.30 LIMITATION YEAR..........................................Page 9
2.31 NET PROFITS..............................................Page 9
2.32 NORMAL RETIREMENT AGE....................................Page 9
2.33 NORMAL RETIREMENT DATE...................................Page 9
2.34 ONE YEAR BREAK IN SERVICE................................Page 9
2.35 OWNER-EMPLOYEE..........................................Page 10
2.36 PARTICIPANT.............................................Page 10
2.37 PARTICIPANT ACCOUNT.....................................Page 10
2.38 PLAN....................................................Page 10
2.39 PLAN YEAR...............................................Page 10
2.40 PREDECESSOR EMPLOYER....................................Page 10
2.41 PARTICIPANT CONTRIBUTION ACCOUNT........................Page 10
2.42 QUALIFIED LEAVE OF ABSENCE..............................Page 10
2.43 SELF-EMPLOYED INDIVIDUAL................................Page 11
2.435 SHORT FORM ADOPTION AGREEMENT..........................Page 11
2.44 SOCIAL SECURITY COVERED COMPENSATION....................Page 11
2.45 TAXABLE WAGE BASE.......................................Page 11
2.46 TOTAL AND PERMANENT DISABILITY..........................Page 11
2.47 TRUST...................................................Page 11
2.48 TRUSTEE..................................................Page 11
2.49 YEAR....................................................Page 12
2.50 YEAR OF SERVICE.........................................Page 12
3.0 ELIGIBILITY........................................................Page 12
3.1 ELIGIBILITY REQUIREMENTS.................................Page 12
3.2 RE-ELIGIBILITY...........................................Page 13
3.3 LEAVE OF ABSENCE.........................................Page 13
4.0 FUNDING...........................................................Page 13
4.1 CONTRIBUTION FORMULA.....................................Page 13
4.2 FORFEITURES..............................................Page 14
4.3 MISTAKE OF FACT..........................................Page 14
4.4 DISALLOWANCE OF DEDUCTION................................Page 14
4.5 VOLUNTARY CONTRIBUTIONS..................................Page 14
4.6 QUALIFIED VOLUNTARY EMPLOYEE
CONTRIBUTIONS........................................Page 14
4.7 ROLLOVER ACCOUNT.........................................Page 15
4.8 EMPLOYER CONTRIBUTION ACCOUNT............................Page 15
4.9 ALLOCATION OF CONTRIBUTIONS AND
FORFEITURES..........................................Page 15
4.10 ALLOCATION OF TRUST GAINS AND LOSSES....................Page 15
4.11 SEGREGATION OF PARTICIPANT ACCOUNTS.....................Page 16
5.0 BENEFIT...........................................................Page 16
5.1 AMOUNT OF DISTRIBUTION...................................Page 16
5.2 FORM OF BENEFIT..........................................Page 17
5.3 DISTRIBUTION OF BENEFITS.................................Page 17
5.4 VESTING ON TERMINATION AND
RE-EMPLOYMENT........................................Page 21
5.5 LIMITATION ON BENEFITS AND
CONTRIBUTIONS........................................Page 23
5.6 ALIENATION PROHIBITED....................................Page 27
5.7 JOINT AND SURVIVOR ANNUITY
REQUIREMENTS.........................................Page 27
5.8 PERMITTED DISPARITY IN PLAN
CONTRIBUTIONS........................................Page 31
6.0 LIFE INSURANCE....................................................Page 33
6.1 AUTHORIZATION TO PURCHASE................................Page 33
6.2 PAYMENT OF PREMIUMS......................................Page 33
6.3 DISPOSITION OF POLICIES AT RETIREMENT....................Page 33
6.4 LIMITATION ON AMOUNTS....................................Page 33
6.5 CONFLICT WITH INSURANCE CONTRACTS........................Page 33
7.0 MISCELLANEOUS.....................................................Page 34
7.1 LOANS TO PARTICIPANTS....................................Page 34
7.2 DISCHARGE RIGHTS PRESERVED...............................Page 35
7.3 BENEFICIARY DESIGNATED BY PARTICIPANT....................Page 35
7.4 PRIORITY OF ADOPTION AGREEMENT...........................Page 35
7.5 REFERENCE TO INTERNAL REVENUE CODE.......................Page 35
7.6 SAVING CLAUSE............................................Page 35
7.7 GOVERNING LAW............................................Page 35
7.8 MERGER OR CONSOLIDATION OF PLAN..........................Page 36
7.9 AGREEMENT BINDING ON ALL PARTIES.........................Page 36
7.10 HEADINGS................................................Page 36
7.11 SINGULAR INCLUDES PLURAL, ETC...........................Page 36
7.12 FORFEITURE OF BENEFITS..................................Page 36
7.13 DISTRIBUTION PURSUANT TO QUALIFIED
DOMESTIC RELATIONS ORDER.............................Page 36
8.0 TOP HEAVY PLAN....................................................Page 36
8.1 PRECEDENCE OF SECTION....................................Page 36
8.2 DEFINITIONS..............................................Page 36
8.3 COMPENSATION IN TOP HEAVY PLAN YEAR......................Page 38
8.4 VESTING IN TOP HEAVY PLAN YEAR...........................Page 38
8.5 MINIMUM CONTRIBUTION UNDER TOP HEAVY
PLAN.................................................Page 39
8.6 MINIMUM CONTRIBUTION UNDER MULTIPLE
PLANS................................................Page 39
8.7 NONFORFEITABILITY OF MINIMUM BENEFIT.....................Page 39
8.8 ADJUSTMENT TO DEFINED BENEFIT AND
DEFINED CONTRIBUTION FRACTION
FOR SUPER TOP-HEAVY PLAN.............................Page 40
9.0 AFFILIATED EMPLOYER...............................................Page 40
9.1 MEMBERS OF CONTROLLED GROUP..............................Page 40
9.2 LEASED EMPLOYEES.........................................Page 40
9.3 PLAN OF A PREDECESSOR....................................Page 40
9.4 CONTROLLED TRADES OR BUSINESSES OF
OWNER-EMPLOYEES......................................Page 40
10.0 TRUST PROVISIONS.................................................Page 41
10.1 ESTABLISHMENT OF TRUST..................................Page 41
10.2 APPOINTMENT OF ADMINISTRATOR AND
TRUSTEE..............................................Page 41
10.3 ADMINISTRATOR FUNCTIONS.................................Page 42
10.4 TRUSTEE FUNCTIONS.......................................Page 42
10.5 INVESTMENT OF TRUST ASSETS..............................Page 47
10.6 MISCELLANEOUS...........................................Page 49
10.10 LOANS TO PARTICIPANTS..................................Page 50
11.0 CASH OR DEFERRED ARRANGEMENT.....................................Page 50
11.1 PURPOSE AND EFFECTIVE DATE..............................Page 50
11.2 ELIGIBILITY TO PARTICIPATE..............................Page 50
11.3 DEFINITIONS.............................................Page 50
11.4 ELECTIVE DEFERRALS .....................................Page 52
11.5 TOP-HEAVY REQUIREMENTS..................................Page 55
11.6 SPECIAL DISTRIBUTION RULES..............................Page 56
11.7 MATCHING CONTRIBUTIONS..................................Page 57
11.8 LIMITATIONS ON EMPLOYEE CONTRIBUTIONS
AND MATCHING CONTRIBUTIONS...........................Page 57
11.9 PROFITS NOT REQUIRED UNDER THE CODA.....................Page 60
11.10 FORFEITURES............................................Page 60
<PAGE>
Defined Contribution Plan and Trust Document
1.0 GENERAL
1.1 PURPOSE
This Prototype Defined Contribution Plan and Trust with its Adoption Agreement
constitute an employee pension benefit plan created hereby for the exclusive
Benefit of eligible Employees of the Employer. All contributions thereto shall
be made for the purpose of distributing to such eligible Employees their Accrued
Benefit. Prior to satisfaction of all liabilities with respect to the
Participants and their Beneficiaries, no part of the corpus or income of the
Trust shall at any time be used for or diverted to purposes other than for the
exclusive benefit of such Participants or their Beneficiaries. It is further the
purpose of the Plan to provide benefits in accordance herewith for those
Participants who remain in the employ of the Employer until their Accrued
Benefit is vested or until they reach Normal Retirement Age, at which time
benefits will be distributed in accordance herewith. It is further the intent to
provide other benefits as are set forth in the Adoption Agreement.
1.2 NAME OF PLAN
The name of the Plan shall be the legal name of the Employer as set forth in the
Adoption Agreement followed by the name of the plan as set forth in the Adoption
Agreement followed by the words "and Trust".
1.3 APPROVAL OF INTERNAL REVENUE SERVICE
This Plan is contingent upon and subject to obtaining such initial approval of
the District Director of Internal Revenue as may be necessary to establish the
qualification for income tax purposes pursuant to Section 401 of the Internal
Revenue Code of 1986 (Code) and as may be necessary to qualify for tax exemption
under the provisions of Section 501 or other applicable provisions of the Code.
Any modification or amendment of the Plan may be made if necessary or
appropriate to initially qualify or maintain qualification of the Plan. If a
final adverse action with respect to initial qualification or requalification is
issued by the Internal Revenue Service, the Plan shall be treated as an
individually designed plan and the Employer shall no longer participate in this
prototype Plan.
1.4 AMENDMENT OR TERMINATION
(A) Amendment
(1) The sponsoring organization may amend any part of the Plan. For purposes
of sponsoring organization amendments, the mass submitter shall be recognized as
the agent of the sponsoring organization. If the sponsoring organization 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. The Employer may:
(a) Change the choice of options in the Adoption Agreement,
(b) 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
(c) Add certain model amendments published by the Internal Revenue Service
which specifically provide that their adoption will not cause the Plan to be
treated as individually designed. An Employer that amends the Plan for any other
reason including a waiver of the minimum funding requirement under Code Section
412(d), will no longer participate in this prototype plan and will be considered
to have an individually designed plan. When this Plan is used to amend an
existing plan, the terms and conditions of the prior plan document shall prevail
as to obligations and rights of the parties to the Plan during the effective
period of the prior plan document. No amendment to the Plan shall decrease the
Accrued Benefit of any Participant. If the Employer amends any of the provisions
of this Plan, it will be considered to be an individually designed plan.
(2) 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 Accrued Benefit may be reduced to the extent
permitted under Code Section 412(c)(8). For purposes of this paragraph, a Plan
amendment which has the effect of:
(a) Decreasing a Participant's Accrued Benefit, or
(b) Eliminating an optional form of benefit, with
respect to benefits attributable to service before the amendment, shall be
treated as reducing Accrued Benefits. Furthermore, if the vesting schedule of
the Plan is amended, in the case of an Employee who is a Participant as of the
later of the date such amendment is
DCSTRPG792 Page 3
<PAGE>
Defined Contribution Plan and Trust Document
adopted or the date it becomes effective, the nonforfeitable percentage
(determined as of such date) of such Employee's Employer - derived accrued
benefit will not be less than the percentage computed under the Plan without
regard to such amendment.
(3) If the Plan's vesting schedule is amended or the Plan is amended in any
way that directly or indirectly affects the computation of a 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 his nonforfeitable
percentage computed under the Plan without regard to such amendment or change.
For 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. 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:
(a) Sixty (60) days after the amendment is adopted;
(b) Sixty (60) days after the amendment becomes
effective; or
(c) Sixty (60) days after the Participant is issued written notice of the
amendment by the Employer or Administrator.
(B) The Employer also reserves the right to terminate the Plan and Trust at
any time. In the event of the termination or partial termination of the Plan, or
the complete discontinuance of contributions under a Profit Sharing Plan, the
rights of all affected Active Participants and Inactive Participants to their
Accrued Benefit as of the date of the termination or partial termination or the
complete discontinuance of contributions under a Profit Sharing Plan, shall be
non-forfeitable. Former Participants shall vest according to the vesting
schedule in effect on their date of termination of service with the Employer. In
no event, however, shall any amount be allocated to a Participant under this
Section 1.4 which would cause the Plan to fail to meet the integration
requirements of Revenue Ruling 71-446 or the limitation specified under Section
5.8 of the Plan. 2.0 DEFINITIONS
2.1 ACCRUED BENEFIT
"Accrued Benefit" shall mean the balance of the
Participant Account of each Participant.
2.2 ACTIVE PARTICIPANT
"Active Participant" means each Participant who is a member of the Eligible
Class on the Anniversary Date or such other date as of which the Accrued Benefit
of a Participant is determined.
2.3 ACTUARIAL EQUIVALENT
(A) "Actuarial Equivalent" shall mean a benefit payable in an alternative mode
which is equivalent to a benefit payable in a given mode under the Plan when
computed using the rate of interest and the Mortality Table specified in the
Adoption Agreement.
(B) Anything in Section 2.3(A) notwithstanding, for purposes of the Short Form
Adoption Agreement and for purposes of establishing present value to compute the
top heavy ratio, benefit payments shall be discounted only for mortality and
interest based upon a pre-retirement interest rate of 6.0% and the 83IAM
Mortality Table at 6.0% interest.
2.4 ADMINISTRATOR
(A) "Administrator" shall mean the Employer or other entity designated in the
Adoption Agreement.
(B) For purposes of the Short Form Adoption Agreement, "Administrator" shall
mean the Employer.
2.5 ADOPTION AGREEMENT
"Adoption Agreement" shall mean that document which is attached hereto and is
made a part hereof and which is an integral part of this document. It sets forth
the detailed specifications of the Plan.
2.6 ANNIVERSARY DATE
"Anniversary Date" shall mean the date as of which the Plan shall be evaluated,
which date shall be specified in the Adoption Agreement.
2.7 ANNUAL ADDITIONS
"Annual Additions" shall mean, with respect to each Participant for any Plan
Year, the sum of the following amounts credited to a Participant's account for
the
DCSTRPG792 Page 4
<PAGE>
Defined Contribution Plan and Trust Document
Limitation Year:
(A) Contributions made by the Employer on behalf of
the Participant to all qualified defined contribution
plans of the Employer,
(B) Forfeitures allocated to the account(s) of the
Participant,
(C) The Participant's contributions, and
(D) Amounts allocated after March 31, 1984 to an
individual medical account, as defined in Code Section 415(l)(2), which is part
of a pension or annuity plan maintained by the Employer, are treated as Annual
Additions to a defined contribution plan; and amounts derived from contributions
paid or accrued after December 31, 1985, in taxable years ending after such
date, which are attributable to post-retirement medical benefits allocated to
the separate account of a key Employee, as defined in Code Section 419(A)(d)(3),
under a welfare benefit fund, as defined in Code Section 419(e), maintained by
the Employer, are treated as Annual Additions to a defined contribution plan.
(E) For this purpose, any excess amount applied pursuant to the provisions of
Section 5.5 in the Limitation Year to reduce Employer Contributions will be
considered Annual Additions for such Limitation
Year.
2.8 AVERAGE ANNUAL COMPENSATION
"Average Annual Compensation" shall mean:
(A) The average of a Participant's Compensation over the period of time
specified in the Adoption Agreement, which shall not be less than three (3)
consecutive Plan Years which produce the highest average. If the Participant has
less than the period of time specified in the Adoption Agreement, Compensation
is averaged over the Participant's total period of service. Compensation shall
be annualized for any period of service which is less than twelve (12) months.
(B) If the Adoption Agreement provides for permitted disparity under Internal
Revenue Code Section 401(l), Final Average Compensation shall mean the greater
of:
(1) The Participant's Average Annual Compensation
over:
(a) The three (3) consecutive year period ending
with the current year, or
(b) If shorter, the Participant's full period of
service, or
(2) The Participant's highest Average Annual Compensation for any other
period of three (3) consecutive years.
2.9 BENEFICIARY
"Beneficiary" shall mean the person or persons or legal entity designated as
such by a Participant and which is entitled to receive benefits under the Plan.
2.10 BOARD
"Board" shall mean the Board of Directors of the Employer. Board shall also mean
the sole proprietor of a sole proprietorship or the directing partners of a
partnership.
2.11 COMPENSATION
As elected by the Employer in the Adoption Agreement, Compensation will mean all
of each Participant's:
(A) W-2 earnings or
(B) Compensation (as that term is defined in section 415(c)(3) of the Code).
(1) For any Self-Employed Individual covered under the plan, compensation
will mean Earned Income. Compensation shall include only that Compensation which
is actually paid to the Participant during the applicable period. Except as
provided elsewhere in this Plan, the applicable period shall be the period
elected by the Employer in the Adoption Agreement. If the Employer makes no
election, the applicable period shall be the Plan Year.
(2) 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 includible in
the gross income of the Employee under Sections 125, 402(a)(8), 402(h) or 403(b)
of the Code.
(3) The annual Compensation of each Participant taken into account under the
Plan for any year shall not exceed $200,000, as adjusted by the Secretary at the
same time and in the same manner as under Section 415(d) of the Code. 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
DCSTRPG792 Page 5
<PAGE>
Defined Contribution Plan and Trust Document
applying such rules, the term "family" shall include only the Spouse of the
Participant and any lineal descendants of the Participant who have not attained
age 19 before the close of the year. If, as a result of the application of such
rules the adjusted $200,000 limitation is exceeded, then (except for purposes of
determining the portion of Compensation up to the integration level if 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 2.11 prior to the application of this limitation.
(C) Anything in Section 2.11(A) or (B) notwithstanding, for purposes of the
Short Form Adoption Agreement, "Compensation" shall mean Compensation as that
term is defined in Section 415(c)(3) of the Code which is actually paid to an
Employee during the Plan Year.
2.12 COVERED YEARS OF SERVICE "Covered Years of Service" shall mean each Year of
Service with which a Participant is credited for purposes of computing his
vested interest in his Accrued Benefit, as determined under the vesting schedule
specified in the Adoption Agreement.
2.13 EARLY RETIREMENT DATE
(A) "Early Retirement Date" shall mean the
Anniversary Date nearest the date on which a Participant meets the requirements
for early retirement specified in the Adoption Agreement.
(B) Anything in Section 2.13(A) notwithstanding, for purposes of the Short
Form Adoption Agreement, early retirement shall not be permitted under the Plan.
2.14 EARNED INCOME
"Earned Income" shall mean the net earnings from self-employment with the
Employer for which the 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 by the Employer to a qualified plan to the
extent deductible under Code Section 404. Net earnings shall be determined with
regard to the deduction allowed to the Employer by Code Section 164(f) for
taxable years beginning after December 31, 1989.
2.15 EFFECTIVE DATE
"Effective Date" of the Plan shall mean the date
specified in the Adoption Agreement.
2.16 ELIGIBLE CLASS
"Eligible Class" shall mean any Employee who is not excluded from participation
under the Adoption Agreement.
2.17 EMPLOYEE
(A) "Employee" shall mean any employee of the Employer maintaining the Plan or
of any other employer required to be aggregated with such Employer as a related
business 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 in the previous paragraph as provided in
sections 414(n) or (o) of the Code.
(B) Anything in Section 2.17(A) notwithstanding, for purposes of eligibility
under Section 6 of the Short Form Adoption Agreement, the term "Employee" shall
include all Employees of the Employer adopting the Plan and any other employer
aggregated with this Employer under Internal Revenue Code Section 414(b), (c),
or (m) and individuals required to be considered Employees of any such Employer
under Code Section 414(n).
2.18 EMPLOYER
"Employer" shall mean the Employer named in the
Adoption Agreement.
2.19 ENTRY DATE
"Entry Date" shall mean the date the Participant enters the Plan, as specified
in the Adoption Agreement.
2.20 ERISA
"ERISA" shall mean the Employee Retirement Income Security Act of 1974 and any
amendments thereto.
2.21 FORMER PARTICIPANT
"Former Participant" shall mean any former Employee who is entitled to receive a
distribution from the Trust.
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Defined Contribution Plan and Trust Document
2.22 FUTURE SERVICE
"Future Service" shall mean each Year of Participation by an Active Participant
prior to his Normal Retirement Date.
2.23 HIGHLY COMPENSATED EMPLOYEE
(A) Highly Compensated Employee includes highly compensated active Employees
and highly compensated former Employees.
(B) A highly compensated active Employee includes any Employee who performs
service for the Employer during the determination year and who, during the
look-back year:
(1) Received Compensation from the Employer in
excess of $75,000 (as adjusted pursuant to section
415(d) of the Code);
(2) Received Compensation from the Employer in excess of $50,000 (as
adjusted pursuant to section 415(d) of the Code) and was a member of the
top-paid group for such year; or
(3) Was an officer of the Employer and received Compensation during such
year that is greater than 50 percent of the dollar limitation in effect under
section 415(b)(1)(A) of the Code.
(C) The term Highly Compensated Employee also includes:
(1) Employees who are both described in Section 2.23(B) if the term
"determination year" is substituted for the term "look-back year" and the
Employee is one of the 100 Employees who received the most Compensation from the
Employer during the determination year; and
(2) Employees who are 5 percent owners at any time during the look-back year
or determination year.
(D) If no officer has satisfied the Compensation requirement of Section
2.23(B)(3) above during either a determination year or look-back year, the
highest paid officer for such year shall be treated as a Highly Compensated
Employee.
(E) For this purpose, the determination year shall be the Plan Year. The
look-back year shall be the twelve-month period immediately preceding the
determination year.
(F) A highly compensated former employee includes any Employee who separated
from service (or was deemed to have separated) prior to the determination year,
performs no service for the Employer during the determination year, and was a
highly compensated active Employee for either the separation year or any
determination year ending on or after the Employee's 55th birthday.
(G) If an Employee is, during a determination year or look-back year, a family
member of either a 5 percent owner who is an active or former Employee or a
Highly Compensated Employee who is one of the 10 most Highly Compensated
Employees ranked on the basis of Compensation paid by the Employer during such
year, then the family member and the 5 percent owner or top-ten Highly
Compensated Employee shall be aggregated. In such case, the family member and 5
percent owner or top-ten Highly Compensated Employee shall be treated as a
single Employee receiving Compensation and Plan contributions or benefits equal
to the sum of such Compensation and contributions or benefits of the family
member and 5 percent owner or top-ten Highly Compensated Employee. For purposes
of this Section 2.23(G), family member includes the spouse, lineal ascendants
and descendants of the Employee or former Employee and the spouses of such
lineal ascendants and descendants.
(H) The determination of who is a Highly Compensated Employee, including the
determinations of the number and identity of Employees in the top-paid group,
the top 100 Employees, the number of Employees treated as officers and the
Compensation that is considered, will be made in accordance with Section 414(q)
of the Code and the regulations thereunder.
2.24 HOUR OF SERVICE
(A) "Hour of Service" shall mean each Hour of Service for which:
(1) An Employee is directly or indirectly paid or entitled to payment by the
Employer for the performance of duties. These hours shall be credited to the
Employee for the period or periods in which the duties were performed;
(2) 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, Qualified
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Defined Contribution Plan and Trust Document
Leave of Absence, or other leave of absence. No more than five hundred one (501)
Hours of Service will be credited under this Section 2.24(A)(2) for a single
computation period (whether or not the period occurs in a single computation
period). These hours shall be credited to the Employee for the period or periods
the payment pertains to rather than the period or periods in which the payment
is made; and
(3) Back pay, irrespective of mitigation of damage, has been either awarded
or agreed to by the Employer. These hours shall be credited to the Employee for
the period or periods to which the award or agreement pertains. In no event
shall an Employee be credited with an Hour of Service under this Section
2.24(A)(3) for a period or periods in which he was credited with Hours of
Service under Section 2.24(A)(1) or 2.24(A)(2).
(B) Where the Employer uses this Plan to maintain a plan of a Predecessor
Employer, an Hour of Service for purposes of eligibility, vesting and accrual
for such Predecessor Employer shall be treated as an Hour of Service for the
Employer. Where the Employer is a member of a controlled group of corporations,
a group of trades or businesses under common control or an affiliated service
group, as defined in Code Section 414(b), (c) or (m), an Hour of Service for
purposes of eligibility or vesting for a member of the above groups shall be
treated as an Hour of Service for the Employer. Hours of Service will also be
credited for any individual considered an employee under Section 414(n) and any
other entity required to be aggregated with the Employer pursuant to Code
Section 414(o) and the regulations thereunder. Notwithstanding the foregoing,
nothing in this Section shall be construed as denying an Employee credit for
Hours of Service pursuant to Section 2530.200(b)-2 of the Department of Labor
Regulations which are hereby incorporated herein by this reference.
Nothing herein shall be construed as denying an Employee credit for an Hour of
Service if credit is required by separate federal law.
(C) Solely for purposes of determining whether a One Year Break in Service, as
defined in Section 2.34, for participation and vesting purposes has occurred in
a computation period, an individual who is absent from work for maternity or
paternity reasons shall receive credit for the Hours of Service which would
otherwise have been credited to such individual but for such absence, or in any
case in which such hours cannot be determined, eight (8) Hours of Service per
day of such absence. For purposes of this Section 2.24(C), an absence from work
for maternity or paternity reasons means an absence:
(1) By reason of the pregnancy of the individual, (2) By reason of a birth
of a child of the individual, (3) By reason of the placement of a child with
the
individual in connection with the adoption of such child
by such individual, or
(4) For purposes of caring for such child for a period beginning immediately
following such birth or placement.
(D) The Hours of Service credited under Section 2.24(C), above, shall be
credited:
(1) In the computation period in which the absence begins if the crediting
is necessary to prevent a One Year Break in Service in that period, or
(2) In all other cases, in the following computation
period.
2.25 INACTIVE PARTICIPANT
"Inactive Participant" shall mean any current Employee who was a Participant in
the Plan who is currently excluded from participation as a result of his loss of
status as a member of the Eligible Class.
2.26 INSURER
"Insurer" shall mean any insurance company selected by the Administrator to
issue any life insurance or annuity contracts.
2.27 INVESTMENT MANAGER
"Investment Manager" shall mean any fiduciary (other
than the Trustee or Administrator):
(A) Who has the power to manage, acquire, or
dispose of any asset of the Plan;
(B) Who is (1) registered as an investment advisor under the Investment
Advisors Act of 1940; (2) is a bank as defined in that Act; or (3) is an
insurance company qualified to perform services described in paragraph 2.27(A),
above, under the laws of more than one state, and;
(C) Has acknowledged in writing that he is a fiduciary with respect to the
Plan.
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Defined Contribution Plan and Trust Document
2.28 JOINT AND SURVIVOR ANNUITY "Joint and Survivor Annuity" shall mean an
immediate annuity for the life of the Participant with a survivor annuity for
the life of his spouse which is not less than one-half (1/2), nor greater than,
the annuity payable during the joint lives of the Participant and his spouse.
The Joint and Survivor Annuity will be the amount of benefit which can be
purchased with the Participant's account balance. The percentage of the survivor
annuity shall be fifty percent (50%). The consent of the Participant's spouse is
required if the account balance is payable in any form other than a qualified
Joint and Survivor Annuity and the Plan is required by law to offer a Qualified
Joint and Survivor Annuity.
2.29 LATE RETIREMENT DATE
"Late Retirement Date" shall mean the first day of the month following a
Participant's separation from service with the Employer after his Normal
Retirement Date.
2.30 LIMITATION YEAR
(A) "Limitation Year" shall mean the twelve (12) consecutive month period
ending on the date specified in the Adoption Agreement.
(B) Anything in 2.30(A) notwithstanding, for purposes of the Short Form
Adoption Agreement "Limitation Year" shall mean the twelve (12) consecutive
month period ending on December 31.
2.31 NET PROFITS
"Net Profits" shall mean the current and accumulated earnings of the Employer
before Federal and State taxes and contributions to this Plan and any other
qualified Plan.
2.32 NORMAL RETIREMENT AGE
(A) "Normal Retirement Age" shall mean the age specified in the Adoption
Agreement. Notwithstanding the vesting schedule elected under the Adoption
Agreement, a Participant's Accrued Benefit shall be fully vested and
non-forfeitable upon attainment of his Normal Retirement Age. 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.
(B) Anything in 2.32(A) notwithstanding, for purposes of the Short Form
Adoption Agreement, "Normal Retirement Age" shall mean age 65.
2.33 NORMAL RETIREMENT DATE
"Normal Retirement Date" shall mean the Anniversary
Date nearest the Participant's Normal Retirement Age.
2.34 ONE YEAR BREAK IN SERVICE
"One Year Break in Service" shall mean a twelve (12) consecutive month period
(computation period) during which a Participant has not completed more than 500
Hours of Service. For purposes of determining a One Year Break in Service, the
twelve (12) consecutive month computation period shall be the same computation
period used in determining Years of Service.
2.35 OWNER-EMPLOYEE
"Owner-Employee" shall mean a sole-proprietor or a partner who owns more than
ten percent (10%) of either the capital or profits interest of the Employer.
2.36 PARTICIPANT
(A) "Participant" shall mean any Employee who has fulfilled the eligibility
requirements as specified in the Adoption Agreement and has become a member of
the Plan.
(B) Anything in 2.36(A) notwithstanding, for purposes of the Short Form
Adoption Agreement, Participant shall not include any Employee who is 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 Representative"
does not include any organization more than half of whose members are Employees
who are owners, officers or executives of the Employer.
2.37 PARTICIPANT ACCOUNT "Participant Account" shall mean the records maintained
to record a Participant's (or his Beneficiary's) interest in the Trust. Each
Participant (or, when applicable, Beneficiary) shall have an Employer
Contribution Account and, when applicable, a Participant Contribution Account, a
Participant Deductible Contribution Account and those accounts necessary for a
cash or deferred arrangement. If this
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Defined Contribution Plan and Trust Document
Plan is part of a qualified cash or deferred arrangement, Employee deferrals
shall be allocated to the Employer Contribution Account established for such
Participant.
2.38 PLAN
"Plan" shall mean this Prototype Defined Contribution Plan together with its
related Adoption Agreement, as adopted by the Employer.
2.39 PLAN YEAR
"Plan Year" shall mean the period between the Effective Date and the first
Anniversary Date following the Effective Date, and thereafter the twelve (12)
consecutive calendar month period ending on each subsequent Anniversary Date.
For periods prior to the Effective Date of the Plan, Plan Year shall mean each
12 month period ending on the Anniversary Date of the Plan, had the Plan then
been in place.
2.40 PREDECESSOR EMPLOYER
(A) "Predecessor Employer" shall mean any
predecessor corporation, partnership or sole proprietorship to the Employer. For
purposes of determining a Participant's Years of Service for eligibility and
Covered Years of Service for vesting, service with the Predecessor Employer
shall be considered service with the Employer, if elected in the Adoption
Agreement.
(B) Anything in Section 2.40(A) notwithstanding, for purposes of the Short
Form Adoption Agreement, service with a Predecessor Employer, as defined in
Section 2.40(A), shall be counted for purposes of eligibility Years of Service
and vesting (covered Years of Service).
2.41 PARTICIPANT CONTRIBUTION ACCOUNT "Participant Contribution Account" shall
mean that portion of the Participant Account which is established to record a
Participant's voluntary, nondeductible contributions to the Plan as adjusted for
allocations of
gains and losses and withdrawals.
2.42 QUALIFIED LEAVE OF ABSENCE "Qualified Leave of Absence" shall mean a leave
of absence granted by the Employer on a uniform basis for service in the Armed
Forces, or for sickness, accident, or other cause, provided, however, that a
Participant granted such leave of absence for service in the Armed Forces shall
be required to report for work within ninety (90) days following the date he was
first eligible for discharge from such service; and provided further that any
Active Participant or Inactive Participant who fails to return to active
employment at or before the expiration of his leave of absence, shall, for the
purposes of this Plan, be deemed to have terminated his employment as of the
date of commencement of his leave of absence; provided further, however, that
should he fail to return to work because of death or disability, his service,
and participation if he was an Active Participant at the time such leave of
absence commenced, shall be deemed to have continued until the date of his death
or of the termination of his employment for disability. In granting Qualified
Leaves of Absence pursuant to the provisions of this paragraph, the Employer
shall not discriminate as between individuals covered by the Plan, and shall
apply the same rules with respect to Qualified Leaves of Absence to all
individuals covered thereby.
2.43 SELF-EMPLOYED INDIVIDUAL
"Self-Employed Individual" means any person who has Earned Income from the
Employer for which the Plan is established for the taxable Year or who would
have had Earned Income but for the fact that the Employer had no net profits for
the taxable Year.
2.435 SHORT FORM ADOPTION AGREEMENT "Short Form Adoption Agreement" shall mean
Money Purchase Pension Plan Adoption Agreement 001 and Profit Sharing Adoption
Agreement 003.
2.44 SOCIAL SECURITY COVERED
COMPENSATION
"Social Security Covered Compensation" shall mean
either:
(A) The amount of Compensation which would be used to calculate the
Participant's old age and survivor insurance benefits under the Social Security
Act if the Participant's annual compensation for each year until age sixty-five
(65) equaled the taxable wage base. Social Security Covered Compensation shall
be determined according to the table specified in the Adoption Agreement.
However, no amendment increasing the amount of Social Security Covered
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Defined Contribution Plan and Trust Document
Compensation shall reduce anyone's Accrued Benefit under the Plan.
(B) The dollar amount specified in the Adoption Agreement. Such amount shall
not exceed the maximum Social Security Covered Compensation under Section
2.44(A) above for the oldest possible Participant in the Plan. No amendment
which increases a Participant's Social Security Covered Compensation shall
reduce the Accrued Benefit of any Participant.
2.45 TAXABLE WAGE BASE
"Taxable Wage Base" shall mean the maximum amount of earnings which may be
considered wages for such Year under Code Section 3121(a)(1) in effect as of the
beginning of the Plan Year.
2.46 TOTAL AND PERMANENT DISABILITY "Total and Permanent Disability" shall mean
a disability where a licensed medical practitioner satisfactory to the
Administrator certifies:
(A) That a Participant has become totally disabled by bodily injury or disease
so as to be prevented from engaging in any occupation suited to him by reason of
education, training and experience.
(B) That such disability can be expected to result in death or shall have
continued or be expected to continue for a period of not less than twelve (12)
consecutive months, and will be permanent and continuous during the remainder of
his lifetime. The rules with respect to disability shall be uniformly and
consistently applied to all Participants in similar circumstances. If the Plan
is integrated with Social Security, the Participant must have commenced to
receive disability benefits under the Federal Old Age Survivor and Disability
Insurance Act.
2.47 TRUST
"Trust" shall mean the legal entity created under the trust agreement relating
to the Plan to hold all monies, securities, and assets held by the Trustee for
the benefit of Participants and Beneficiaries.
2.48 TRUSTEE
"Trustee" shall mean the Trustee(s) appointed by the Board under the trust
agreement relating to the Plan and any duly appointed successor(s). 2.49 YEAR
"Year" shall mean twelve (12) consecutive calendar months.
2.50 YEAR OF SERVICE
(A) "Year of Service" shall mean each Plan Year in which an Employee is
credited with at least one thousand (1000) Hours of Service, unless a lesser
number of Hours of Service is elected in the Adoption Agreement. For purposes of
determining an Employee's eligibility to participate in the Plan, Year of
Service shall also mean the twelve (12) consecutive months of employment with
the Employer beginning on the date for which the Employee is first credited with
an Hour of Service for the Employer (Employment Commencement Date) and ending on
the anniversary of such date during which he is credited with at least one
thousand (1000) Hours of Service or the Hours of Service specified in the
Adoption Agreement as constituting a Year of Service, if less than one thousand
(1000). For purposes of computing an Employee's nonforfeitable right to the
account balance derived from Employer contributions, Years of Service and One
Year Breaks in Service will be measured by the Plan Year.
(B) Short Form Adoption Agreement.
(1) Anything in Section 2.50(A) notwithstanding,
for purposes of the Short Form Adoption Agreement, a Year of Service shall mean
each Plan Year in which an Employee is credited with at least one thousand
(1000) Hours of Service.
(2) If the Years of Service selected in Option 6.2 of the Short Form
Adoption Agreement is or includes a fraction of a Year of Service, an Employee
shall not be required to complete any specified number of Hours of Service to
receive credit for such fractional year.
(C) Where this definition is used for purposes of contributions and
allocations, it is possible that the Plan can fail the nondiscrimination tests
under Code Sections 401(a)(26) and 410(b) by creating a group of nonbenefitting
employees who have not incurred a Break in Service and because of the Year of
Service requirement, are not entitled to receive an allocation of the Employer
contribution.
Each Nonstandard Adoption Agreement shall specifically address and remedy
this problem so that the Plan will pass the required nondiscrimination tests.
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Defined Contribution Plan and Trust Document
Each Standardized and Standardized Short Form Adoption Agreement will require
that a Participant who has not incurred a Break in Service will be entitled to
receive an allocation of the Employer contribution.
3.0 ELIGIBILITY
3.1 ELIGIBILITY REQUIREMENTS
(A) Initial Eligibility. An Employee shall become a Participant in the Plan on
the Entry Date coinciding with or next following the date he satisfies the
requirements for eligibility specified in the Adoption Agreement, provided that
he is then a member of the Eligible Class. For purposes of determining Years of
Service and One Year Breaks in Service for purposes of eligibility, the initial
eligibility computation period is the twelve (12) consecutive month period
beginning on the date the Employee first performs an Hour of Service for the
Employer (Employment Commencement Date).
(B) Subsequent Eligibility. An Employee who fails to meet the requirements for
participation in the Plan on the Entry Date on which he would otherwise commence
participation in the Plan shall become a Participant on the Entry Date
coinciding with or next following his completion of twelve (12) consecutive
month period commencing on the date the Participant is first credited with one
(1) Hour of Service with the Employer (Employment Commencement Date) and each
subsequent anniversary thereof. The succeeding twelve (12) consecutive month
periods commence with the first anniversary of the Employee's Employment
Commencement Date.
Where an Employer has specified an eligibility computation period which is
greater than one (1) Year of Service, the number of Years of Service (and
fractions thereof, if any,) specified in the Adoption Agreement shall be
substituted for one (1) Year of Service in Section 3.1 (B), above.
(C) All Years of Service with the Employer are counted toward eligibility
except the following:
(1) If an Employee has a One Year Break in Service before satisfying the
Plan's requirement for eligibility, service before such break will not be taken
into account. This Section 3.1(C)(1) shall apply only if a participant is 100%
vested upon completion of not more than two (2) Years of Service.
(2) In the case of a Participant who does not have any nonforfeitable right
to the account balance derived from Employer contributions, Years of Service
before a period of consecutive One Year Breaks in Service will not be taken into
account in computing eligibility service if the number of consecutive One Year
Breaks in Service in such period equals or exceeds the greater of 5 or the
aggregate number of Years of Service. Such aggregate number of Years of Service
will not include any Years of Service disregarded under the preceding sentence
by reason of prior breaks in service.
(3) If a Participant's Years of Service are disregarded pursuant to the
preceding paragraph, such Participant will be treated as a new Employee for
eligibility purposes. If a Participant's Years of Service may not be disregarded
pursuant to the preceding paragraph, such Participant shall continue to
participate in the Plan, or, if terminated, shall participate immediately upon
reemployment.
3.2 RE-ELIGIBILITY
If a Participant terminates employment, incurs a One Year Break in Service and
is subsequently re-employed, such Former Participant shall become a Participant
immediately upon his re-employment.
In the event an Active Participant becomes ineligible to participate because
he is no longer a member of the Eligible Class, but has not incurred a One Year
Break in Service, such Employee shall again become an Active Participant as of
the date on which he again becomes a member of the Eligible Class. If such
Participant incurs a One Year Break in Service, eligibility will be determined
under the break in service rules of the Plan. In the event an Employee who is
not a member of the Eligible Class becomes a member of the Eligible Class, such
Employee shall participate immediately if such Employee has satisfied the
requirements for eligibility specified in the Adoption Agreement and would have
previously become an Active Participant had he then been a member of the
Eligible Class.
3.3 LEAVE OF ABSENCE
If an Employee leaves the employment of the Employer for the expressed purpose
of a Qualified Leave of Absence authorized by the Employer, or for the expressed
purpose of entering the Armed Forces and
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Defined Contribution Plan and Trust Document
serves therein, the time spent on such Qualified Leave of Absence or the time
spent in the Armed Forces shall be included in determining his eligibility to
participate in the Plan, provided that re-employment occurs within ninety (90)
days following such Qualified Leave of Absence. If re-employment does not occur
within said ninety (90) day period, his rights under the Plan, if any, shall be
determined as of the date the absence began. All Employees, under similar
circumstances, shall be treated alike according to uniform and impartial rules.
4.0 FUNDING
4.1 CONTRIBUTION FORMULA
(A) Profit Sharing Plan. The Employer contribution for each Plan Year will be
such amount as may be approved by the Board, in its sole discretion, without
regard to the Net Profits of the Employer. In no event, however, shall such
contribution exceed, in total, the maximum amount which is deductible under Code
Section 404. Except as required by Section 8.5, no contribution shall be made on
behalf of a Participant who has not been credited with a Year of Service during
the Plan Year for which the contribution is made.
(B) Money Purchase Pension Plan. The Employer contribution for each Plan Year
shall be determined according to the formula specified in the Adoption
Agreement.
(C) Target Benefit Pension Plan. The Employer contribution for each Plan Year
shall be determined according to the formula specified in the Adoption
Agreement.
4.2 FORFEITURES
Forfeitures shall be added to the Employer contribution for the current Plan
Year and allocated therewith, in accordance with the Adoption Agreement.
Forfeitures arising hereunder will be allocated only for the benefit of
Employees of the Employer who adopted this Plan.
4.3 MISTAKE OF FACT
In the event that the Employer shall make a contribution by reason of a mistake
of fact, the Employer shall be entitled to recover from the Trustee that portion
of the contribution contributed by virtue of the mistake of fact within one (1)
Year of the date the contribution is made by reason of a mistake of fact.
4.4 DISALLOWANCE OF DEDUCTION
In the event that the deduction for a contribution made by the Employer is not
allowed under Section 404(a) of the Code, the Employer shall be entitled to
recover from the Trustee that portion of such contribution which is in excess of
the allowable deduction under Section 404(a) of the Code within one (1) Year of
the date the deduction is disallowed. However, any income attributable to the
portion of the contribution made in excess of the allowable deduction shall not
revert to the Employer and any loss attributable thereto shall be used to reduce
the amount to be returned.
4.5 VOLUNTARY CONTRIBUTIONS
(A) Beginning with the Plan Year in which this Plan is adopted by the
Employer, this Plan will no longer accept nondeductible Employee contributions
and matching contributions. Employee contributions for Plan Years beginning
after December 31, 1986, together with any matching contributions as defined in
Section 401(m) of the Code, will be limited so as to meet the nondiscrimination
test of section 401(m).
(B) A separate "Participant Contribution Account" shall be maintained by the
Trustee for the nondeductible voluntary contributions of each Participant. The
assets of the Trust shall be valued annually at fair market value as of the last
day of the Plan Year. On such date, the earnings and losses attributable to the
Participant Contribution Account will be added to each Participant's Participant
Contribution Account in the ratio that such account balance bears to all such
account balances. The total market value of the Employee contributions shall be
nonforfeitable at all times. No forfeitures will occur solely as a result of a
Participant's withdrawal of voluntary contributions.
(C) A Participant may request withdrawal of an amount not to exceed the lesser
of the total amount of actual contributions made by him or the total market
value of said contributions, subject to the following conditions:
(1) The Participant shall bear the administrative expense incident to this
withdrawal of contributions.
(2) Each Participant shall be limited to one such
withdrawal in any Plan Year.
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Defined Contribution Plan and Trust Document
(D) Subject to the Joint and Survivor Annuity requirements of Section 5.7, but
notwithstanding any other provisions of this Plan to the contrary, the
Participant Contribution Account, adjusted for gains and losses, of a
Participant shall be paid to him, as the Administrator shall direct, upon his
termination of employment for any reason (including retirement), or to his
beneficiary in the event of his death while a Participant. (E) Neither the
Employer, the Trustee, nor the Administrator to any extent warrants or
represents that the value of a Participant Contribution Account at any time
shall equal the total of the amounts previously credited thereto.
(F) All amount allocated to the Participant's Participant Contribution Account
shall be invested in the same manner as Employer contributions to the Plan
unless directed by the Participant pursuant to the provisions of Section 4.11.
4.6 QUALIFIED VOLUNTARY EMPLOYEE
CONTRIBUTIONS
The Administrator will not accept deductible employee contributions which are
made for a taxable year beginning after December 31, 1986. Contributions made
prior to that date will be maintained in a separate account which will be
nonforfeitable at all times. The assets of the trust will be valued annually at
fair market value as of the last day of the Plan Year. On such date, the
earnings and losses of the trust attributable to the accumulated deductible
voluntary contribution will be allocated to each Participant's deductible
voluntary contributions account in the ratio that such account balance bears to
all such account balances. No part of the deductible voluntary contribution
account will be used to purchase life insurance. Subject to Section 5.7, Joint
and Survivor Annuity requirements (if applicable), the Participant may withdraw
any part of the deductible voluntary contribution account by making a written
application to the Plan Administrator.
4.7 ROLLOVER ACCOUNT
(A) If permitted by the Administrator and under rules established by the
Administrator on a non-discriminatory basis, any Employee who is or will become
eligible to participate in the Plan may at the sole discretion of the
Administrator roll over to the Trust any lump sum distribution received by such
Employee from a tax-qualified plan under Code Section 401(a) or 408(k), an
annuity plan qualified under Code Section 403(a) or 403(b) or accumulated
deductible employee contributions as defined in Code Section 72(o)(5) that were
distributed from a qualified retirement plan and rolled over pursuant to Code
Sections 402(a)(5), 402(a)(7), 403(a)(4) or 408(d)(3) within sixty (60) days of
the date such distribution occurred. Provided, however, that any Employee who
transferred such lump sum distribution into an Individual Retirement Account
under Code Section 408 within sixty (60) days of the date such distribution
occurred may rollover such transferred amount to this Plan. The Plan will not
accept rollovers of accumulated deductible employee contributions from a plan in
which the Employee was covered as a Self-Employed Individual under Code Section
401(c).
(B) The Employee's rollover contribution shall be maintained in a separate
"Rollover Account" in which the Employee will be one hundred percent (100%)
vested at all times.
(C) An Employee may withdraw his Rollover Account at any time with the
approval of the Administrator, in its sole discretion.
(D) An Employee shall receive the benefits attributable to his Rollover
Account in the manner specified in Section 5.2 and at the time specified in
Section 5.3 of the Plan.
(E) All amounts allocated to an Employee's Rollover Account shall be invested
in the same manner as Employer contributions to the Plan unless directed by the
Participant pursuant to the Provisions of Section 4.11.
4.8 EMPLOYER CONTRIBUTION ACCOUNT A separate Employer Contribution Account shall
be opened and maintained by the Administrator for each Participant who has
become eligible to participate in the Plan in which shall be recorded the
amounts of the Employer's contribution allocated to such Participant,
adjustments for allocation of Trust earnings, forfeitures, distributions, and
all other information affecting the value of such Employer Contribution Account.
This account shall include such subaccounts as required to meet accounting rules
for the plan.
4.9 ALLOCATION OF CONTRIBUTIONS AND
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Defined Contribution Plan and Trust Document
FORFEITURES
(A) The Employer's contributions to the Trust for each Plan Year, together
with any forfeitures, shall be allocated to the Employer Contribution Account
for each Active Participant as specified in the Adoption Agreement.
(B) Anything in Section 4.9(A) notwithstanding, for purposes of the Short Form
Adoption Agreement, Employer contributions shall be allocated among Participant
Accounts in the ratio which each Active Participant's Compensation bears to the
Compensation
paid to all Active Participants.
4.10 ALLOCATION OF TRUST GAINS AND
LOSSES
(A) The Participant's account balance attributable to his Employer
Contribution Account, Participant Contribution Account, Participant Deductible
Contribution Account and his Rollover Account (Participant Account) shall be
determined on each Anniversary Date in the following manner:
(1) The Participant's Participant Account on the
preceding Anniversary Date; plus
(2) Any contributions to such Participant's Participant Account with respect
to the Plan Year ended on the current Anniversary Date; minus
(3) The amount of any withdrawals from such Participant Account during the
Plan Year ended on the current Anniversary Date; plus or minus
(4) The Participant's pro-rata share of the earnings or losses of that
portion of the Trust, since the preceding Anniversary Date, attributable to all
Participant Accounts, as determined under Section
4.10(B).
(B) The earnings or losses of the Trust fund attributable to Participant
Accounts shall be valued annually at fair market value and allocated as of the
last day of each Plan Year and any other interim date selected by the
Administrator for valuing the Trust ("Valuation Date") to each Participant in
the ratio that his Participant Account on such Valuation Date bears to the total
of all Participant Accounts on such Valuation Date. For purposes of this Section
4.10(B), in determining a Participant's Participant Account on such Valuation
Date, any Participant contributions or rollovers actually contributed subsequent
to the next preceding Valuation Date shall be disregarded.
4.11 SEGREGATION OF PARTICIPANT
ACCOUNTS
(A) Subject to uniform rules established by the Administrator on a
non-discriminatory basis, a Participant may request, subject to the approval of
the Administrator, that his Participant Account and/or Participant Deductible
Contribution Account and/or his Rollover Account be segregated in a separate
account. The Administrator shall establish rules regarding the manner and the
times by which such request can be made and/or revoked. The Plan Administrator
shall adopt rules and regulations concerning all aspects of the segregated
account including the adjustment of the segregated account for earnings and
losses generated by the general Trust Fund if and where applicable. If the Plan
Administrator authorized the segregation of any such Participant's account, such
Participant shall have the full authority to direct the investment of such
segregated account, held on his behalf, by written instruction delivered to the
Trustee, in which event the Trustee shall follow, as soon as practicable, the
directions of the Participant with respect to the investment of such segregated
account; provided, however, that such an investment is not prohibited by statute
or by any other provision of the Plan and Trust. In so doing, the Trustee shall
be completely exonerated from any liability and held harmless by the Participant
and the Plan Administrator with respect to such investments. Contributions made
during the period in which a segregated account is maintained for the
Participant shall be allocated appropriately to such segregated account.
Notwithstanding the provisions of Section 4.10, the Participant's applicable
segregated account shall be increased and/or decreased solely by the net
earnings and/or losses resulting from the investments of the segregated account.
All expenses incurred as a result of such an election and operation of the
segregated account shall be charged to and deducted directly from said account.
Upon retirement of the Participant, if any of his account balances are still
segregated, his benefits shall be equal to the assets in his segregated account.
(B) For purposes of the Short Form Adoption Agreement, each Participant will
have a separate Individual Investment Account which will contain the
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Defined Contribution Plan and Trust Document
amount allocated to the Participant Account. Each Participant will have the
power to direct the investment with respect to his Individual Investment
Account, as provided in Section 4.11(A).
5.0 BENEFIT
5.1 AMOUNT OF DISTRIBUTION
(A) A Participant who attains Normal Retirement Age or who terminates his
employment with the Employer by reason of death or Total and Permanent
Disability shall be entitled to receive one hundred percent (100%) of the amount
credited to his Employer Contribution Account as of the preceding valuation date
together with one hundred percent (100%) of the amounts credited to his
Participant Contribution Account and his Participant Deductible Contribution
Account, if any.
(B) A Participant who terminates his employment with the Employer for any
reason other than death, Total and Permanent Disability or attainment of Normal
Retirement Age will be entitled to receive his vested account balance.
(C) For purposes of the Short Form Adoption Agreement, a Participant shall be
vested 100% in his account balance at all times.
(D) Anything in this Plan and Trust to the contrary
notwithstanding;
(1) A Participant under a Profit Sharing Plan may be able to take an
in-service withdrawal of the funds which have accumulated in the Plan after two
years provided that
(a) such a distribution is on account of hardship,
and
(b) the Administrator approves such hardship as
qualifying under the plan.
(2) For purposes of this Section 5.1(D), a distribution will be on account
of hardship if the distribution is necessary in light of immediate and heavy
financial needs of the Employee. A distribution based upon financial hardship
cannot exceed the amount required to meet the immediate need created by the
hardship and the Employee lacks other available resources.
5.2 FORM OF BENEFIT
(A) If this plan is a new profit sharing plan or an amended profit sharing
plan which does not and has never permitted benefit forms subject to the joint
and survivor requirements of Code Sections 401(a)(11) or 417, and meets the
requirements of Section 5.7(F) of this Plan, the Participant may elect to
receive his benefit in one of the following optional forms:
(1) a single lump sum payment, or
(2) substantially equal monthly, quarterly or annual
installments over a period of years not to exceed the life expectancy of the
Participant or that of the Participant and his spouse.
(B) In all cases to which Section 5.2(A) does not apply, notwithstanding
anything in this document to the contrary, the Participant may elect, subject to
the requirements of Section 5.7 of this document, to receive his benefit in one
of the following optional forms:
(1) In the form of a single lump sum payment;
(2) In the form of substantially equal monthly,
quarterly or annual installments over a period of years which does not exceed
the life expectancy of the Participant or the life expectancy of the Participant
and his spouse;
(3) In the form of an annuity for the life of the
Participant;
(4) In the form of an annuity for the life of the Participant, with the
provision that if he dies prior to having received monthly benefit payments for
a period of five (5), ten (10) or fifteen (15) years, the benefit payments
remaining for the balance of the specified period shall continue to be paid to
his Beneficiary;
(5) In the form of a Joint and Survivor Annuity where the monthly amount
payable to the contingent annuitant is fifty percent (50%) or one hundred
percent (100%) of the amount payable during the joint lives of the Participant
and the contingent annuitant.
(C) 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.
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.
5.3 DISTRIBUTION OF BENEFITS
(A) Unless the Participant elects otherwise,
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Defined Contribution Plan and Trust Document
distribution of benefits will begin no later than the 60th day after the latest
of the close of the Plan Year in which:
(1) The Participant attains age 65 (or Normal
Retirement Age, if earlier);
(2) Occurs the 10th anniversary of the year in which
the Participant commenced participation in the Plan;
or,
(3) The Participant terminates service with the Employer. 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 5.4(D) of the Plan, shall be deemed to be an election to defer
commencement of payment of any benefit sufficient to satisfy this Section.
A Participant who has satisfied the service requirement for Early Retirement,
but separated from service (with any non-forfeitable right to his Accrued
Benefit) before satisfying the age requirement for such Early Retirement, shall
be entitled to elect upon the satisfaction of such age requirement a benefit
equal to the benefit to which he would be entitled at Normal Retirement Age. Any
annuity contract distributed under this Plan shall be non-transferable.
(B) Subject to Section 5.7, Joint and Survivor Annuity Requirements, the
requirements of this Section 5.3 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 Section 5.3
apply to calendar years beginning after December 31, 1984.
All distributions required under this Section 5.3 shall be determined and made
in accordance with the Proposed 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.
(C) 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.
(D) 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):
(1) The life of the Participant,
(2) The life of the Participant and a designated
Beneficiary,
(3) A period certain not extending beyond the life
expectancy of the Participant, or
(4) A period certain not extending beyond the joint and last survivor
expectancy of the Participant and a designated Beneficiary.
(E) Determination of amount to be distributed each year. If the Participant's
interest is to be distributed in other than a single sum, the following minimum
distribution rules shall apply on or after the required beginning date:
(1) Individual Account.
(a) If a Participant's benefit is to be distributed over (i) 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 (ii) 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.
(b) For calendar years beginning before January 1, 1989, if the
Participant's spouse is not the designated Beneficiary, the method of
distribution selected must assure that at least 50% of the present value of the
amount available for distribution is paid within the life expectancy of the
Participant.
(c) 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:
(i) The applicable life expectancy or
(ii) 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 section 5.3(E)(1)(a) above as the relevant divisor without regard
to Proposed Regulations section 1.401(a)(9)-2.
(d) The minimum distribution required for the Participant's first
distribution calendar year must be made on or before the Participant's required
beginning
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Defined Contribution Plan and Trust Document
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.
(2) 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.
(F) Death Distribution Provisions.
(1) Distribution beginning before death. If the
Participant dies after distribution of his 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.
(2) Distribution beginning after death. If the Participant dies before
distribution of his 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 (a) or (b) below:
(a) If any portion of the Participant's interest is payable to a
designated Beneficiary, distributions may be made over the life or over a period
certain not greater than the life expectancy of the designated Beneficiary
commencing on or before December 31 of the calendar year immediately following
the calendar year in which the Participant died;
(b) If the designated Beneficiary is the Participant's surviving Spouse,
the date distributions are required to begin in accordance with (a) above shall
not be earlier than the later of (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 70 1/2.
If the Participant has not made an election pursuant to this Section 5.3(F)(2)
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.
(3) For purposes of Section 5.3(F)(2) above, if the surviving spouse dies
after the Participant, but before payments to such spouse begin, the provisions
of Section 5.3(F)(2), with the exception of paragraph (b) therein, shall be
applied as if the surviving spouse were the Participant.
(4) For purposes of this Section (F), 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.
(5) For the purposes of this Section (F), distribution of a Participant's
interest is considered to begin on the Participant's required beginning date
(or, if Section 5.3(F)(3) above is applicable, the date distribution is required
to begin to the surviving spouse pursuant to Section 5.3(F)(2) above). If
distribution in the form of an annuity irrevocably commences to the Participant
before the required beginning date, the date distribution is considered to begin
is the date distribution actually commences.
(G) Definitions
(1) Applicable life expectancy. The life expectancy (or joint and last
survivor expectancy) calculated using the attained age of the Participant (or
designated Beneficiary) as of the Participant's (or designated Beneficiary's)
birthday in the applicable calendar year reduced by one for each calendar year
which has elapsed since the date life expectancy was first calculated. If life
expectancy is being recalculated, the 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.
(2) Designated beneficiary. The individual who is designated as the
Beneficiary under the Plan in accordance with Section 401(a)(9) of the Code and
the regulations thereunder.
(3) Distribution calendar year. A calendar year for
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Defined Contribution Plan and Trust Document
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 F above.
(4) Life expectancy. 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.
Unless otherwise elected by the Participant (or spouse, in the case of
distributions described in Section 5.3(F)(2)(b) 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 nonspouse Beneficiary may not
be recalculated.
(5) Participant's benefit.
(a) 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.
(b) Exception for second distribution calendar year. For purposes of
paragraph (a) 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.
(6) Required beginning date.
(a) 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 70 1/2.
(b) Transitional rule. The required beginning date of a Participant who
attains age 70 1/2 before January 1, 1988, shall be determined in accordance
with (i) or (ii) below:
(i) Non-5-percent owners. The required beginning date of a Participant
who is not a "5-percent owner" (as defined in (c) below) is the first day of
April of the calendar year following the calendar year in which the later of
retirement or attainment of age 70 1/2 occurs.
(ii) 5-percent owners. The required beginning date of a Participant who
is a 5-percent owner during any year beginning after December 31, 1979, is the
first day of April following the later of:
(1) The calendar year in which the Participant
attains age 70 1/2, or
(2) The earlier of the calendar year with or within which ends the
Plan Year in which the Participant becomes a 5-percent owner, or the calendar
year in which the Participant retires.
The required beginning date of a Participant who is not a 5-percent owner who
attains age 70 1/2 during 1988 and who has not retired as of January 1, 1989, is
April 1, 1990.
(c) 5-percent owner. A Participant is treated as a 5-percent owner for
purposes of this Section if such Participant is a 5-percent 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 66
1/2 or any subsequent Plan Year.
(d) Once distributions have begun to a 5-percent owner under this Section,
they must continue to be distributed, even if the Participant ceases to be a
5-percent owner in a subsequent year.
(H) Transitional Rule
(1) Notwithstanding the other requirements of this Section 5.3 and subject
to the requirements of Section 5.7, Joint and Survivor Annuity Requirements,
distribution on behalf of any Employee, including a 5-percent owner, may be made
in accordance with all of the following requirements (regardless of when such
distribution commences):
(a) 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.
(b) The distribution is in accordance with a method
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Defined Contribution Plan and Trust Document
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.
(c) Such designation was in writing, was signed by
the Employee or the Beneficiary, and was made before
January 1, 1984.
(d) The Employee had accrued a benefit under the
Plan as of December 31, 1983.
(e) The method of distribution designated by the Employee or the
Beneficiary specifies the time at which distribution will commence, the period
over 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.
(2) 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.
(3) 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 Sections 5.3(H)(1)(a) and (e).
(4) 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 Proposed 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 of Section 1.401(a)(9)-1 of the Proposed Regulations shall apply.
5.4 VESTING ON TERMINATION AND
RE-EMPLOYMENT
(A) If a Participant terminates employment, incurs a One Year Break in Service
and is subsequently re-employed, Covered Years of Service completed prior to
such break shall not be counted for vesting purposes until such time as the
Participant has been re-employed by the Employer and has completed a Year of
Service after his return to service. Such Year of Service will be measured by
the twelve (12) month period beginning on the first day on which the Employee is
credited with an Hour of Service for the performance of duties after the first
eligibility computation period in which the Employee incurs a One Year Break in
Service and on each subsequent anniversary of such date. After that time, that
Year of Service shall be counted as a Covered Year of Service for vesting
purposes, and all Covered Years of Service prior to the One Year Break in
Service, except as provided in paragraph (C) below, shall be included in the
aggregate of Covered Years of Service for vesting purposes.
(B) If an Employee terminates service:
(1) And the value of the Employee's Employer
Contribution Account and Participant Contribution Account is not greater than
$3,500, the Employee will receive a distribution of the value of the entire
vested portion of such account balance and the non-vested portion will be
treated as a forfeiture. For purposes of this Section 5.4(B)(1), if the value of
a Participant'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 7.2(o)(5)(B) of the Code for Plan
Years beginning
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Defined Contribution Plan and Trust Document
prior to January 1, 1989.
(2) And elects, in accordance with the requirements of Section 5.4(D), to
receive the value of the Employee's Employer Contribution Account and
Participant Contribution Account, the non-vested portion will be treated as a
forfeiture. If the Employee elects to have distributed less than the entire
vested portion of the Employer Contribution Account, the part of the non-vested
portion that will be treated as a forfeiture is the total non-vested 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 Contribution Account.
(3) And receives or is deemed to receive a distribution pursuant to this
Section 5.4(B) which is less than the value of the Employee's account balance
derived from Employer contributions, and resumes employment covered under this
Plan, the Employee's account will be restored to the amount on the date of
distribution if the Employee repays to the Plan the full amount of the
distribution on or before the Employee incurs five (5) consecutive One Year
Breaks in Service following the date of distribution.
If a distribution is made at a time when a Participant has a nonforfeitable
right to less than 100 percent of the account balance derived from Employer
contributions and the Participant may increase the nonforfeitable percentage in
the account:
(a) A separate account will be established for the
Participant's interest in the Plan as of the time of the
distribution, and
(b) At any relevant time the Participant's nonforfeitable portion of the
separate account will be equal to an amount ("X") determined by the formula:
X=P(AB + (R x D)) - (R x D)
For purposes of applying the formula: P is the nonforfeitable percentage at
the relevant time, AB is the account balance at the relevant time, D is the
amount of the distribution, and R is the ratio of the account balance at the
relevant time to the account balance after distribution.
(C) In the case of a Participant who has 5 or more consecutive One Year Breaks
in Service, all service after such One Year Breaks in Service will be
disregarded for the purpose of vesting the Employer-derived account balance that
accrued before such One Year Breaks in Service. Such Participant's pre-break
service will count in vesting the post-break Employer-derived account balance
only if either:
(1) such Participant has any nonforfeitable interest in the account balance
attributable to Employer contributions at the time of separation from service;
or
(2) upon returning to service the number of consecutive One Year Breaks in
Service is less than the number of Years of Service.
Separate accounts will be maintained for the Participant's pre-break and
post-break Employer-derived account balance. Both accounts will share in the
earnings and losses of the fund. If a Participant's Years of Service are
disregarded pursuant to the preceding paragraph, such Participant will be
treated as a new Employee for eligibility purposes. If a Participant's Years of
Service may not be disregarded pursuant to the preceding paragraph, such
Participant shall continue to participate in the Plan, or, if terminated, shall
participate immediately upon reemployment.
(D) 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) $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 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 30 days and no more than 90 days prior to the annuity
starting date. Notwithstanding the foregoing, only the Participant need consent
to the commencement of a distribution in the form of a qualified Joint and
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Defined Contribution Plan and Trust Document
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 5.7 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.
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 62.
(E) 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.
5.5 LIMITATION ON BENEFITS AND
CONTRIBUTIONS
(A) No Participation in Another Qualified Plan or
Welfare Benefit Fund
(1) 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 adopting Employer or an individual medical
account, as defined in Code Section 415(l)(2) of the Code, maintained by the
Employer, which provides an Annual Addition as defined in Section 2.7, the
amount of Annual Additions which 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.
(2) 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.
(3) 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.
(4) If pursuant to Section 5.5(A)(3) or as the result of the allocation of
forfeitures, there is an excess amount, the excess will be disposed of as
follows:
(a) Any non-deductible voluntary employee contributions, to the extent
they would reduce the excess amount, will be returned to the Participant;
(b) If after the application of Section 5.5(A)(4)(a) an excess amount
still exists, and the Participant is covered by the Plan at the end of the
Limitation Year, the excess amount in the Participant's account will be used to
reduce Employer contributions (including any allocation of forfeitures) for such
Participant in the next Limitation Year, and each succeeding Limitation Year, if
necessary;
(c) If after the application of Section 5.5(A)(4)(a) an excess amount
still exists, and the Participant is not covered by the Plan at the end of a
Limitation Year, the excess amount will be held unallocated in a suspense
account. The suspense account will be applied to reduce future Employer
contributions (including allocation of any forfeitures) for all remaining
Participants in the next Limitation Year, and each succeeding Limitation Year,
if necessary;
(d) If a suspense account is in existence at any time during a Limitation
Year pursuant to this Section 5.5, 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
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Defined Contribution Plan and Trust Document
Year, all amounts in the suspense account must be allocated and reallocated to
Participant's accounts before Employer contributions 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.
(B) Participation in Another Qualified Master or
Prototype Plan or Welfare Benefit Fund.
(1) This Section 5.5(B)(1) 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 Code Section 415(l)(2) of the Code, maintained by
the Employer, which provides an Annual Addition as defined in Section 2.7,
during any Limitation Year. The Annual Additions which 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.
(2) 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
5.5(A)(2).
(3) 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.
(4) If, pursuant to Section 5.5(B)(3) 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.
(5) 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: The total excess amount
allocated as of such date, times the ratio of the Annual Additions allocated to
the Participant for the Limitation Year, as of such date under this Plan to 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.
(6) Any excess amount attributed to this Plan will be disposed in the manner
described in Section 5.5(A)(4).
(C) 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 5.5(B) as though
the other plan were a master or prototype plan, unless the Employer provides
other limitations in the Adoption Agreement. For purposes of the Short Form
Adoption Agreement, the provisions of Section 5.5(B) of the Plan will apply as
if the other plan were a master or prototype plan.
(D) If the Employer maintains, or at any time maintained, a qualified defined
benefit plan (other than paired plan #01) covering any Participant in this Plan,
the sum of the Participant's defined benefit plan fraction and defined
contribution plan 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
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Defined Contribution Plan and Trust Document
in accordance with the Adoption Agreement. If the Employer maintains, or at any
time maintained, a qualified defined benefit plan other than paired plan #01,
the Employer cannot adopt the Short Form Adoption Agreement.
(E) Definitions
(1) 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:
(a) Employer contributions to a plan of deferred compensation which are
not includible 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 deductible by the Employee, or any
distributions from a plan of deferred compensation;
(b) Amounts realized from the exercise of a nonqualified stock option, or
when restricted stock (or property) held by the Employee either becomes freely
transferable or is no longer subject to a substantial risk of forfeiture;
(c) Amounts realized from the sale, exchange or
other disposition of stock acquired under a qualified
stock option; and
(d) Other amounts which received special tax benefits, or contributions
made by the Employer (whether or not under a salary reduction agreement) towards
the purchase of an annuity described in Section 403(b) of the Internal Revenue
Code (whether or not the amounts are actually excludable from the gross income
of the Employee).
For purposes of applying the limitations of this Section 5.5, Compensation for
a Limitation Year is the Compensation actually paid or includible in gross
income during such year.
Notwithstanding the preceding sentence,
Compensation for a Participant in a defined
contribution plan who is permanently and totally
disabled (as defined in Section 22(e)(3) of the Internal Revenue 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 Code Section 414(q); and contributions
made on behalf of such Participant are non-forfeitable when made.
(2) 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 125 percent of the dollar limitation
determined for the Limitation Year under Sections 415(b) and (d) of the Internal
Revenue Code, or 140 percent of the highest average compensation including any
adjustments under Code Section 415(b).
Notwithstanding the above, if the Participant was a participant as of the
first day of the first Limitation Year beginning after December 31, 1986 in one
or more defined benefit plans maintained by the Employer which were in existence
on May 6, 1986, the denominator of this fraction will not be less than 125
percent 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 for
all Limitation Years beginning before January 1, 1987.
(3) Defined contribution dollar limitation: $30,000
or if greater, one-fourth of the defined benefit dollar
limitation set forth in section 415(b)(1) of the Code as
in effect for the Limitation Year.
(4) 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 non-deductible employee contributions to all
defined benefit plans, whether or not terminated, maintained by the Employer,
and the Annual Additions attributable to all
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Defined Contribution Plan and Trust Document
welfare benefit funds, as defined in Section 419(e) of the Code and individual
medical accounts, as defined in Code Section 415(l)(2), maintained by the
Employer); and the denominator of which is the sum of the maximum aggregate
amounts for the current and all prior Limitation Years of service with the
Employer (regardless of whether a defined contribution plan was maintained by
the Employer). The maximum aggregate amount in any Limitation Year is the lesser
of 125 percent of the dollar limitation determined under Code Sections 415(b)
and (d) in effect under Section 415(c)(1)(A) of the Code or 35 percent of the
Participant's Compensation for such year. If the Employee was a Participant as
of the end of the first day of the first Limitation Year beginning after
December 31, 1986, in one or more defined contribution plans maintained by the
Employer which were in existence on May 6, 1986, the numerator of this fraction
will be adjusted if the sum of this fraction and the defined benefit fraction
would otherwise exceed 1.0 under the terms of this Plan. Under the adjustment,
an amount equal to the product of the excess of the sum of the fractions over
1.0 times 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.
(5) Employer: For purposes of this Section 5.5, 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 Internal Revenue Code as
modified by Section 415(h)), all commonly controlled trades or businesses (as
defined in Section 414(c) as modified by Section 415(h) or affiliated service
groups (as defined in Section 414(m)) of which the adopting Employer is a part,
and any other entity required to be aggregated with the Employer pursuant to
regulations under Code Section 414(o).
(6) Excess amount: The excess of the Participant's Annual Additions for the
Limitation Year over the maximum permissible amount.
(7) Highest average compensation: The average compensation for the three
consecutive Years of Service with the Employer that produces the highest
average. A Year of Service with the Employer is the 12-consecutive month period
ending on the Anniversary Date defined in Section 4 of the Adoption Agreement.
(8) Limitation Year: A calendar year or the 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 12-consecutive month period, the new Limitation
Year must begin on a date within the Limitation Year in which the amendment is
made.
(9) Master or prototype plan: A plan, the form of which, is the subject of a
favorable option letter from the Internal Revenue Service.
(10) 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) 25 percent of the Participant's Compensation
for the Limitation Year.
The Compensation limitation referred to in (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 419A(d)(2) of the Code.
If a short Limitation Year is created because of an amendment changing the
Limitation Year to be a different 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
(11) 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:
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Defined Contribution Plan and Trust Document
(a) the Participant will continue employment until
Normal Retirement Age under the Plan (or current age,
if later), and
(b) 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.
5.6 ALIENATION PROHIBITED
No benefit or interest available under the Plan shall be subject in any manner
to alienation, anticipation, assignment, charge, encumbrance, pledge, sale or
transfer, either voluntary or involuntary, and any attempt to do so shall be
void. No benefit under the Plan shall in any manner be liable or subject to the
debts, contracts, liabilities, engagements, or torts of any person. The
preceding sentences 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 Code Section 414(p), or any domestic
relations order entered before January 1, 1985.
5.7 JOINT AND SURVIVOR ANNUITY
REQUIREMENTS
(A) The provisions of this Section 5.7 shall apply to any Participant whose
vested Accrued Benefit exceeds $3,500 and who is credited with at least one Hour
of Service with the Employer on or after August 23, 1984, and such other
Participants as provided in Section 5.7(G).
(B) Unless an optional form of benefit is selected pursuant to a Qualified
Election within the 90-day period ending on the annuity starting date, a married
Participant's vested Accrued Benefit will be paid in the form of a qualified
Joint and Survivor Annuity and an unmarried Participant's vested Accrued Benefit
will be paid in the normal form of an immediate life annuity. The Participant
may elect to have such annuity distributed upon attainment of the Earliest
Retirement Age under the Plan.
(C) 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.
(D) Definitions.
(1) Election Period: The period which begins on the first day of the Plan
Year in which the Participant attains age 35 and ends on the date of the
Participant's death. If a Participant separates from service prior to the first
day of the Plan Year in which age 35 is attained, with respect to benefits
accrued prior to separation, the Election Period shall begin on the date of
separation.
Pre-age 35 waiver: A Participant who will not yet attain age 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 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 5.7(E). Qualified preretirement survivor annuity coverage will be
automatically reinstated as of the first day of the Plan Year in which the
Participant attains age 35. Any new waiver on or after such date shall be
subject to the full requirements of this Section 5.7.
(2) Earliest Retirement Age: The earliest date on
which, under the Plan, the Participant could elect to
receive retirement benefits.
(3) Qualified Election: 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:
(a) the Participant's Spouse consents in writing to
the election;
(b) the election designates a specific alternate Beneficiary, including
any class of Beneficiaries or any contingent Beneficiaries, which may not be
changed without spousal consent (or the Spouse expressly permits designations by
the Participant without any further spousal consent;
(c) the Spouse's consent acknowledges the effect of
the election; and
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Defined Contribution Plan and Trust Document
(d) 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 will 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
such written consent may not be obtained because there is no Spouse or the
Spouse cannot be located, a waiver will be deemed a Qualified Election.
Any consent by a Spouse obtained under this provision (or establishment that
the consent of a Spouse may not be obtained) shall be effective only with
respect to such Spouse. A consent that permits designations by the Participant
without any requirement of further consent by such Spouse must acknowledge that
the Spouse has the right to limit consent to a specific Beneficiary, and a
specific form of benefit where applicable, and that the Spouse voluntarily
elects to relinquish either or both of such rights. A revocation of a prior
waiver may be made by a Participant without the consent of the Spouse at any
time prior to 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 5.7(E) below.
(4) 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 is
not less than 50 percent and not more than 100 percent 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.
(5) 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.
(6) Annuity Starting Date: The first day of the first
period for which an amount is paid as an annuity or any
other form.
(7) Vested Account Balance: The aggregate value of the Participant's vested
Account Balance derived from Employer and Employee contributions (including
rollovers) whether vested before or upon death, including the proceeds of
insurance contracts, if any, on the Participant's life. The provisions of this
Section 5.7 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.
(E) Notice Requirements
(1) In the case of a qualified Joint and Survivor Annuity as described in
Section 5.7(B), the Plan Administrator shall provide each Participant no less
than 30 days and no more than 90 days prior to the annuity starting date a
written explanation of: (a) the terms and conditions of a qualified Joint and
Survivor Annuity; (b) the Participant's right to make and the effect of an
election to waive the qualified Joint and Survivor Annuity form of benefit; (c)
the rights of a Participant's Spouse; and (d) the right to make, and the effect
of, a revocation of a previous election to waive the qualified Joint and
Survivor Annuity.
(2) In the case of a qualified preretirement survivor annuity as described
in Sections 5.7(C), 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 a manner as
would be comparable to the explanation provided for meeting the requirements of
Section 5.7(E)(1) applicable to a qualified Joint and Survivor Annuity.
The applicable period for a Participant is whichever of the following periods
ends last: (a) the period beginning with the first day of the Plan Year in which
the Participant attains age 32 and ending with the close of the Plan Year
preceding the Plan Year in which the Participant attains age 35; (b) a
reasonable period ending after the individual becomes a Participant; (c) a
reasonable period ending after Section 5.7(E)(3) ceases to apply to the
Participant; (d) a reasonable period ending after this Section 5.7 first applies
to the Participant. Notwithstanding the foregoing, notice must be provided
within a reasonable period ending after separation of service in case of a
Participant who separates from service before attaining age 35.
For purposes of the preceding paragraph, a reasonable
period ending after the enumerated events described in
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Defined Contribution Plan and Trust Document
(b), (c) and (d) is the end of the two year period beginning one year prior to
the date the applicable event occurs and ending one year after that date. In the
case of a Participant who separates from service before the Plan Year in which
age 35 is attained, notice shall be provided within the two year period
beginning one year prior to separation and ending one year after separation. If
such a Participant thereafter returns to employment with the Employer, the
applicable period for such Participant shall be redetermined.
(3) Notwithstanding the other requirements of this Section 5.7(E), the
respective notices prescribed by this Section need not be given to the
Participant if:
(a) the Plan "fully subsidizes" the costs of a
Qualified Joint and Survivor Annuity or qualified
preretirement survivor annuity, and
(b) 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 Section 5.7(E)(3), 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.
(F) Safe harbor rules.
(1) This Section 5.7(F) 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: (1) the Participant does not or cannot elect
payments in the form of a life annuity; and (2) 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. The surviving Spouse may elect to have
distribution of the vested account balance commence within the 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. This Section 5.7(F) 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 Section 401(a)(11) and Section 417 of the
Code. If this Section 5.7(F) is operative, then the provisions of this Section
5.7 other than Section 5.7(G), shall be inoperative.
(2) The Participant may waive the spousal death benefit described in this
Section 5.7 at any time provided that no such waiver shall be effective unless
it satisfies the conditions described in Section 5.7(D)(3) (other than the
notification requirement referred to therein) that would apply to the
Participant's waiver of the qualified preretirement survivor annuity.
(3) For purposes of this Section 5.7(F), 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 5.7(D)(7).
(G) Transitional Rules.
(1) Any living Participant not receiving benefits on August 23, 1984, who
would otherwise not receive the benefits prescribed by the previous sections of
this Section 5.7 must be given the opportunity to elect to have the prior
sections of this Section 5.7 apply if such Participant is credited with at least
one 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 10
years of vesting service when he separated from service.
(2) Any living Participant not receiving benefits on August 23, 1984, who
was credited with at least one 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 benefits paid in accordance
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Defined Contribution Plan and Trust Document
with Section 5.7(G)(4).
(3) The respective opportunities to elect (as described in Section 5.7(G)(1)
and (2) 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.
(4) Any Participant who has elected pursuant to Section 5.7(G)(2) and any
Participant who does not elect under Section 5.7(G)(1) or who meets the
requirement of Section 5.7(G)(1) except that such Participant does not have at
least 10 years of vesting service when he separates from service, shall have his
benefits distributed in accordance with all of the following requirements if
benefits would have been payable in the form of a life annuity:
(a) Automatic joint and survivor annuity. If benefits in the form of a
life annuity become payable to a married Participant who:
(i) Begins to receive payments under the plan on
or after Normal Retirement Age; or
(ii) Dies on or after Normal Retirement Age
while still working for the Employer; or
(iii) Begins to receive payments on or after the
qualified early retirement age; or
(iv) 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 6 months before the Participant attains qualified
early retirement age and end not more than 90 days before the commencement of
benefits. Any election hereunder will be in writing and may be changed by the
Participant at any time.
(b) 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 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 (i) the 90th day before the Participant attains
the qualified early retirement age, or (ii) the date on which participation
begins, and ends on the date the Participant terminates employment.
(c) For purposes of this Section 5.7(G)(4):
(i) Qualified early retirement age is 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 is an
annuity for the life of the Participant with a survivor annuity for the life of
the Spouse as described in Section 5.10(G)(4).
5.8 PERMITTED DISPARITY IN PLAN
CONTRIBUTIONS
(A) Profit Sharing Plan
(1) A Profit Sharing Plan meets the requirements of Code Section 401(l) if
the Excess Contribution Percentage does not exceed the Base Contribution
Percentage by more than the Profit Sharing Maximum
Disparity Rate.
(2) "Profit Sharing Maximum Disparity Rate" means
the lesser of:
(a) The greater of:
(i) 2.7% (5.7% if not Top Heavy)
(ii) The percentage equal to the portion of the rate
of tax under Code Section 3111(a) (in effect as of the beginning of the Plan
Year) which is attributable to old age insurance, less the percentage allocated
under Section 11.2(2) of the Adoption Agreement.
(b) The applicable percentage determined in
accordance with the table below:
If the Integration Level:
is more than but not the applicable
more than percentage is:
$0 X* 2.7% (5.7%
if not Top
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Defined Contribution Plan and Trust Document
Heavy)
X* of TWB 80% of TWB 1.3% (4.3% if
not Top Heavy)
80% of TWB Y** 2.4% (5.4% if
not Top Heavy)
TWB = Taxable Wage Base
*X = the greater of $10,000 or 20 percent of the
Taxable Wage Base.
**Y = any amount more than 80% of the Taxable Wage Base but less than 100% of
the Taxable Wage Base.
If the Integration Level used is equal to the Taxable Wage Base, the
applicable percentage is the percentage specified in Section 5.8(A)(2)(a) above.
(B) Money Purchase Pension Plan
(1) A Money Purchase Pension Plan meets the
requirements of Code Section 401(l) if the Excess Contribution Percentage does
not exceed the Base Contribution Percentage by more than the Money Purchase
Maximum Disparity Rate.
(2) "Money Purchase Maximum Disparity Rate"
means the applicable of:
(a) If Section 10.2 of the Adoption Agreement is
elected, the lesser of:
(i) The greater of:
(aa) 5.7%
(bb) The percentage equal to the portion of the rate of tax under Code
Section 3111(a) (in effect as of the beginning of the Plan Year) which is
attributable to old age insurance.
(ii) If the Integration Level:
is more than but not the applicable
more than percentage is:
$0 X* 5.7%
X* of TWB 80% of TWB 4.3%
80% of TWB Y** 5.4%
TWB = Taxable Wage Base
*X = the greater of $10,000 or 20 percent of the
Taxable Wage Base.
**Y = any amount more than 80% of the Taxable Wage Base but less than 100% of
the Taxable Wage Base.
If the Integration Level used is equal to the Taxable Wage Base, the
applicable percentage is the percentage specified in Section 5.8(B)(2)(a)(i)(aa)
above.
(b) If Sections 10.1 and 11.2 of the Adoption
Agreement are elected, the lesser of:
(i) The greater of:
(aa) 2.7% (5.7% if not Top Heavy)
(bb) The percentage equal to the portion of the
rate of tax under Code Section 3111(a) (in effect as of the beginning of the
Plan Year) which is attributable to old age insurance, less the percentage
allocated under Section 11.2(2) of the Adoption Agreement.
(ii) If the integration level:
is more than but not the applicable
more than percentage is:
$0 X* 2.7% (5.7% if
not Top Heavy)
X* of TWB 80% of TWB 1.3% (4.3% if
not Top Heavy)
80% of TWB Y** 2.4% (5.4% if
not Top Heavy)
TWB = Taxable Wage Base
*X = the greater of $10,000 or 20 percent of the
Taxable Wage Base.
**Y = any amount more than 80% of the Taxable Wage Base but less than 100% of
the Taxable Wage Base.
If the Integration Level used is equal to the Taxable Wage Base, the
applicable percentage is the percentage specified in Section 5.8(B)(2)(b)(i)
above.
(C) Target Benefit Plan - See Adoption Agreement
(D) Definitions
The following definitions apply to Sections 5.8(A) and (B) above:
(1) "Excess Contribution Percentage" means the percentage of Compensation
which is contributed under the Plan with respect to that portion of each
Participant's Compensation in excess of the Integration Level specified in the
Adoption Agreement.
(2) "Base Contribution Percentage" means the percentage of Compensation
contributed under the Plan with respect to that portion of each Participant's
Compensation which is not in excess of the Integration Level specified in the
Adoption Agreement.
(3) "Integration Level" means the amount of Compensation specified under the
Plan (by dollar amount or formula) at or below which the rate at which
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Defined Contribution Plan and Trust Document
contributions or benefits are provided (expressed as a percentage) is less than
such rate above such amount. The Integration Level shall be equal to the Taxable
Wage Base or such lesser amount elected by the Employer in the Adoption
Agreement. In no event shall the Integration Level exceed the contribution and
benefit base in effect under Section 230 of the Social Security Act for such
Plan Year.
(4) "Compensation" shall mean compensation as
defined in Code Section 414(S).
(E) If this Plan is paired with another plan sponsored by the Employer, the
permitted disparity under this Section 5.8 shall be in only one of the paired
plans. Such permitted disparity shall be as follows:
(1) If this Plan is paired with a Money Purchase Pension Plan, the permitted
disparity shall be in the Money Purchase Pension Plan.
(2) If this Plan is paired with a Defined Benefit Pension Plan, the
permitted disparity shall be in the Defined Benefit Pension Plan.
(3) If the paired plans are a Profit Sharing Plan and a Target Benefit
Pension Plan, the permitted disparity shall be in the Target Benefit Pension
Plan.
6.0 LIFE INSURANCE
6.1 AUTHORIZATION TO PURCHASE
The Administrator may direct the Trustee to invest a portion of each Participant
Account in an annual premium contract on a Participant's life issued by a legal
reserve life insurance company. The Administrator shall direct the purchase of
life insurance as an earmarked investment for a Participant, if said Participant
consents to such purchase. If any life insurance is purchased, the option to
purchase shall be available to each Participant in a nondiscriminatory manner.
6.2 PAYMENT OF PREMIUMS
The Trustee shall normally pay premiums on any policy subject hereto as such
premiums fall due. Dividends, experience rating credits, or surrender or
cancellation credits shall be allocated to the Employer Contribution Account of
the Participant for whose benefit the contract is held. If at any time the
Administrator shall decide that the premium on any policy is not to be paid in
cash, the Administrator, in its sole discretion, shall decide whether such
premium is to be paid by policy loan (if the policy contains such a provision)
or whether the policy is to be continued as a paid-up policy, or whether some
other action is to be taken under the policy. Notwithstanding the above, policy
loans may cause Unrelated Business Income tax to become payable by the Trust.
6.3 DISPOSITION OF POLICIES AT
RETIREMENT
Subject to Section 5.7, when any Participant whose policy is held hereunder
shall reach his actual retirement date, or if this Trust shall terminate, the
Trustee at the direction of the Administrator shall convert the contracts on a
Participant's life to cash or an annuity or distribute such contracts to the
Participant upon commencement of benefits. If insurance contracts are
distributed, the modes of settlement under the contract shall be limited to
those provided under the Plan. Any annuity contract distributed hereunder must
be non-transferable.
6.4 LIMITATION ON AMOUNTS
The amount of life insurance held by the Trustee on the life of any Participant
shall be limited as follows:
(A) Ordinary Life - For purposes of these incidental insurance provisions,
ordinary life insurance contracts are contracts with both non-decreasing death
benefits and non-increasing premiums. If such contracts are purchased, less than
one-half (1/2) of the aggregate Employer contributions allocated to any
Participant shall be used to pay premiums on ordinary life insurance contracts.
(B) Term Life - No more than one-fourth (1/4) of the aggregate Employer
contributions allocated to any Participant shall be used to pay premiums on term
life insurance contracts and all other life insurance contracts which are not
ordinary life.
(C) Combination - The sum of one-half (1/2) of the ordinary life insurance
premiums and all other life insurance premiums shall not exceed one-fourth (1/4)
of the aggregate Employer contributions allocated to any Participant.
6.5 CONFLICT WITH INSURANCE CONTRACTS The Trustee shall apply for and will be
the owner of any insurance contract purchased under the terms of
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Defined Contribution Plan and Trust Document
this Plan. The insurance contract(s) must provide that proceeds will be payable
to the Trustee; however, the Trustee shall be required to pay over all proceeds
of the contract(s) to the Participant's designated Beneficiary in accordance
with the distribution provisions of this Plan. A Participant's spouse will be
the designated Beneficiary of the proceeds in all circumstances unless a
qualified election has been made in accordance with Section 5.7, Joint and
Survivor Annuity Requirements, if applicable. Under no circumstances shall the
Trust retain any part of the proceeds. In the event of any conflict between the
terms of this Plan and the terms of any insurance contract purchased hereunder,
the Plan provisions shall control.
7.0 MISCELLANEOUS
7.1 LOANS TO PARTICIPANTS
The Administrator may, in its sole discretion, establish a loan program and
direct the Trustee to make a loan to a Participant or Beneficiary, other than
shareholder-Employees or Owner-Employees.
(A) Loans made pursuant to this program shall be subject to such rules as the
Administrator, in its sole discretion, shall adopt, provided that such rules and
regulations do not discriminate in favor of officers, shareholders or highly
compensated Employees of the Employer and that loans shall be available to all
Participants or Beneficiaries on a non-discriminatory basis. No loans shall be
made under this Section 7.1 to any shareholder-Employees or Owner-Employees.
(B) Any loan to a Participant made under this program shall comply with the
following terms and conditions:
(1) An application for a loan shall be made in writing to the Administrator,
whose action thereon shall be final.
(2) The loan shall be adequately secured, pursuant to Section 5, below.
(3) The loan shall bear a reasonable rate of interest, as determined by the
Plan Administrator in its sole discretion. The interest rate shall be comparable
to the rate charged by commercial lenders in the geographical area of the
Employer for similar types of loans, as determined by conditions customarily
taken into account by such lenders in the making of similar types of loans.
(4) A loan shall be made for fixed period of time, as determined by the Plan
Administrator in its sole discretion, which in no event shall exceed five (5)
Years from the date of such loan, except that such five (5) Year repayment rule
shall not apply to any loan used to acquire a dwelling unit which, within a
reasonable period of time, will be used as a principal residence of the
Participant.
Security for Loans to Participants is described in section 10.6.
(5) No distribution shall be made to any Active Participant, inactive
Participant, Former Participant or Beneficiary of any such Participant unless
and until all unpaid loans, including accrued interest thereon, have
been satisfied.
(6) Loans shall be made available to all Participants and Beneficiaries on a
reasonably equivalent basis.
(7) No loan to any Participant or Beneficiary can be made to the extent that
the amount of the loan, when added to the outstanding balance of all other loans
to the Participant or Beneficiary, would exceed the lesser of:
(a) $50,000 reduced by the excess (if any) of the highest outstanding
balance of loans during the one year period ending on the day before the loan is
made, over the outstanding balance of loans from the Plan on the date the loan
is made, or
(b) one-half the value of the vested account balance of the Participant.
For the purpose of the above limitation, all loans from all qualified plans of
the Affiliated Employers are aggregated.
(8) In the event of default, foreclosure on and attachment of security will
not occur until a distributable event occurs in the Plan.
(9) Loans shall not be made available to highly compensated employees (as
defined in Section 414(g) of the Code) in an amount greater than the amount made
available to other Employees.
(10) A Participant must obtain the consent of his Spouse, if any, to use of
the Accrued Benefit as security for the loan. Spousal consent shall be obtained
no earlier than the beginning of the 90-day period that ends on the date on
which the loan is to be so secured. The consent must be in writing, must
acknowledge the effect of the loan, and must be witnessed by a Plan
representative or notary public. Such consent shall thereafter be binding with
respect to the consenting
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Defined Contribution Plan and Trust Document
Spouse or any subsequent Spouse with respect to that loan. A new consent shall
be required if the Accrued Benefit is used for renegotiation, extension,
renewal, or other revision of the loan. If a valid spousal consent has been
obtained in accordance with this Section 7.1(c)(11), then, notwithstanding any
other provision of this Plan, the portion of the Participant's vested Accrued
Benefit 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 Accrued Benefit payable at the time of death or
distribution, but only if the reduction is used as repayment of the loan. If
less than 100% of the Participant's vested Accrued Benefit (determined without
regard to the preceding sentence) is payable to the surviving Spouse, then the
Accrued Benefit shall be adjusted by first reducing the vested Accrued Benefit
by the amount of the security used as repayment of the loan, and then
determining the benefit payable to the surviving Spouse.
(C) No loan may be made to any Owner Employee or shareholder Employee. For
purposes of this requirement, a shareholder Employee means an Employee or
officer of an electing small business (Sub Chapter S) corporation who owns (or
is considered as owning within the meaning of Code Section 318(a)(1)), on any
day during the taxable year of such corporation, more than five percent (5%) of
the outstanding stock of the corporation.
7.2 DISCHARGE RIGHTS PRESERVED The Plan shall not be deemed to constitute an
employment contract or to be consideration for the employment of any Employee.
7.3 BENEFICIARY DESIGNATED BY
PARTICIPANT
Subject to the Joint and Survivor Annuity requirements of Section 5.7, a
beneficiary designation shall be filed by all Participants with the
Administrator at the time they become Participants. In the absence of a valid
designation or the survival of any Beneficiary designated by the Participant,
the Administrator may, either before or after the Participant's death, designate
the Participant's Beneficiary or Beneficiaries from among the following order of
Priority: spouse, children, grandchildren, parents, brothers and sisters,
nephews and nieces, or his estate.
7.4 PRIORITY OF ADOPTION AGREEMENT Should the terms and conditions of this Plan
and the related trust agreement conflict with the terms and conditions of the
Adoption Agreement, the latter shall prevail. The Adoption Agreement, therefore,
has the function of amending the terms of this Plan and trust agreement when
necessary or appropriate. In the event of any conflict between the terms of the
Plan or the Adoption Agreement and the terms of any insurance contract issued
hereunder, the Plan or Adoption Agreement provisions shall control.
7.5 REFERENCE TO INTERNAL REVENUE
CODE
All references herein to Sections of the Internal Revenue Code, or any
regulations or ruling thereunder shall be deemed to refer to such Sections as
they may subsequently be modified, amended, replaced, or amplified by any
Federal tax statutes, regulations or rulings of similar application and import.
7.6 SAVING CLAUSE
In the event any provision of the Plan is held illegal or invalid for any
reason, said illegality or invalidity shall not affect the remaining parts of
the Plan, but this instrument shall be construed and enforced as if said
provision had never been included.
7.7 GOVERNING LAW
This Plan shall be construed, administered, and governed in all respects under
and by ERISA and to the extent applicable, the laws of the Home State of the
Employer, provided, however, that if any provision is susceptible to more than
one interpretation, such interpretation shall be given thereto as is consistent
with this Plan and Trust being a qualified employees' pension benefit plan and
trust within the meaning of the Code and ERISA.
7.8 MERGER OR CONSOLIDATION OF PLAN In the case of a merger or consolidation of
this Plan with another plan or transfer of assets or liabilities to another
plan, each participant in the successor plan shall (if the Plan then terminated)
receive a benefit immediately after the merger, consolidation or transfer
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Defined Contribution Plan and Trust Document
which is at least equal to the benefit he would have been entitled to receive
immediately before the merger, consolidation or transfer (if the Plan had then
terminated).
7.9 AGREEMENT BINDING ON ALL PARTIES This Agreement shall be binding upon the
heirs, executors, administrators, successors and assigns, as such terms shall
apply, or any and all parties hereto, present and future.
7.10 HEADINGS
Headings in this instrument are inserted for convenience of reference only. They
constitute no part of this instrument.
7.11 SINGULAR INCLUDES PLURAL, ETC.
Whenever appropriate, words used herein in the
singular may include the plural or the plural may be
read as the singular and the masculine may include the
feminine.
7.12 FORFEITURE OF BENEFITS
(A) If a retirement benefit become payable under this Plan to a Participant
(or his Beneficiary) and such retirement benefit remains unpaid for a period of
five (5) Years from the date such retirement benefit first became payable
because the Participant (or his Beneficiary) cannot be located, the retirement
benefit shall be deemed to be a forfeiture under the Plan and shall be used to
reduce future Employer contributions to the Plan as soon as practicable after
the deemed forfeiture.
(B) Anything in this Section 7.12 to the contrary notwithstanding, if a
retirement benefit is forfeited under the provisions of Section 7.12(A) and the
Participant (or his Beneficiary) is located, the retirement benefit shall be
reinstated and paid to the Participant (or his Beneficiary) under the terms of
this Plan. The Employer shall make up any loss to the Plan as a result of the
reinstatement of a retirement benefit as soon as practicable thereafter.
7.13 DISTRIBUTION PURSUANT TO QUALIFIED DOMESTIC RELATIONS ORDER Anything in
Section 5.3 notwithstanding, the Plan Administrator may, pursuant to procedures
which do not discriminate in favor of highly compensated employees as defined in
Code Section 414(q), and at
the request of the Participant and his former Spouse, elect to treat a Qualified
Domestic Relations Order as immediately distributable even though the
Participant had not yet attained the Earliest Retirement Age under the Plan.
8.0 TOP HEAVY PLAN
8.1 PRECEDENCE OF SECTION
Anything in this Plan or the Adoption Agreement to the contrary notwithstanding,
this Section 8 shall supersede and take precedence over any other provisions of
the Plan or the Adoption Agreement for any Plan Year commencing on or after
January 1, 1984, for which the Plan is determined to be a Top Heavy Plan or
Super Top Heavy Plan under this Section 8.
8.2 DEFINITIONS
For purposes of determining whether the Plan is a Top Heavy Plan or Super Top
Heavy Plan for any Plan Year commencing on or after January 1, 1984, the
following terms, wherever capitalized, shall have the meanings
set forth below:
(A) "Determination Date" shall mean the date on which the Plan is tested to
determine if it is a Top Heavy Plan or Super Top Heavy Plan, which date shall be
the last day of the Plan Year for the first Plan Year and the last day of the
preceding Plan Year for all subsequent Plan Years.
(B) "Key Employee" shall mean any Employee or former Employee (or Beneficiary)
in the Plan who, at any time during the "Determination Period," is or was:
(1) An officer of the Employer if such individual's annual Compensation
exceeds fifty percent (50%) of the dollar limitation under Code Section
415(b)(1)(A) (not more than 10% of the Employees of the Employer to a maximum of
50 such Employees shall be considered officers for this purpose);
(2) An owner (or considered an owner under Code Section 318) of one (1) of
the ten largest interests in the Employer if such individual's Compensation
exceeds one hundred percent (100%) of the dollar limitation under Code Section
415(c)(1)(A);
(3) An owner of five percent (5%) or more of an
Employer; and
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Defined Contribution Plan and Trust Document
(4) An owner of one percent (1%) or more of the Employer having an annual
Compensation from the Employer which is in excess of $150,000.00.
Annual Compensation means Compensation as defined in Section 415(c)(3) of the
Code but includes amounts contributed by the Employer pursuant to a salary
reduction agreement which are excludable from the Employee's gross income under
Section 125, Section 402(a)(8), Section 402(h) or Section 403(b) of the Code.
"Determination Period" is the Plan Year containing the Determination Date and
the four (4) preceding Plan Years. The determination of who is a Key Employee
will be made in accordance with Code Section 416(i)(1) and the regulations
thereunder.
(C) "Permissive Aggregation Group" shall mean the Required Aggregation Group
of plans plus any other plan or plans of the Employer which, when considered as
a group with the Required Aggregation Group, would continue to satisfy the
requirements of Section 401(a)(4) and 410 of the Code.
(D) "Present Value" shall be based only on the interest and mortality rates
specified in the Adoption Agreement.
(E) "Required Aggregation Group" shall mean:
(1) Each qualified plan of the Employer in which at
least one Key Employee participates or participated at
any time during the determination period (regardless of
whether the Plan terminated); and
(2) Any other qualified plan of the Employer which enables a plan described
in Section 8.2(E)(1) above to meet the requirements of Sections 401(a)(4) or 410
of the Code.
(F) "Top Heavy Plan" shall mean the Plan where, with respect to any Plan Year
commencing after December 31, 1983, any of the following conditions exist:
(a) If the Top-Heavy Ratio for this Plan exceeds 60 percent and this Plan
is not part of any Required Aggregation Group or Permissive Aggregation Group of
plans,
(b) If this Plan is a part of a Required Aggregation
Group of plans (but which is not part of a Permissive
Aggregation Group ) and the Top-Heavy Ratio for the
group of plans exceeds 60 percent, or
(c) If this Plan is a part of a Required Aggregation Group of plans and
part of a Permissive Aggregation Group and the Top-Heavy Ratio for the
Permissive Aggregation Group exceeds 60 percent.
(G) "Top-Heavy Ratio" shall mean:
(1) If the Employer maintains one or more defined
contribution plans (including any Simplified Employee Pension Plan) and the
Employer has not maintained any defined benefit plans which during the 5-year
period ending on the Determination Date(s) has or has had accrued benefits, the
Top-Heavy Ratio for this Plan alone or for the Required or Permissive
Aggregation Group as appropriate is a fraction, the numerator of which is the
sum of the account balances of all Key Employees as of the Determination Date(s)
(including any part of any account balance distributed in the five-year period
ending on the Determination Date(s)), and the denominator of which is the sum of
all account balances (including any part of any account balances distributed in
the five-year period ending on the Determination Date(s)), both computed in
accordance with Code Section 416 and the regulations thereunder. Both the
numerator and denominator of the Top-Heavy Ratio are increased to reflect any
contribution not actually made as of the Determination Date, but which is
required to be taken into account on that date under Section 416 of the Code and
the regulations thereunder.
(2) If the Employer maintains one or more defined contribution plans
(including any Simplified Employee Pension Plan) and the Employer maintains or
has maintained one or more defined benefit plans which during the 5-year period
ending on the Determination Date(s) has or has had any accrued benefits, the Top
Heavy Ratio for any Required or Permissive Aggregation Group as appropriate is a
fraction, the numerator of which is the sum of the present value of accrued
benefits under the aggregate defined benefit plan or plans for all Key Employees
and the sum of account balances under the aggregated defined contribution plan
or plans for all Key Employees, determined in accordance with (1) above, as of
the Determination Date(s), and the denominator of which is the sum of the
present values of accrued benefits under the aggregated defined benefit plan or
plans for all Participants and the sum of the account balances under the
aggregated defined contribution plan or plans, determined in accordance with (1)
above, for all participants as of the Determination Date(s), all determined in
accordance with Section 416 of the Code and the regulations thereunder. The
accrued benefits
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Defined Contribution Plan and Trust Document
under a defined benefit plan in both the numerator and denominator of the
Top-Heavy Ratio are increased for any distribution of an accrued benefit made in
the 5-year period ending on the Determination Date.
(3) For purposes of (1) and (2) above, the value of account balances and the
present value of accrued benefits will be determined as of the most recent
Valuation Date that falls within or ends with the 12-month period ending on the
Determination Date, except as provided in Section 416 of the Code and the
regulations thereunder for the first and second plan years of a defined benefit
plan. The account balances and accrued benefits of a Participant (a) who is not
a Key Employee but who was a Key Employee in a prior year, or (b) who has not
been credited with at least one (1) Hour of Service with any Employer
maintaining the Plan at any time during the 5-year period ending on the
Determination Date will be disregarded. The calculation of the Top-Heavy Ratio,
and the extent to which distributions, rollovers, and transfers are taken into
account will be made in accordance with Section 416 of the Code and the
regulations thereunder. Deductible employee contributions will not be taken into
account for purposes of computing the Top-Heavy Ratio. When aggregating plans,
the value of account balances and accrued benefits will be calculated with
reference to the Determination Dates that fall within the same calendar year.
The Accrued Benefit of a Participant other than a key employee shall be
determined under (a) the method, if any, that uniformly applies for accrual
purposes under all defined benefit plans maintained by the Employer, or (b) if
there is no such method, as if such benefit accrued not more rapidly than the
slowest accrual rate permitted under the fractional rule of section 411(b)(1)(C)
of the Code.
(H) "Valuation Date" shall mean the date as of which account balances or
accrued benefits are valued for purposes of calculating the Top-Heavy Ratio
which date shall be the last day of the Plan Year.
8.3 COMPENSATION IN TOP HEAVY PLAN
YEAR
During any Plan Year in which the Plan is determined to be a Top Heavy Plan or
Super Top Heavy Plan, the Compensation used to determine a Participant's Accrued
Benefit under Section 11 of the Adoption Agreement shall be limited to
$200,000.00, as adjusted annually for increases in the cost of living by the
Secretary of the Treasury, as described in Code Section 416(d)(2).
8.4 VESTING IN TOP HEAVY PLAN YEAR When a Plan is determined to be a Top Heavy
Plan or a Super Top Heavy Plan for a Plan Year, each Participant's Accrued
Benefit shall be subject to the following vesting schedule provided that the
Participant has at least (1) Hour of Service during any Plan Year in which the
Plan is determined to be a Top Heavy Plan or Super Top Heavy Plan:
Years of Service Vesting 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%
This Section 8.4 shall be applicable only in the event that the Employer has
adopted a variable vesting schedule under Section 9 of the Adoption Agreement
which is not as favorable as the above vesting schedule in all years. If the
vesting schedule under the Plan shifts in or out of the above schedule for any
Plan Year because of the Plan's top-heavy status, such shift is an amendment to
the vesting schedule and the election in Section 1.4(A)(3) of the Plan applies.
The minimum vesting schedule applies to all benefits within the meaning of Code
Section 411(a)(7) except those attributable to Employee contributions, including
benefits accrued before the effective date of Code Section 416 and benefits
accrued before the Plan became top heavy. Further, no decrease in a
Participant's nonforfeitable percentage may occur in the event the Plan's status
as a Top Heavy Plan changes for any Plan Year.
8.5 MINIMUM CONTRIBUTION UNDER TOP
HEAVY PLAN
(A) Except as otherwise provided in Sections 8.5(C) and (D) below, the
Employer contributions and forfeitures allocated in any Plan Year in which the
plan is determined to be a Top Heavy Plan or a Super Top
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Defined Contribution Plan and Trust Document
Heavy Plan, 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 416 of the Code, the largest percentage of Employer
contributions and forfeitures, as a percentage of the first $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
(1) the Participant's failure to complete 1,000 Hours of Service (or any
equivalent provided in the Plan); (2) the Participant's failure to make
mandatory employee contributions to the Plan; or (3) Compensation less than a
stated amount.
(B) For purposes of computing the minimum allocation, Compensation will mean
Compensation as defined in Section 2.11 of the Plan.
(C) The provision in (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 (A) above shall not apply to any Participant to the
extent the Participant is covered under any other plan or plans of the Employer,
and the Employer has provided in the Adoption Agreement that the minimum
allocation or benefit requirement applicable to Top Heavy Plans will be met in
the other plan or plans.
8.6 MINIMUM CONTRIBUTION UNDER
MULTIPLE PLANS
(A) If the Employer elects to provide the additional minimum benefit under the
Adoption Agreement, when the paired plans are top heavy but not super top heavy,
the Employer will provide each non-key Employee who is a participant in paired
defined benefit plan #01 a minimum non-integrated contribution of seven and
one-half percent (7 1/2%) of Compensation. A minimum non-integrated contribution
of four percent (4%) of Compensation will be provided to any non-key Employee
otherwise entitled to receive top heavy contributions from this Plan who is not
entitled to receive a minimum benefit from the paired defined benefit plan.
(B) If the Employer does not elect to provide the additional minimum benefit
under the Adoption Agreement, if the paired plans are top heavy, or when the
paired plans are super top heavy, then the top heavy requirements set forth in
Section 8.5 of this Plan shall apply except that each non-key Employee who is a
Participant in paired defined contribution plan #02 and who is also a
participant in paired defined benefit plan #01 shall receive a minimum
contribution of five percent (5%) of such Employee's total Compensation. For
purposes of the Short Form Adoption Agreement, if the minimum benefit
requirement is met under this Plan, the additional minimum benefit shall not be
provided.
8.7 NONFORFEITABILITY OF MINIMUM BENEFIT
The minimum benefit required under Section 8.5 and 8.6 of the Plan (to the
extent required to be nonforfeitable under Code Section 416(b)) may not be
suspended or forfeited under Code Section 411(a)(3)(B) or Section 411(a)(3)(D).
8.8 ADJUSTMENT TO DEFINED BENEFIT AND DEFINED CONTRIBUTION FRACTION FOR
SUPER TOP-HEAVY PLAN
In any Plan Year in which the Top-Heavy Ratio exceeds ninety percent (90%)
(i.e., the Plan becomes a super Top-Heavy Plan) or sixty percent (60%) where the
Employer does not elect to provide the additional minimum benefit in the
Adoption Agreement the denominators of the defined benefit fraction as defined
in Section 5.5(E)(2) of the Plan, and defined contribution fraction as defined
in Section 5.5(E)(3) of the Plan shall be computed using 100 percent of the
dollar limitation instead of 125 percent.
9.0 AFFILIATED EMPLOYER
9.1 MEMBERS OF CONTROLLED GROUP All employees of all corporations which are
members of a controlled group of corporations (as defined in Section 414(b) of
the Code), all employees of all trades or businesses (whether or not
incorporated) which are under common control (as defined in Section 414(c) of
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Defined Contribution Plan and Trust Document
the Code) and all employees of members of affiliated service groups (as defined
in Section 414(m) of the Code) shall be treated as employed by a single
employer.
9.2 LEASED EMPLOYEES
(A) "Leased Employee" shall mean any person (other than an Employee of the
recipient) who pursuant to an agreement between the recipient and any other
person ("leasing organization") has performed services for the recipient (or for
the recipient and related persons determined in accordance with Section
414(n)(6) of the Code) on a substantially full-time basis for a period of at
least one year, and such services are of a type historically performed by
employees in the business field of the recipient Employer. Contributions or
benefits provided a Leased Employee by the leasing organization which are
attributable to services performed for the recipient employer shall be treated
as provided by the recipient employer.
(B) A leased Employee shall not be considered an employee of the recipient if:
(1) Such employee is covered by a money purchase
pension plan providing:
(a) A nonintegrated employer contribution rate of at least 10 percent 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 section 125, section 402(a)(8), section 402(h)
or section 403(b) of the Code.
(b) Immediate participation, and
(c) Full and immediate vesting; and
(2) Leased Employees do not constitute more than 20 percent of the
recipient's nonhighly compensated workforce.
9.3 PLAN OF A PREDECESSOR EMPLOYER If the Employer maintains this Plan as a
successor to the plan of a Predecessor Employer, Years of Service and Covered
Years of Service with the Predecessor Employer shall be treated as Years of
Service and Covered Years of Service with the Employer.
9.4 CONTROLLED TRADES OR BUSINESSES OF
OWNER-EMPLOYEES
(A) If this Plan provides contributions or benefits for one (1) or more
Owner-Employees who control both the business for which the Plan is established
and one (1) or more other trades or businesses, this Plan and the plan
established for such other trades or businesses must, when looked at as a single
plan, satisfy Section 401(a) and (d) of the Code for the Employees of this and
all other trades or businesses.
(B) If the Plan provides contributions or benefits for one (1) or more
Owner-Employees who control one (1) or more other trades or businesses, the
employees of the other trades or businesses must be included in a plan which
satisfies Code Sections 401(a) and (d) and which provides contributions and
benefits not less favorable than provided for Owner-Employees under this Plan.
(C) If an individual is covered as an Owner-Employee under the plans of two
(2) or more trades or businesses which are not controlled and such individual
controls at least one (1) other trade or business, the contributions and
benefits provided for the employees under the plan of such controlled trade or
business must be as favorable as those provided for such individual under the
most favorable plan of the trade or business which is not controlled.
(D) For purposes of this Section 9.4, an Owner-Employee, or two (2) or more
Owner-Employees, will be considered to control a trade or business if the
Owner-Employee, or two (2) or more Owner-Employees together:
(1) Own the entire interest in an unincorporated
trade or business; or
(2) In the case of a partnership, own more than fifty percent (50%) of
either the capital interest or the profits interest in the partnership.
(E) For purposes of section 9.4(D), an Owner-Employee or two (2) or more
Owner-Employees will be treated as owning any interest in a partnership which is
owned, directly or indirectly, by a partnership which such Owner-Employee or
such two (2) or more Owner-Employees are considered to control within the
meaning of Section 9.4(D).
10.0 TRUST PROVISIONS
10.1 ESTABLISHMENT OF TRUST
It is the intention of the Employer that the Trust
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Defined Contribution Plan and Trust Document
established pursuant to this Section 10 shall be a qualified Trust under Section
501(a) of the Internal Revenue Code, and under such other Federal or State
statute of a similar import, in order that the Trust created hereby may qualify
as a tax exempt employees' Trust under all applicable law. However,
notwithstanding any other provisions of the Trust, if the Internal Revenue
Service is requested to issue to the Company a favorable written determination
or ruling with respect to the initial qualification of the Plan and exemption of
the Trust from tax and such request is denied, the Trustee shall, after
receiving a written direction from the Employer or Administrator, pay to each
Participant that portion of the Trust Fund applicable to said Participant's
voluntary contributions, if any, and provided the Plan so states, pay to the
Company any part of the Trust Fund attributable to Company contributions then
remaining in the Trustee's possession. As a condition to such repayment, the
Company must execute, acknowledge, and deliver to the Trustee its written
undertaking, in form satisfactory to the Trustee, to indemnify, defend, and hold
the Trustee harmless from all claims, actions, demands, or liabilities arising
in connection with such repayment, and provided further that such repayment will
occur within one year after the date the request for qualification is denied.
10.2 APPOINTMENT OF ADMINISTRATOR AND
TRUSTEE
(A) The Board shall appoint the Administrator, who may be a person or
committee consisting of any number of members. Any member of the Administrator
may resign by giving notice in writing to the Employer. The Board shall have the
power to remove a member of the Administrator for any or no reason. A member
shall cease to be such upon his death or upon being declared legally
incompetent.
(B) The Board shall appoint the Trustee(s) (hereinafter referred to as the
Trustee). The Trustee may resign at any time upon sixty (60) days written notice
to the Board. The Trustee may be removed for any or no reason at any time by the
Board upon sixty (60) days written notice to the Trustee. In the event of
resignation, death or removal of the Trustee, or one or more of the Trustees,
the Board shall appoint a successor Trustee who shall become effective upon
acceptance in writing by the successor Trustee or Co-Trustee. Upon such
resignation, death or removal of the Trustee or in the event of termination of
this Trust, the Trustee shall have the right to a settlement of its account,
which may be made, at the option of the Trustee, either
(1) By judicial settlement in an action instituted by
the Trustee in a court of competent jurisdiction, or
(2) By agreement of settlement between the Trustee
and the Administrator.
Upon such settlement, all right, title and interest of the Trustee in the
assets of the Trust and all rights and privileges under this Agreement
heretofore vested in the Trustee shall vest in the successor Trustee and
thereupon all future liability of the Trustee shall terminate; provided however
that the Trustee shall execute, acknowledge and deliver all documents and
written instruments which are necessary to transfer and convey the right, title
and interest in the Trust assets and all rights and privileges to the successor
Trustee.
10.3 ADMINISTRATOR FUNCTIONS
(A) As of each Anniversary Date, the Employer shall, as soon as possible,
certify to the Administrator the name, date of birth, date of employment, Hours
of Service, and Compensation of each Employee who has become a Participant
hereunder within the Plan Year in question; and shall also certify the name,
Hours of Service, and Compensation of each Employee who was a Participant on the
prior Anniversary Date and who was such at any time during the Plan Year in
question. As soon as the above is determined, the Employer shall notify the
Administrator of the amount of the contribution due to be made by it or made by
it as of the Anniversary Date in question. The Administrator, upon receipt of
such certifications from the Employer, shall compute therefrom the Accrued
Benefit of each Participant. The Administrator shall keep complete records which
shall show its actions under this Plan. The Administrator shall also keep such
records for such periods as may be required under ERISA and regulations issued
thereunder and under any other Federal law or regulations issued thereunder. The
Administrator shall also maintain and retain records on matters for which
disclosure is required by ERISA in sufficient detail that the information
disclosed may be verified, and it shall keep such records available for
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Defined Contribution Plan and Trust Document
examination for a period of not less than six (6) years after the filing date of
documents containing the disclosed information.
(B) The Administrator shall prepare, or cause to have prepared by any plan
service organization as may be retained to do so, a written Participant
statement to be delivered to the Participant setting forth the Accrued Benefit
of such Participant. The statement of a Participant's Accrued Benefit shall not
be made available for examination by any other Participant without the consent
of the Administrator.
(C) Upon the occurrence of an event giving rise to the payment of benefits
under the Plan, the Administrator shall undertake to calculate such benefits
based on the records of the Administrator and such other pertinent information
as may be put before the Administrator by outside agencies or the Participant or
the Beneficiary of the Participant and shall direct the Trustee to distribute
the benefits at the time that such benefit becomes due and payable.
(D) The Administrator shall give a Participant, or the Beneficiary of a
deceased Participant, written notice, addressed to his last known address, by
certified mail, of any denial of claim for benefits under the Plan, setting
forth the specific reasons for such denial, written in a manner calculated to be
understood by him. Such notice shall be sent within ninety (90) days after such
denial and shall grant such Participant, or the Beneficiary of a deceased
Participant, a reasonable opportunity within sixty (60) days after registered
receipt of such notice to appear before the named members of the Administrator
at a stated place, date and time for a full and fair review by them of the
decision to deny the claim. Failure of the Participant, or the Beneficiary of a
deceased Participant, to so appear before the Administrator within such sixty
(60) day period, shall constitute an irrevocable consent by such Participant, or
the Beneficiary of a deceased Participant, to the decision denying the claim
made by the Administrator. The Administrator shall extend such sixty (60) day
period an additional thirty (30) days and shall provide another stated place,
date and time for such review or appearance, if it receives a written request to
do so by the Participant, or the Beneficiary of a deceased Participant, within
the first sixty (60) day period. The Administrator shall also change the stated
time and date of such appearance if requested to do so by the Participant, or
the Beneficiary of a deceased Participant, and if the parties are able to agree
upon such other time and date. The written notice by the Administrator shall
explain such irrevocable consent upon failure to appear before the Administrator
at the stated place, time and date, and the right of the Participant, or the
Beneficiary of a deceased Participant, to one thirty (30) day extension for his
appearance, and his right to request a different time and date within such
period. The Administrator shall maintain minutes of any meeting denying a claim
for benefits and of any review thereof and copies thereof shall be made
available to the Participant, or the Beneficiary of a deceased Participant, upon
written request.
(E) The Administrator may retain and consult with legal counsel, who may be
counsel for the Employer, with respect to the meaning or construction of this
agreement or its obligations or duties hereunder, or with respect to any action
or proceeding or any question of law, and shall be fully protected with respect
to any action taken or omitted by it in good faith pursuant to the advice of
such legal counsel, provided that the Administrator acts prudently in choosing
such legal counsel. The Administrator may retain such other persons or
organizations including actuaries, accountants and benefit, financial or
administrative consultants to assist in the plan ministerial services. The
Administrator shall have the sole ultimate to construe Plan terms and determine
eligibility for benefits.
(F) The Employer may directly pay the reasonable expenses of the Administrator
in the administration of this Trust, including legal, accounting, and advisor
fees or expenses. Should the Employer, for any reason, fail to pay such
expenses, the same shall be paid by the Trustee out of the Trust. No member of
the Administrator shall be entitled to compensation for his services as such
member, but the Employer agrees to supply such stenographic or office help as
may be necessary to assist the Administrator in the performance of his powers,
duties and discretions.
(G) The Administrator shall establish a funding
policy so that the Trust will meet Plan needs. The
Administrator shall review the funding policy just prior
to the end of each Fiscal Year for its appropriateness
under the circumstances then prevailing. In
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Defined Contribution Plan and Trust Document
establishing a funding policy for the Trust, the Administrator shall follow the
procedures set forth in this paragraph. The Administrator shall first determine
the following matters:
(1) Approximate value of the assets in the Trust;
(2) Anticipated Employer contribution for the Plan
Year then ending;
(3) Approximate amount to be transferred to
segregated accounts of the Trust during the following
year;
(4) Anticipated income of the Trust during the
following year;
(5) Estimate of the anticipated withdrawals during
the following year from Participants' voluntary
contribution accounts;
(6) Anticipated distributions from the Trust during
the following year to retired Participants, terminated
Participants and to Beneficiaries; and
(7) Estimate as to such distributions for the next five
(5) years.
Following a review of this material and consideration of anticipated
contributions and income and distributions, the Administrator shall determine a
funding policy for the Trust bearing in mind both the short-run and long-run
needs and goals of the Plan. Such funding policy shall be communicated to the
Trustee if the investment policy has been delegated to the Trustee or to the
Investment Manager of the Trust, if one shall have been appointed, so that the
investment policy of the Trust can be coordinated with Plan needs.
10.4 TRUSTEE FUNCTIONS
The Administrator hereby delegates to the Trustee the following functions:
(A) The Trustee shall hold in safekeeping the funds and assets received by the
Trustee under this Trust subject to the terms of this Agreement and for the
purposes herein set forth. The Trustee shall be responsible only for such funds
and assets as shall actually be received by the Trustee as Trustee hereunder. So
long as a Trustee is acting, title to any of the assets of the Trust may be held
or registered in the name of a nominee of the Trustee for ease of dealing with
the same, provided that the books of the Trust reflect actual ownership. The
assets so held or registered shall at all times remain in the possession or
under the control of the Trustee. The Trustee may not maintain the indicia of
ownership of any assets of the Trust outside the jurisdiction of the district
courts of the United States except as authorized by Regulations. The Trustee may
retain and consult with legal counsel, who may be legal counsel for the
Employer, with respect to the meaning or construction of this agreement or its
obligations or duties hereunder, or with respect to any action or proceeding or
any question of law, and shall be fully protected with respect to any action
taken or omitted by it in good faith pursuant to the advice of such legal
counsel, provided that the Trustee acts prudently in choosing such legal counsel
and in retaining such legal counsel. The Trustee may retain such other persons
or organization including actuaries, accountants and benefit, financial or
administrative consultants to assist in the Trust ministerial services.
(B) The Trustee shall have such powers as may from time to time be necessary,
appropriate or expedient to perform its functions in the management of the
Trust. In addition to the powers enumerated herein, the Trustee shall have each
and all the powers for trustees enumerated in the Statutes of the Home State of
the Employer. The enumeration herein of a lesser, greater or other power shall
not be deemed to exclude any statutory power. Without limiting the generality of
the foregoing, the Trustee has the power to:
(1) Receive the income of the Trust;
(2) Hold uninvested any cash contributions to the
Trust and to create reserves of cash or other assets of the Trust for the
payment of expenses or for distribution pursuant to the Plan, or for any other
purpose in connection with the Plan;
(3) Enter into any contracts with, or purchase any annuities from, any
insurance company or insurance companies for the purpose of providing for the
payment of all or any part of the retirement income payable under the Plan, and
to disburse under any such contracts or for the purchase of any such annuities
any monies held in the Trust;
(4) Deposit any monies at any time held in the Trust in any savings and loan
association or in the savings department of any bank, including the savings
department of the Trustee;
(5) Purchase, or subscribe for, any securities or
property and to retain the same in the Trust;
(6) Sell, exchange, convey, transfer, or otherwise
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Defined Contribution Plan and Trust Document
dispose of, any securities or property held by it, by private contract or public
action, and no person dealing with the Trustee shall be bound to see the
application of the purchase money or to inquire into the validity, expediency,
or propriety of any such sale or other dispositions;
(7) Accept and retain for such time as it shall be determined any securities
or other property received or acquired by the Trustee hereunder, whether or not
such securities or other property would normally be purchased as investments
hereunder;
(8) Renew or extend, or to participate in the renewal or extension of, any
mortgage, upon such terms as may be deemed advisable by the Plan Administrator
or the Investment Manager, as the case may be;
(9) Vote upon any stocks, bonds or other securities; to give general or
special proxies or powers of attorney with or without powers of substitution; to
exercise any conversion privileges, subscription rights or other options, and to
make payments incidental thereto; to oppose, or to consent to, or otherwise
participate in, corporate reorganizations or other changes affecting corporate
securities, and to delegate discretionary powers, and to pay any assessments or
charges in connection therewith; to abandon any property determined by it to be
worthless; and generally to exercise any of the powers of an owner with respect
to stocks, bonds, securities and other property held as part of the Trust.
(10) Borrow or raise monies for the purposes of the Trust from anyone (other
than a "party in interest" as defined in Section 3(14) of ERISA) in such amount,
and upon such terms and conditions, as the Plan Administrator may deem
advisable; 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; and no person lending money to the Trustee shall be bound to see to
the application of the money lent or to inquire into the validity, expediency or
propriety of such borrowing; it being intended that the Trustee shall also have
the power to borrow from itself;
(11) Settle, compromise, or submit to arbitration any claims, debts or
damages due or owing from the Trust, to commence or defend suits or legal or
administrative proceedings, and to represent the Trust in all suits and legal
and administrative proceedings;
(12) Repair, alter or improve any buildings which may be on any real estate
forming part of the Trust or to erect an entirely new structure thereon;
(13) Register any investment held as part of the Trust Fund in its own name
or in the name of a nominee or to hold any investment in bearer form; provided,
however, that the books and records of the Trustee shall at all time show that
all such investments are part of the Trust;
(14) Engage such attorneys, investment advisors, accountants and such other
advisors as it may deem necessary or helpful in connection with the
administration of the Trust, at such wages, fees, remuneration, consideration or
otherwise, and upon such terms and conditions as it shall deem proper. Such
compensation shall in no event be deducted from any commissions or other
compensation payable to the Trustee;
(15) 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;
(16) Lend or borrow securities, write or sell options or futures or enter
into repurchase agreements unless specifically prohibited by the Plan
Administrator, subject to such restrictions as the Trustee in its sole
discretion may impose;
(17) Do all such acts, and exercise all such rights and privileges, although
not specifically mentioned herein, as may be necessary or proper for the
accomplishment of the purposes for which the Trust is established; and
(18) Settle securities trades effected by the Administrator or the
Investment Manager through a securities depository utilizing an institutional
delivery system. In such event, the Trustee may deliver or receive securities in
accordance with appropriate trade reports or statements given to the Trustee by
the depository without having received communications or instructions directly
from the Administrator or the Investment Manager.
(C) The Trustee shall receive from the Employer its contributions in cash made
under the Plan. If Participant contributions are required under the Plan, the
Trustee shall receive from the Employer such Participant contributions in cash.
All contributions so received, together with the income and earnings therefrom
and any increments thereto, shall be held,
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Defined Contribution Plan and Trust Document
managed, and administered in trust pursuant to the terms of this Plan and Trust,
to provide benefits under the Plan according to its terms. The Trustee shall be
under no duty to determine whether any contribution made to this Trust is in a
proper amount; nor shall the Trustee have any duty or responsibility to collect
any sum which the Employer is to contribute under this Trust.
(D) The Trustee shall from time to time, on the written directions of the
Administrator, make benefit payments out of the Trust to Participants or
Beneficiaries in such manner, in such amounts, and for such purposes as may be
specified by the Administrator. The Trustee shall not be responsible in any way
for the purpose or application of such payments.
The Trustee shall not be required to make any investigation beyond contacting
the Social Security Administration to determine the mailing address of any
retired or terminated Participant entitled to benefits under this agreement, or
to determine the identity and mailing address of any person entitled to death
benefits, and shall be entitled to withhold making any payments or deliveries
until such mailing address of retired or terminated Participants, and identity
and mailing address of persons entitled to death benefits, have been certified
to the Trustee by the Administrator or Social Security Administration.
(E) As agreed upon from time to time by the Employer and Trustee, the Trustee
may be paid reasonable compensation for services rendered, or reimbursed
expenses properly and actually incurred in the performance of duties with
respect to the Trust. However, no Trustee who already receives full time pay
from the Employer shall receive compensation from such Trust, except for
reimbursement of expenses properly and actually incurred. In the absence of
specific arrangement for such payments, any compensation or reimbursed expenses
shall be withdrawn by the Trustee from the Trust, unless paid by the Employer.
Such compensation shall include accounting, legal and administrative services
rendered by or to the Trustee unless specifically excluded by appropriate
written agreement. If so excluded, the Trustee may charge and withdraw from the
Trust the cost of such services as may be authorized by the Employer. To the
extent that the Trustee fees are to be charged against Employee contributions,
the Employer shall so advise each Participant.
(F) The Trustee shall keep accurate and detailed records of the administration
of the Trust hereunder which shall be open to inspection at all reasonable times
by any person designated by the Administrator or by the Board. At the end of
each Plan Year, as soon as is practicable after the close of such other periods
as may be agreed upon between the Trustee and the Employer and within sixty (60)
days after the removal or resignation of the Trustee, the Trustee shall file
with the Employer a written report setting forth all investments, receipts,
disbursements and other transactions effected by it during such Plan Year or
other period. The report shall contain an exact description of all securities,
contracts, or other property purchased and sold, the cost or net proceeds of
sale, (excluding accrued interest paid or received), and showing the securities
and investments held at the end of such Plan Year or other period, and the cost
and fair market value of each item thereof as carried on the books of the
Trustee, and the total market value of the Trust at the end of such Plan Year or
other period. The approval of the Administrator, or the lack of written
objection from him within sixty (60) days after submission, of any report or
accounting by the Trustee shall be a complete release and discharge to the
Trustee and shall be binding upon all Participants and all persons claiming in
place of or through such Participants, provided that they do not contain any
statement that is a result of a breach of any fiduciary duty by the Trustee or
they do not omit or conceal such breach. If the Trustee shall determine that the
Trust consists in whole or in part of property not traded freely on a recognized
market, or that information necessary to ascertain the fair market value thereof
is not readily available to the Trustee, the Trustee shall request the party
determining investment policy to instruct the Trustee as to the value of such
property for all purposes under the Plan and Trust, and such party shall comply
with such request. The value placed upon such property by such party in its
instructions to the Trustee shall be conclusive and binding upon the Employer,
the Administrator, Participants, their Beneficiaries and all other persons with
an interest herein. If such party determining investment policy fails or refuses
to instruct the Trustee as to the value of such property
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Defined Contribution Plan and Trust Document
within a reasonable time after receipt of the Trustee's request, the Trustee
shall engage a competent appraiser to fix the fair market value of such property
for all purposes hereunder. The determination of any such property shall be
conclusive upon all parties interested therein and the Trustee shall have no
liability in connection therewith. The reasonable fees and expenses incurred for
any such appraisal shall be paid by the Trustee out of the Trust or, at the
option of the Employer, by the Employer. The Trustee shall prepare and file such
other reports, publications, statements, tax returns and forms required to be
filed by the Trustee with the Secretary of Labor or Secretary of Treasury as the
Trustee shall agree to undertake.
(G) If the Administrator directs, the Trustee will commingle into one Trust
the assets of two or more Employer plans each of which shall be qualified under
Section 401(a) of the Internal Revenue Code. The Trustee shall have no
responsibility to determine the value of each separate plan; such responsibility
shall remain with the Administrator. Should one or more plans be disqualified,
the Administrator shall notify the Trustee and the Trustee shall segregate the
funds of such plan or plans.
(H) If the Administrator directs, the Trustee shall keep full accounts of all
receipts and disbursements for each Participant's account. The Trustee shall
render an annual report for each Participant's account to the Plan Administrator
within sixty (60) days after the end of each Plan Year, said report to contain a
complete accounting showing the total assets in the Trust and the fair market
value of such assets as of that date, as well as a statement of purchases, sales
and any investment changes and all income, expenses and disbursements since the
last such report.
(I) Notwithstanding any other provision contained in this Trust, the Trustee,
at the direction of the Administrator and at the election of the Participant,
shall transfer, upon termination of a Participant, the non-forfeitable interest
to another trust forming part of a pension, profit sharing or stock bonus plan
maintained by such Participant's new employer and meeting the requirements of
Code Section 401(a), provided that the trust to which such transfers are made
permits the transfer to be made. With the consent of the Administrator, the
Trustee may accept funds transferred from another Trust forming part of a
pension, profit sharing or stock bonus plan maintained by such Participant's
previous employer and meeting the requirements of Internal Revenue Code Section
401(a) for the account of a Participant under this Plan, provided that the trust
from which such funds are transferred permits the transfer to be made and, in
the opinion of legal counsel for the Employer, the transfer will not jeopardize
the exempt status of the Trust or create adverse tax consequences to the
Employer. In the event of such a transfer to a Participant's account under this
Trust, the Trustee shall maintain a separate, non-forfeitable account for the
amount transferred and its share of the gains or losses of the Trust hereafter,
as provided under Section 4.7.
(J) The duties and responsibilities of the Trustee shall be solely those set
forth in this document and the Trustee shall not have the authority to interpret
the Plan.
10.5 INVESTMENT OF TRUST ASSETS
(A) If an individual Trustee has been appointed by the Board, the Trustee
shall have the authority and duty to direct the investment and management of all
of the Trust assets and the Trustee shall be the fiduciary with respect to the
investment and management of such Trust assets and the Administrator shall have
no responsibility therefore, to the extent that such authority and duty has not
been delegated to the Administrator or an Investment Manager by the Board. If
more than one (1) individual Trustee is appointed by the Board, each such
individual Trustee shall have full investment and management powers with respect
to the Trust assets as if such Trustee was the sole Trustee, unless such
investment and management authority is restricted by the Board or the
Administrator.
(B) If a bank or other corporate Trustee has been appointed by the Board, the
Administrator shall have the authority and duty to direct the investment and
management of all of the Trust assets, to the extent that such authority and
duty has not been delegated to the Trustee or an Investment Manager by the
Administrator.
(1) The Administrator may by appropriate action appoint the Trustee to
direct the investment and management of all or a portion of the assets of the
Trust pursuant to the powers enumerated in Section 10.5. Written direction of
the Administrator's action shall be
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Defined Contribution Plan and Trust Document
delivered to the Trustee whereupon the Trustee shall be the fiduciary with
respect to the investment and management of such Trust assets and the
Administrator shall have no responsibility therefore. Any transfer of investment
and management to the Trustee may be revoked by a written notice to that effect
by the Administrator.
(C) The Board or the Administrator, by appropriate action, may appoint an
Investment Manager to direct the Trustee to invest and manage all or a portion
of the assets of the Trust pursuant to the powers enumerated in Section 10.5. If
investment of the Trust Fund is to be directed in whole or in part by an
Investment Manager, the Plan Administrator shall deliver to the Trustee a copy
of each of the following documents: (1) Instrument appointing the Investment
Manager; (2) Instrument evidencing the Investment Manager's acceptance of such
appointment; (3) Investment Manager's acknowledgment that it is a fiduciary of
the Plan; and (4) Certificate evidencing the Investment Manager's current
registration under the Investment Advisor's Act of 1940, whereupon the
Investment Manager shall be the fiduciary with respect to the investment and
management of such Trust assets and the Administrator and the Trustee shall have
no responsibility therefore. The Trustee shall be fully protected in relying
upon such documents until such time as it is otherwise notified in writing of
some change by the Plan Administrator.
(D) The party who has been charged with the duty and authority to direct the
investment and management of Trust assets shall have such powers as may from
time to time be necessary, appropriate or expedient to perform its functions in
the management of the Trust. The term "Power" is used herein in its broad sense
and as including powers, implied powers, rights, privileges and immunities.
Without limiting the foregoing, such party shall have the following enumerated
powers:
(1) To sell, convey, exchange, lease, convert, transfer, divide, repair,
partition, consent to partition, or otherwise dispose of any property at any
time held in trust hereunder;
(2) Subject to the provisions of Sections 404, 405 and 407 of ERISA, to
invest and reinvest the Trust and keep the Trust invested, without distinction
between principal and income in such securities or in such property, real or
personal, wherever situated, as they shall deem advisable, including, but not
limited to, annuity contracts, insurance contracts, real estate, management
commodity assets, stocks, common or preferred, option, futures, contract options
on futures in trust and participation certificates, bonds and mortgages
(including part interests in bonds and mortgages or notes and mortgages insured
by the Federal Housing Administration), leaseholds on improved and unimproved
real estate, qualifying securities or qualifying real property of the Employer
or any of its affiliates to the maximum extent permitted under ERISA,
partnership interests, interests in joint ventures, insurance company investment
contracts, trust funds established by the Trustee, common or collective trust
funds or pooled investment funds maintained for the investment of qualified
retirement trusts by a bank, trust company or other financial institution acting
in a fiduciary or custodial capacity for the Plan, (investment in a common or
collective trust fund or pooled investment funds shall constitute the adoption
of the instrument or agreement creating such fund), and other evidences of
indebtedness or ownership;
(3) Borrow money, and to secure the same by mortgage, deed of trust, or
pledge of the Trust, or any assets constituting a part thereof, and to pay and
discharge any and all indebtedness of the Trust or any liens or other charges
against the Trust;
(4) Borrow the cash values of annuity or insurance contracts. Such borrowed
funds may be invested in any security or other property including premiums for
insurance or annuity contracts. Notwithstanding anything herein to the contrary,
the Administrator will only direct the Trustee to exercise its power hereunder
to the extent that the unborrowed cash values of the contracts issued to the
accounts of highly compensated Participants and officers or shareholders of the
Employer are proportionally no greater than the unborrowed cash values of
insurance contracts issued to the accounts of other Participants;
(5) To have, with respect to bonds, shares of stock and other securities,
all the rights, powers and privileges of an owner, including holding securities
in the name of the Trustee or in the name of a nominee with or without
disclosures of the Trust, voting, giving proxies, making payment of calls,
assessments, or other sums deemed by the Trustee expedient for the
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Defined Contribution Plan and Trust Document
protection of the Trust, exchanging securities, selling or exercising stock
subscriptions or conversion rights, participating in foreclosures,
reorganizations, consolidations, mergers, liquidations, pooling agreements,
voting trusts, and assenting to corporate sales, leases and encumbrances;
(6) Settle, compromise or submit to arbitration any claims, debts, or
damages due or owing to or from the Trust; to commence to defend legal
proceedings for or against the Trust; and to represent the Trust in all
proceedings in any court of law or equity or before any other body or tribunal.
The Trustee shall not exercise these powers conferred on it without first giving
notice of the action proposed to be taken by the Administrator and obtaining
written approval of such action from the Administrator;
(7) Invest, on a uniform basis for all Participants, in an annual premium
contract on his life issued by a legal reserve life insurance company and, if
permitted by the policy purchased, at the Participant's retirement, to pay to
such insurance company additional amounts from the Participant's account for the
purpose of converting such policy so as to provide a retirement income;
(8) Invest in any common or collective trust funds in which an Employee
Benefit Trust is eligible to participate if such trust is established and
maintained by the Trustee. The Declaration of Trust, as amended from time to
time, shall be deemed to be a part hereof to the same extent as if fully set
forth at length herein at the time of execution; and
(9) Deposit funds in any interest bearing savings account at the bank which
may also serve as Trustee.
(E) If a Participant or Beneficiary exercises control over the assets in his
account under the Plan, the Trustee shall invest such account as directed by
such Participant or Beneficiary in writing. Provided, however, that the Trustee
shall have no duty or obligation with respect to any such individually directed
investments beyond the duties and obligations imposed upon the Trustee in this
Section 10 with respect to non-individually directed investments.
(F) All directions concerning investments made by the Administrator or the
Investment Manager shall be verbal unless the Trustee requires written
confirmation. The Trustee shall be under no duty to question any directions of
the Administrator or Investment Manager nor to review any securities or other
property of the Trust constituting assets thereof with respect to which the
Administrator or the Investment Manager has investment responsibility, nor to
make any suggestions to such Administrator or the Investment Manager in
connection therewith. The Trustee shall, as promptly as possible, comply with
any written directions given by the Administrator or the Investment Manager
hereunder. The Trustee shall not be liable, in any manner nor for any reason,
for the making or retention of any investment pursuant to such directions of the
Administrator or the Investment Manager, nor shall the Trustee be liable for its
failure to invest any or all of the Trust in the absence of such written
direction. The Administrator or the Investment Manager shall not direct the
purchase, sale or retention of any assets of the Trust if such directions are
not in compliance with the applicable provision of ERISA and any Regulations or
Rulings issued thereunder.
(G) The Trustee shall not be liable nor responsible for losses or unfavorable
results arising from the Trustee's compliance with proper directions of the
Administrator or Investment Manager which are made in accordance with the terms
of the Plan and Trust and which are not contrary to the provisions of any
applicable Federal or State statute regulating such investment and management of
the assets of any employee benefit trust.
10.6 MISCELLANEOUS
(A) This Trust is declared to be irrevocable. However, although the Employer
has established the Trust with the bona fide intention and expectation that it
will be able to make contributions to it indefinitely, the Employer is not and
shall not be under any obligation or liability whatsoever to continue its
contributions or to maintain the Plan for any given length of time. The Employer
may in its sole and absolute discretion completely discontinue its contributions
or terminate the Trust in accordance with the provisions of the Plan at any
time. Unless sooner terminated in accordance with the other provisions of this
agreement, this Trust shall in any event terminate:
(1) Upon the date specified in a written notice of
termination of the Plan and Trust, executed by the
Employer and delivered to the Trustee; or
(2) Upon the complete accomplishment of all the
purposes for which the Plan is created.
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Defined Contribution Plan and Trust Document
The assets of a Plan shall never inure to the benefit of any Employer and
shall be held for the exclusive purposes of providing benefits to Participants
in the Plan and their Beneficiaries and defraying reasonable expenses of
administering the Trust. Any contribution made by the Employer because of a
mistake of fact must be returned to the Employer within one year of the
contribution. In the event that the Commissioner of Internal Revenue determines
that the Plan is not initially qualified under the Internal Revenue Code, any
contribution made incident to that initial qualification by the Employer must be
returned to the Employer within one year after the date the initial
qualification is denied, 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.
(B) The Trustee and the Administrator as well as all other fiduciaries under
the Trust shall discharge their duties with respect to this Trust solely in the
interest of the Participants and their Beneficiaries; and,
(1) For the exclusive purpose of providing benefits to Participants and
their Beneficiaries, and defraying reasonable expenses of administering this
Trust;
(2) Acting prudently, 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;
(3) By diversifying the investments of the Trust so as to minimize the risk
of large losses, unless under the circumstances it is clearly not prudent to do
so; and
(4) In accordance with the terms of this Trust insofar as they are
consistent with Title I of the Employee Retirement Income Security Act of 1974.
(C) The Trust created hereby shall not terminate or be held to have terminated
upon any theory of merger based on the fact that the same persons are, by the
terms of this instrument, made sole Participant and Trustee of said Trust; and
said Participants are expressly given the right and privilege to participate in
the profits, dividends, earnings and increases thereof, without regard to the
relation as Trustee which such Participants may bear to said Trust.
(D) The Trust will be administered in the Home State of the Trustee, and its
validity, construction, and all rights hereunder shall be governed by ERISA and,
to the extent not preempted, by the laws of the Home State of the Trustee. If
any provisions of this Agreement shall be invalid or unenforceable, the
remaining provisions shall continue to be fully effective.
10.10 LOANS TO PARTICIPANTS
(A) All loans shall be adequately secured by the assignment of fifty percent
of the Participant's vested Accrued Benefit in the plan and such other security
as the Plan Administrator deems appropriate under the circumstances. The loan
shall be evidenced by the Participant's collateral promissory note payable to
the Trustee describing the amount, term and security for the loan.
11.0 CASH OR DEFERRED ARRANGEMENT
(The Plan Sponsor may choose to offer this provision
in his Plan)
11.1 PURPOSE AND EFFECTIVE DATE
(A) Purpose. If so elected in the cash or deferred arrangement (CODA) adoption
agreement, it is the intention of the Employer to incorporate a CODA, which
satisfies the requirements of Section 401(k) of the Code, as part of its profit
sharing plan.
(B) Effective Date. The CODA is effective upon
adoption by the adopting employer.
11.2 ELIGIBILITY TO PARTICIPATE
(A) Notwithstanding any other provision of the Plan, an Employee will be
eligible to make Elective Deferrals on the Entry Date next following the earlier
of:
(1) The date on which the Employee meets the age
and service requirements specified in Section 6 of the
Adoption Agreement, or
(2) The date on which the Employee attains age 21 and is credited with one
(1) Year of Service.
11.3 DEFINITIONS
The following definitions shall apply for purposes of this amendment only:
(A) "Actual Deferral Percentage" or "ADP" shall
mean, for a specified group of Participants for a Plan
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Defined Contribution Plan and Trust Document
Year, the average of the ratios (calculated separately
for each Participant in such group) of
(1) The amount of Employer contributions actually paid over to the trust on
behalf of such Participant for the Plan Year to
(2) The Participant's Compensation for such Plan Year (whether or not the
Employee was a Participant for the entire Plan Year). Employer contributions on
behalf of any Participant shall include:
(a) Any Elective Deferrals made pursuant to the Participant's deferral
election, including Excess Elective Deferrals, but excluding Elective Deferrals
that are taken into account in the Contribution Percentage test (provided the
ADP test is satisfied both with and without exclusion of these Elective
Deferrals); and
(b) At the election of the Employer, Qualified Non-elective Contributions
and Qualified Matching Contributions. For purposes of computing Actual Deferral
Percentages, an Employee who would be a Participant but for the failure to make
Elective Deferrals shall be treated as a Participant on whose behalf no Elective
Deferrals are made.
(B) "Adjustment Factor" shall mean the cost of living factor prescribed by the
Secretary of the Treasury under Section 415(d) of the Code for years beginning
after December 31, 1987, as applied to such items and in such manner as the
Secretary shall provide.
(C) "Affiliated Employer" shall mean 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; any organization (whether or not incorporated) which is a member
of an affiliated service group (as defined in Section 414(m) of the Code) which
includes the Employer; and any other entity required to be aggregated with the
Employer pursuant to regulations under Section 414(o) of the Code.
(D) "Average Actual Deferral Percentage" shall mean the average (expressed as
a percentage) of the Actual Deferral Percentages of the Participants in a group.
(E) "Code" shall mean the Internal Revenue Code of 1986.
(F) "Compensation" shall mean, unless otherwise elected in the CODA adoption
agreement, compensation paid by the Employer to the Participant during the Plan
Year which is required to be reported as wages on the Participant's Form W-2, or
which, in the case of a self-employed individual, constitutes payment for
services includible in the self-employed individual's gross income. For purposes
of the EZFLEX Adoption Agreement: the Employer may elect that Compensation shall
not include earnings prior to the date an Employee became a Plan Participant.
This definition shall apply solely for purposes of determining the Actual
Deferral Percentage under Section 11.4(F) and the Contribution Percentage under
Section 11.8(A).
(G) "Elective Deferrals" shall mean any Employer contributions made to the
Plan at the election of the Participant, in lieu of cash Compensation, and shall
include contributions made pursuant to a salary reduction agreement or other
deferral mechanism. With respect to any taxable year, a Participant's Elective
Deferral is the sum of all Employer contributions made on behalf of such
Participant pursuant to an election to defer under any qualified CODA as
described in Section 401(k) of the Code, any simplified employee pension cash or
deferred arrangement as described in Section 402(h)(1)(B), any eligible deferred
compensation plan under Section 457, any plan as described under Section
501(c)(18), and any Employer contributions made on the behalf of a Participant
for the purchase of an annuity contract under Section 403(b) pursuant to a
salary reduction agreement.
(H) "Employee" shall mean employees of the Employer and shall include leased
employees within the meaning of Section 414(n)(2) of the Code. Notwithstanding
the foregoing, if such leased employees constitute less than twenty (20) percent
of the Employer's Non-highly Compensated work force within the meaning of
Section 414(n)(5)(C)(ii) of the Code, the term "Employee" shall not include
those leased employees covered by a plan described in Section 414(n)(5)(B) of
the Code unless otherwise provided by the terms of this plan other than this
amendment.
(I) "Employee Contributions" shall mean contributions to the plan made by a
Participant during the Plan Year.
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Defined Contribution Plan and Trust Document
(J) "Employer" shall mean the entity that establishes or maintains the plan,
any successor to such entity, and any Affiliated Employer.
(K) "Excess Contributions" shall mean, with respect to any Plan Year, the
excess of:
(1) The aggregate amount of employer contributions actually taken into
account in computing the ADP of Highly Compensated Employees for such Plan Year,
over
(2) The maximum amount of such contributions permitted by the ADP test
(determined by reducing contributions made on behalf of Highly Compensated
Employees in order of the ADPs, beginning with the highest of such percentages).
(L) "Excess Elective Deferrals" shall mean those Elective Deferrals that are
includible in a participant's gross income under Section 402(g) of the Code to
the extent such participant's Elective Deferrals for a taxable year exceed the
dollar limitation under such Code section. Excess Elective Deferrals shall be
treated as annual additions under the plan.
(M) "Family Member" shall mean an individual described in Section 414(q)(6)(B)
of the Code.
(N) "Highly Compensated Employee" shall mean an Employee described in Section
2.23 of the Plan and in Section 414(q) of the Code. (O) "Matching Contribution"
shall mean any contribution to the plan made by the Employer for the Plan Year
and allocated to a Participant's account by reason of the Participant's Employee
Contributions or Elective Deferrals. Matching Contributions are subject to the
distribution provisions applicable to Employer contributions in the underlying
Plan document.
(P) "Non-highly Compensated Employee" shall mean the Employee of the Employer
who is neither a Highly Compensated Employee nor a Family Member.
(Q) "Participant" shall mean any Employee of the Employer who has met the
eligibility and participation requirements of the Plan.
(R) "Plan Year" shall mean the Plan Year otherwise specified in the Plan.
(S) "Qualified Non-elective Contributions" shall mean contributions (other
than Matching Contributions or Qualified Matching Contributions) made by the
Employer and allocated to Participant's accounts that the Participants may not
elect to receive in cash until distributed from the Plan; that are
nonforfeitable when made; and that are distributable only in accordance with the
distribution provisions that are applicable to Elective Deferrals and Qualified
Matching Contributions.
(T) "Qualified Matching Contributions" shall mean Matching Contributions which
are subject to the distribution and nonforfeitability requirements under Section
401(k) of the Code when made.
11.4 ELECTIVE DEFERRALS
(A) Allocation of Deferrals. The Employer shall contribute and allocate to
each Participant's Elective Deferral account an amount equal to the amount of a
Participant's Elective Deferrals.
(B) Elective Deferrals Pursuant to a Salary Reduction Agreement. To the extent
provided in the CODA adoption agreement, a Participant may elect to have
Elective Deferrals made under this plan. Elective Deferrals shall include both
single-sum and continuing contributions made pursuant to a salary reduction
agreement. A Participant shall designate the amount and frequency of his or her
Elective Deferrals in the form and manner specified by the Plan Administrator.
(1) Commencement of Elective Deferrals: A Participant shall be afforded a
reasonable period at least once each calendar year, as specified in Section 10.2
of the CODA adoption agreement, to elect to commence Elective Deferrals. Such
election shall not become effective before the time specified in Section 10.2 of
the CODA adoption agreement.
(2) Modification and Termination of Elective Deferrals. A Participant's
election to commence Elective Deferrals shall remain in effect until modified or
terminated. A Participant shall be afforded a reasonable period at least once
each calendar year, as specified in Section 10.2(e) of the CODA adoption
agreement, to modify the amount or frequency of his or her Elective Deferrals. A
Participant may terminate his or her election to make Elective Deferrals at any
time.
(C) Cash bonuses. To the extent provided in Section 10.2 of the CODA adoption
agreement, a Participant may also base Elective Deferrals on cash bonuses that,
at the Participant's election, may be contributed to the CODA or received by the
Participant in cash.
(1) Time and Manner of Election. A Participant
shall be afforded a reasonable period, as provided in
Section 10.2(f) of the CODA adoption agreement, to
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Defined Contribution Plan and Trust Document
elect to defer amounts described in Section 11.4(c) above to the CODA. Such
election shall not become effective before the time specified in Section 10.2(a)
of the CODA adoption agreement.
(D) Maximum Amount of Elective Deferrals. A Participant's Elective Deferrals
are subject to any limitations imposed in Section 10.2 of the CODA adoption
agreement and any further limitations under the plan. No Participant shall be
permitted to have Elective Deferrals made under this Plan during any calendar
year in excess of the maximum dollar limitation under Section 402(g) of the Code
in effect at the beginning of the calendar year.
(E) Distribution of Excess Elective Deferrals. A participant may assign to
this Plan any Excess Elective Deferrals made during a taxable year of the
Participant by notifying the Plan Administrator on or before the date specified
in the adoption agreement of the amount of the Excess Elective Deferrals to be
assigned to the Plan. Notwithstanding any other provisions of the Plan, Excess
Elective Deferrals, plus any income and minus any loss allocable thereto, shall
be distributed no later than April 15 to any Participant to whose account Excess
Elective Deferrals were assigned for the preceding year and who claims Excess
Elective Deferrals for such taxable year.
(1) The Participant's claim shall be in writing; shall be submitted to the
plan administrator not later than the date elected in Section 15 of the CODA
adoption agreement; shall specify the amount of the Participant's Excess
Elective Deferral for the preceding calendar year; and shall be accompanied by
the Participant's written statement that if such amounts are not distributed,
such Excess Elective Deferrals, when added to amounts deferred under other plans
or arrangements described in Sections 401(k), 408(k), or 403(b) of the Code,
will exceed the limit imposed on the Participant by Section 402(g) of the Code
for the year in which the deferral occurred.
(2) Determination of income and loss: Excess Elective Deferrals shall be
adjusted for any income or loss up to the date of distribution. The income or
loss allocable to Excess Elective Deferrals is the sum of:
(a) Income or loss allocable to the Participant's Elective Deferral
account for the taxable year multiplied by a fraction, the numerator of which is
such Participant's Excess Elective Deferrals for the year and the denominator is
the Participant's account balance attributable to Elective Deferrals without
regard to any income or loss occurring during such taxable year; and
(b) Ten percent of the amount determined under (a) multiplied by the
number of whole calendar months between the end of the Participant's taxable
year and the date of distribution, counting the month of distribution if
distribution occurs after the 15th of such month.
(F) Actual Deferral Percentage. The Actual Deferral Percentage "ADP" for
Participants who are Highly Compensated Employees for each Plan Year and the ADP
for Participants who are Non-highly Compensated Employees for the same Plan Year
must satisfy one of the following tests:
(1) The ADP for Participants who are Highly Compensated Employees for the
Plan Year shall not exceed the ADP for Participants who are Non-highly
Compensated Employees for the Plan Year multiplied by 1.25; or
(2) The ADP for Participants who are Highly Compensated Employees for the
Plan Year shall not exceed the ADP for Participants who are Non-highly
Compensated Employees for the Plan Year multiplied by 2.0, provided that the ADP
for Participants who are Highly Compensated Employees does not exceed the ADP
for Participants who are Non-highly Compensated Employees by more than two (2)
percentage points.
(G) Special Rules:
(1) The ADP for any Participant who is a Highly Compensated Employee for the
Plan Year and who is eligible to have Elective Deferrals (and Qualified
Non-elective Contributions or Qualified Matching Contributions, or both, if
treated as Elective Deferrals for purposes of the ADP test) allocated to his
accounts under two or more arrangements described in Section 401(k) of the Code,
that are maintained by the Employer, shall be determined as if such Elective
Deferrals (and, if applicable, such Qualified Non-elective Contributions or
Qualified Matching Contributions, or both) were made under a single arrangement.
If a Highly Compensated Employee participates in two or more cash or deferred
arrangements that have different Plan Years, all cash or deferred arrangements
ending with or within the same calendar year shall be treated as a single
arrangement.
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Defined Contribution Plan and Trust Document
(2) In the event that this Plan satisfies the requirements of Section
401(k), 401(a)(4), or 410(b) of the Code only if aggregated with one or more
other plans, or if one or more other plans satisfy the requirements of such
sections of the Code only if aggregated with this Plan, then this Section shall
be applied by determining the ADP of Employees as if all such plans were a
single plan. For Plan Years beginning after December 31, 1989, plans may be
aggregated in order to satisfy Section 401(k) of the Code only if they have the
same Plan Year.
(3) For purposes of determining the ADP of a Participant who is a 5-percent
owner or one of the ten most highly-paid Highly Compensated Employees, the
Elective Deferrals (and Qualified Non-elective Contributions or Qualified
Matching Contributions, or both, if treated as Elective Deferrals for purposes
of the ADP test) and Compensation of such Participant shall include the Elective
Deferrals (and, if applicable, Qualified Non-elective Contributions and
Qualified Matching Contributions, or both) and Compensation for the Plan Year of
Family Members (as defined in Section 414(q)(6) of the Code). Family Members,
with respect to such Highly Compensated Employees, shall be disregarded as
separate employees in determining the ADP both for Participants who are
Non-highly Compensated Employees and for Participants who are Highly Compensated
Employees.
(4) For purposes of determining the ADP test, Elective Deferrals, Qualified
Non-elective Contributions and Qualified Matching Contributions must be made
before the last day of the twelve-month period immediately following the Plan
Year to which
contributions relate.
(5) The Employer shall maintain records sufficient to demonstrate
satisfaction of the ADP test and the amount of Qualified Non-elective
Contributions or Qualified Matching Contributions, or both, used in such test.
(6) The determination and treatment of the ADP amounts of any participant
shall satisfy such other requirements as may be prescribed by the Secretary of
the Treasury.
(H) Distribution of Excess Contributions. Notwithstanding any other provision
of this Plan, Excess Contributions, plus any income and minus any loss allocable
thereto, shall be distributed no later than the last day of each Plan Year to
Participants to whose accounts such Excess Contributions were allocated for the
preceding Plan Year. If such excess amounts are distributed more than 2 1/2
months after the last day of the Plan Year in which such excess amounts arose, a
ten (10) percent excise tax will be imposed on the Employer maintaining the Plan
with respect to such amounts. Such distributions shall be made to Highly
Compensated Employees on the basis of the respective portions of the Excess
Contributions attributable to each of such Employees. Excess Contributions shall
be allocated to Participants who are subject to the family member aggregation
rules of Section 414(q)(6) of the Code in the manner prescribed by the
regulations. Excess Contributions (including the amounts recharacterized) shall
be treated as Annual Additions under the Plan.
(1) Determination of Income or Loss: Excess Contributions shall be adjusted
for any income or loss up to the date of distribution. The income or loss
allocable to Excess Contributions is the sum of:
(a) Income or loss allocable to the Participant's Elective Deferral
account (and, if applicable, the Qualified Non-elective Contribution account or
the Qualified Matching Contributions account or both) for the Plan Year
multiplied by a fraction, the numerator of which is such Participant's Excess
Contributions for the year and the denominator is the Participant's account
balance attributable to Elective Deferrals (and Qualified Non-Elective
Contributions or Qualified Matching Contributions, or both, if any of such
contributions are included in the ADP test) without regard to any income or loss
occurring during such Plan Year; and
(b) Ten Percent of the amount determined under (a) multiplied by the
number of whole calendar months between the end of the Plan Year and the date of
distribution, counting the month of distribution if distribution occurs after
the 15th of such month.
(2) Accounting for Excess Contributions: Excess Contributions shall be
distributed from the Participant's Elective Deferral account and Qualified
Matching Contribution account (if applicable) in proportion to the Participant's
Elective Deferrals and Qualified Matching Contributions (to the extent used in
the ADP test) for the Plan Year. Excess Contributions shall be distributed from
the Participant's Qualified
DCSTRPG792 Page 51
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Defined Contribution Plan and Trust Document
Non-elective Contribution account only to the extent that such Excess
Contributions exceed the balance in the Participant's Elective Deferral account
and Qualified Matching Contribution account.
(3) A Participant may treat his Excess Contributions as an amount
distributed to the Participant and then contributed by the Participant to the
Plan. Recharacterized amounts will remain nonforfeitable and subject to the same
distribution requirements as Elective Deferrals. Amounts may not be
recharacterized by a Highly Compensated Employee to the extent that such amount
in combination with other Employee Contributions made by that Employee would
exceed any stated limit under the Plan on Employee Contributions.
Recharacterization must occur no later than two and one-half months after the
last day of the Plan Year in which such Excess Contributions arose and is deemed
to occur no earlier than the date the last Highly Compensated Employee is
informed in writing of the amount recharacterized and the consequences thereof.
Recharacterized amounts will be taxable to the Participant for the Participant's
tax year in which the Participant would have received them in cash.
(I) Qualified Non-Elective Contributions
(1) The Employer may elect to make Qualified
Non-elective Contributions under the Plan on behalf of Employees as provided in
the Adoption Agreement.
(2) In addition, in lieu of distributing Excess Contributions as provided in
Section 11.4(H) of the Plan, or Excess Aggregate Contributions as provided in
Section 11.8(D) of the Plan, and to the extent elected by the Employer in the
Adoption Agreement, the Employer may make Qualified Non-elective Contributions
on behalf of Non-highly Compensated Employees that are sufficient to satisfy
either the Actual Deferral Percentage test or the Average Contribution
Percentage test, or both, pursuant to regulations under the Code.
(J) Separate Accounts. A separate account shall be maintained for that portion
of a Participant's accrued benefit that is attributable to Elective Deferrals
and a separate account shall be maintained for that portion of a Participant's
accrued benefit that is attributable to Qualified Non-elective Contributions.
Each separate account shall be credited with the applicable contributions,
earnings and losses, distributions, and other applicable adjustments.
(K) Under no circumstances may Elective Deferrals and Qualified Non-elective
Contributions be contributed and allocated to the trust under the plan later
than thirty (30) days after the close of the Plan Year for which the
contributions are deemed to be made, or such other time as provided in
applicable regulations under the Code.
11.5 TOP-HEAVY REQUIREMENTS
(A) If the underlying plan document does not
designate another plan to satisfy the top-heavy requirements of Section 416 of
the Code, or if the underlying plan document allocates less than three (3)
percent of each Non-key Employee's top-heavy Compensation under the Plan to such
Participant's account for a Plan Year, then the minimum top-heavy allocation
under the Plan shall be allocated on behalf of Non-key Employees in accordance
with Section 416 of the Code. Such allocation shall not be less than the lesser
of three (3) percent 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 $200,000 of the Key Employee's
compensation, allocated on behalf of any Key Employee for that year.
(B) For purposes of satisfying the minimum contribution on behalf of each
Non-key Employee under Section 11.5(A) above, Elective Deferrals and Matching
Contributions shall not be taken into account.
(C) For purposes of determining whether a plan is top-heavy under Section 416
of the Code, Elective Deferrals are considered employer contributions.
11.6 SPECIAL DISTRIBUTION RULES
(A) Elective Deferrals, Qualified Non-elective Contributions and Qualified
Matching Contributions and income allocable thereto are not distributable to the
Participant, or the Participant's Beneficiary or Beneficiaries, in accordance
with the Participant's or Beneficiary's election, earlier than upon separation
from service, death, or disability.
(B) Such amounts may also be distributed upon:
(1) Termination of the Plan without the
establishment of another defined contribution plan.
(2) The disposition by a corporation to an unrelated
DCSTRPG792 Page 52
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Defined Contribution Plan and Trust Document
corporation of substantially all of the assets (within the meaning of Section
409(d)(2) of the Code) used in a trade or business of such corporation if such
corporation continues to maintain this Plan after the disposition, but only with
respect to Employees who continue employment with the corporation acquiring such
assets.
(3) The disposition by a corporation to an unrelated entity of such
corporation's interest in a subsidiary (within the meaning of Section 409(d)(3)
of the Code) if such corporation continues to maintain this Plan, but only with
respect to Employees who continue employment with such subsidiary.
(4) The hardship of the Participant as described in
Section 11.6(C).
(5) The attainment of age 59 1/2 in the case of a
Profit Sharing Plan.
All distributions that may be made pursuant to one or more of the foregoing
distributable events are subject to the spousal and participant consent
requirements (if applicable) contained in Sections 401(a)(11) and 417 of the
Code.
(C) Distribution of Elective Deferrals (and earnings thereon accrued as of
December 31, 1988) may be made to a Participant in the event of hardship. For
the purposes of this Section, hardship is defined as an immediate and heavy
financial need of the Employee where such Employee lacks other available
resources. Hardship distributions are subject to the spousal consent
requirements contained in Sections 401(a)(11) and 417 of the Code.
(1) The following are the only financial needs considered immediate and
heavy: deductible medical expenses (within the meaning of Section 213(d) of the
Code) of the Employee, the Employee's spouse, children, or dependents; the
purchase (excluding mortgage payments) of a principal residence for the
Employee; payment of tuition for the next quarter or semester of post-secondary
education for the Employee, the Employee's spouse, children or dependents; or
the need to prevent the eviction of the Employee from, or a foreclosure on the
mortgage of, the Employee's principal residence.
(2) A distribution will be considered as necessary to satisfy an immediate
and heavy financial need of the Employee only if:
(a) The Employee has obtained all distributions, other than hardship
distributions, and all nontaxable loans under all plans maintained by the
Employer;
(b) All plans maintained by the Employer provide that the Employee's
Elective Deferrals (and Employee Contributions) will be suspended for twelve
months after the receipt of the hardship distribution;
(c) The distribution is not in excess of the amount
of an immediate and heavy financial need; and
(d) All plans maintained by the Employer provide that the Employee may
not make Elective Deferrals for the Employee's taxable year immediately
following the taxable year of the hardship distribution in excess of the
applicable limit under Section 402(g) of the Code for such taxable year less the
amount of such Employee's Elective Deferrals for the taxable year of the
hardship distribution.
(3) The determination of the existence of financial hardship, and the amount
required to be distributed to meet the need created by the hardship, shall be
made by a person or persons designated by the Employer (unless a different
person or persons are given authority elsewhere in the plan to approve hardship
distributions).
(4) All determinations regarding financial hardship shall be made in
accordance with written procedures that are established by the person or persons
described in Section 11.6(C)(3) above, and applied in a uniform and
nondiscriminatory manner. Such written procedures shall specify the requirements
for requesting and receiving distributions on account of hardship, including
what forms must be submitted and to whom. All determinations regarding financial
hardship must be made in accordance with objective criteria set forth in Section
7.2(a) through (c) of the CODA adoption agreement. Such determinations must also
comply with applicable regulations under the Code.
(5) Processing of applications and distributions of amounts under this
Section, on account of a bona fide financial hardship, must be made as soon as
administratively feasible.
(6) If this Plan document provides for distributions on account of hardship,
but does not comply with the requirements for hardship as stated in this Section
11.6(C), and as otherwise provided in applicable regulations under the Code,
then Elective Deferrals may be distributed on account of hardship only in
DCSTRPG792 Page 53
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Defined Contribution Plan and Trust Document
accordance with this Section 11.6(C).
11.7 MATCHING CONTRIBUTIONS
(A) If elected by the Employer in the CODA adoption agreement, the Employer
will make Matching Contributions to the Plan. The amount of such Matching
Contributions shall be calculated by reference to the Participant's Elective
Deferrals as specified by the Employer in the Adoption Agreement.
(B) Separate Account. A separate account shall be maintained for that portion
of a Participant's accrued benefit that is attributable to Matching
Contributions. Such separate account shall be credited with the applicable
contributions, earnings and losses, distributions, and other adjustments.
(C) Vesting. Matching Contributions will be vested in accordance with the
Employer's election in Section 13.2 of the CODA adoption agreement. In any
event, Matching Contributions shall be fully vested at Normal Retirement Age,
upon the complete or partial termination of the Profit Sharing Plan, or upon the
complete discontinuance of Employer contributions.
(D) Forfeitures. Forfeitures of Matching Contributions other than Excess
Aggregate Contributions shall be made in accordance with Section 4.2 of the
Plan.
(E) Qualified Matching Contributions. If elected by the Employer in Section 12
of the CODA adoption agreement, the Employer will make Qualified Matching
Contributions to the plan. The amount of such Qualified Matching Contributions
shall be calculated by reference to the Participant's Elective Deferrals as
specified in the CODA adoption agreement.
11.8 LIMITATIONS ON EMPLOYEE
CONTRIBUTIONS AND MATCHING
CONTRIBUTIONS
(A) The Average Contribution Percentage ("ACP") for Participants who are
Highly Compensated Employees for each Plan year and the ACP for Participants who
are Non-highly Compensated Employees for the same Plan Year must satisfy one of
the following tests:
(1) The ACP for Participants who are Highly Compensated Employees for each
Plan Year shall not exceed the ACP for Participants who are Non-highly
Compensated Employees for the same Plan Year multiplied by 1.25; or
(2) The ACP for Participants who are Highly Compensated Employees for the
Plan Year shall not exceed the ACP for Participants who are Non-highly
Compensated Employees for the same Plan Year multiplied by two (2), provided
that the ACP for Participants who are Highly Compensated Employees does not
exceed the ACP for Participants who are Non-highly Compensated Employees by more
than two (2) percentage points.
(B) Definitions:
(1) "Aggregate Limit" shall mean the sum of:
(a) 125 percent of the greater of the ADP of the
Non-highly Compensated Employees for the Plan Year or the ACP of Non-highly
Compensated Employees under the plan subject to Code Section 401(m) for the Plan
Year beginning with or within the Plan Year of the CODA and
(b) The lesser of 200% or two plus the lesser of
such ADP or ACP.
(2) "Average Contribution Percentage" shall mean the average of the
Contribution Percentages of the Eligible Participants in a group.
(3) "Contribution Percentage" shall mean the ratio (expressed as a
percentage) of the Participant's Contribution Percentage Amounts to the
Participant's Compensation for the Plan Year (whether or not the Employee was a
Participant for the entire Plan Year).
(4) "Contribution Percentage Amounts" shall mean the sum of the Employee
Contributions, Matching Contributions, and Qualified Matching Contributions (to
the extent not taken into account for purposes of the ADP test) made under the
plan on behalf of the Participant for the Plan Year. Such Contribution
Percentage Amounts shall include forfeitures of Excess Aggregate Contributions
or Matching Contributions allocated to the Participant's account which shall be
taken into account in the year in which such forfeiture is allocated. If so
elected in the adoption agreement the Employer may include Qualified
Non-elective Contributions in the Contribution Percentage Amounts. The employer
also may elect to use Elective Deferrals in the Contribution Percentage Amounts
so long as the ADP test is met before the Elective Deferrals are used in the ACP
test and continues to be met following the exclusion of those Elective Deferrals
that are used to meet the ACP test.
DCSTRPG792 Page 54
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Defined Contribution Plan and Trust Document
(5) "Eligible Participant" shall mean any Employee who is eligible to make
an Employee Contribution, or an Elective Deferral (if the employer takes such
contributions into account in the calculation of the Contribution Percentage),
or to receive a Matching Contribution (including forfeitures) or a Qualified
Matching Contribution. If an Employee Contribution is required as a condition of
participation in the Plan, any Employee who would be a Participant in the Plan
if such Employee made such a contribution shall be treated as an Eligible
Participant on behalf of whom no Employee Contributions are made.
(6) "Employee Contribution" shall mean any contribution made to the Plan by
or on behalf of a Participant that is included in the Participant's gross income
in the year in which made and that is maintained under a separate account to
which earnings and losses are allocated.
(7) "Matching Contribution" shall mean an Employer contribution made to this
or any other defined contribution plan on behalf of a Participant on account of
an Employee Contribution made by such Participant, or on account of a
Participant's Elective Deferral, under a plan maintained by the Employer.
(C) Special Rules:
(1) Multiple Use: If one or more Highly Compensated Employees participate in
both a CODA and a plan subject to the ACP test maintained by the Employer and
the sum of the ADP and ACP of those Highly Compensated Employees subject to
either or both tests exceeds the Aggregate limit, then the ACP of those Highly
Compensated Employees who also participate in a CODA will be reduced (beginning
with such Highly Compensated Employee whose ACP is the highest) so that the
limit is not exceeded. The amount by which each Highly Compensated Employee's
Contribution Percentage Amounts is reduced shall be treated as an Excess
Aggregate Contribution. The ADP and ACP of the Highly Compensated Employees are
determined after any corrections required to meet the ADP and ACP tests.
Multiple use does not occur if both the ADP and ACP of the Highly Compensated
Employees does not exceed 1.25 multiplied by the ADP and ACP of the Non-highly
Compensated Employees.
(2) For purposes of this Section, the Contribution Percentage for any
Participant who is a Highly Compensated Employee and who is eligible to have
Contribution Percentage Amounts allocated to his account under two or more plans
described in Section 401(a) of the Code, or arrangements described in Section
401(k) of the Code that are maintained by the Employer, shall be determined as
if the total of such Contribution Percentage Amounts was made under such plan.
If a Highly Compensated Employee participates in two or more cash or deferred
arrangements that have different plan years, all cash or deferred arrangements
ending with or within the same calendar year shall be treated as a single
arrangement.
(3) In the event that that Plan satisfies the requirements of Section
401(m), 401(a)(4) or 410(b) of the Code only if aggregated with one or more
other plans, or if one or more other plans satisfy the requirements of such
Sections of the Code only if aggregated with this Plan, then this Section shall
be applied by determining the Contribution Percentage of Employees as if all
such plans were a single plan. For plan years beginning after December 31, 1989,
plans may be aggregated in order to satisfy Section 401(m) of the Code only if
they have the same Plan Year.
(4) For purposes of determining the Contribution Percentage of a Participant
who is a five-percent owner or one of the ten most highly-paid Highly
Compensated Employees, the Contribution Percentage Amounts and Compensation of
such Participant shall include the Contribution Percentage Amounts and
Compensation for the Plan Year of Family Members (as defined in Section
414(g)(6) of the Code). Family Members, with respect to Highly Compensated
Employees, shall be disregarded as separate Employees in determining the
Contribution Percentage both for Participants who are non-highly Compensated
Employees and for Participants who are Highly Compensated Employees.
(5) For purposes of determining the Contribution Percentage test, Employee
Contributions are considered to have been made in the Plan Year in which
contributed to the Trust. Matching Contributions and Qualified Non-elective
Contributions will be considered made for a Plan Year if made no later than the
end of the twelve-month period beginning on the day after the close of the Plan
Year.
(6) The Employer shall maintain records sufficient
to demonstrate satisfaction of the ACP test and the
DCSTRPG792 Page 55
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Defined Contribution Plan and Trust Document
amount of Qualified Non-elective Contributions or Qualified Matching
Contributions, or both, used in such test.
(7) The determination and treatment of the Contribution Percentage of any
Participant shall satisfy such other requirements as may be prescribed by the
Secretary of the Treasury.
(D) Distribution of Excess Aggregate Contributions
(1) Notwithstanding any other provision of this
Plan, Excess Aggregate Contributions, plus any income and minus any loss
allocable thereto, shall be forfeited, if forfeitable, or if not forfeitable,
distributed no later than the last day of each Plan year to Participants to
whose accounts such Excess Aggregate Contributions were allocated for the
preceding Plan Year. Excess Aggregate Contributions shall be allocated to
Participants who are subject to the Family Member aggregation rules of Section
414(q)(6) of the Code in the manner prescribed by the regulations. If such
Excess Aggregate Contributions are distributed more than 2 1/2 after the last
day of the Plan Year in which such excess amounts arose, a ten (10) percent
excise tax will be imposed on the Employer maintaining the Plan with respect to
those amounts. Excess Aggregate Contributions shall be treated as Annual
Additions under the Plan.
(2) Determination of Income or Loss: Excess Aggregate Contributions shall be
adjusted for any income or loss up to the date of distribution. The income or
loss allocable to Excess Aggregate Contributions is the sum of:
(a) Income or loss allocable to the Participant's Employee Contribution
account, Matching Contribution account (if any, and if all amounts therein are
not used in the ADP test) and, if applicable, Qualified Non-elective
Contribution account and Elective Deferral account for the Plan Year multiplied
by a fraction, the numerator of which is such Participant's Excess Aggregate
Contributions for the year and the denominator is the Participant's account
balance(s) attributable to Contribution Percentage Amounts without regard to any
income or loss occurring during such Plan Year; and
(b) Ten Percent of the amount determined under (a) multiplied by the
number of whole calendar months between the end of the Plan Year and the date of
distribution, counting the month of distribution if distribution occurs after
the 15th of such month.
(3) Forfeitures of Excess Aggregate Contributions: Forfeitures of Excess
Aggregate Contributions may either be reallocated to the accounts of Non-highly
Compensated Employees or applied to reduce Employer contributions, as elected by
the Employer in Section 17 of the CODA Adoption Agreement.
(4) Accounting for Excess Aggregate Contributions: Excess Aggregate
Contributions shall be forfeited, if forfeitable or distributed on a pro-rata
basis from the Participant's Employee Contribution account, Matching
Contribution account, Qualified Matching Contribution account (and, if
applicable, the Participant's Qualified Non-elective Contribution account or
Elective Deferral account, or both).
(E) "Excess Aggregate Contributions" shall mean, with respect to any Plan
Year, the excess of:
(1) The aggregate Contribution Percentage Amounts taken into account in
computing the numerator of the Contribution Percentage actually made on behalf
of Highly Compensated Employees for such Plan Year, over
(2) The maximum Contribution Percentage Amounts permitted by the ACP test
(determined by reducing contributions made on behalf of Highly Compensated
Employees in order of their Contribution Percentages beginning with the highest
of such percentages).
Such determination shall be made after first determining Excess Elective
Deferrals pursuant to Section 11.4(E) and then determining Excess Contributions
pursuant to Section 11.4(H).
11.9 PROFITS NOT REQUIRED UNDER THE CODA
(A) If the Employer elects, Employer contributions to the CODA may be made
without regard to profits in accordance with Section 10.1 of the CODA Adoption
Agreement. The Plan shall continue to be designed to qualify as a profit sharing
plan for purposes of Section 401(a), 402, 412, and 417 of the Code.
11.10 FORFEITURES
The Participant's Accrued Benefit derived from
Elective Deferral, Qualified Non-elective
Contributions, Employee Contributions, and Qualified
Matching Contributions is nonforfeitable. Separate
DCSTRPG792 Page 56
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Defined Contribution Plan and Trust Document
accounts for Elective Deferrals, Qualified Non-elective Contributions, Employee
Contributions, Matching Contributions, and Qualified Matching Contributions will
be maintained for each Participant. Each account will be credited with the
applicable contributions and earnings thereon.
DCSTRPG792 Page 57
<PAGE>
First Amendment to the Defined Contribution Plan and Trust
Pursuant to Article 1.4 of the Basic Plan and Trust, the Trust Consultants, Inc,
Mass Submitter Defined Contribution Plan and Trust is hereby amended effective
the first day of the Plan Year beginning on or after January 1, 1993.
The following new Section 5.9 is added to Article 5 of the Basic Document:
"5.9 Direct Rollover
(A) This Section applies to distributions made on or after January 1, 1993.
Notwithstanding any provision of the Plan to the contrary that would otherwise
limit a distributee's election under this Section, a distributee may elect, at
the time and in the manner prescribed by the Plan Administrator, to have any
portion of an eligible rollover distribution paid directly to an eligible
retirement plan specified by the distributee in a direct rollover.
(B) Definitions.
(1) 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
the life expectancies) of the distributee and the distributee's
designated beneficiary, or for a specified period of ten years or more;
any distribution to the extent such is required under section 401 (a)
(9) of the Code; and the portion of any distribution that is not
includible in gross income (determined without regard to the exclusion
for net unrealized appreciation with respect to employer securities.)
(2) Eligible retirement plan: An eligible retirement plan is an individual
retirement acount described in section 408(a) of the Code, an
individual retirement annuity described in section 408 (h) 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 account or individual retirement annuity.
(3) 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 sppouse 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.
(4) Direct rollover: A direct rollover is payment by the plan to the
eligible retirement plan specified by the distributee."
<PAGE>
Second Amendment to the Defined Contribution Plan and Trust
Pursuant to Article 1.4 of the Basic Plan and Trust, the Defined Contribution
Plan and Trust is hereby amended as noted below:
1. Effective the first day of the Plan Year beginning on or after January 1,
1993 the following new Section 5.10 is added to Article 5 of the Basic Document.
"5.10 Less than 30 Day Notice
If a distribution is one to which sections 401(a) (11) and 417 of the Internal
Revenue code do not apply, such distribution may commence less than 30 days
after the notice required under section 1.411(a)11(C) of the Income Tax
Regulations is given, provided that:
(A) The plan administrator clearly informs the participant that the participant
has a right to a period of at least 30 days after receiving the notice to
consider the decision of whether or not to elect a distribution (and, if
applicable, a particular distribution option), and
(B) The participant, after receiving the notice, affirmatively elects a
distribution."
2. Effective the first day of the Plan Year beginning on or after January 1,
1994 the following new Section 2.11(B)(4) is added to Article 2 of the Basic
Document:
(4) In addition to other applicable limitation 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 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, OBRA '93 annual
compensation limit is $150,000.*
TNE CASH MANAGEMENT TRUST, MONEY MARKET SERIES
* COMMENCED OPERATIONS 7-10-78
EARNINGS CALCULATION DIVIDENDS REINVESTED
==================== ==================== ====================
<TABLE>
<CAPTION>
1. PLUS VALUE OF 1. PLUS VALUE OF
MONTHLY DIV. PRINCIPAL + MONTHLY DIV. PRINCIPAL +
FACTOR REINV. DIVS. FACTOR REINV. DIVS.
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C> <C>
1993 JANUARY 27 $1.0020674073 $34,726.72 1988 JANUARY 1.0057944091 $25,255.57
FEBRUARY 24 1.0020555962 34,798.10 FEBRUARY 1.0051187065 25,384.84
MARCH 31 1.0024201409 34,882.32 MARCH 1.0053220696 25,519.94
APRIL 28 1.0018872697 34,948.15 APRIL 28 1.0048133941 25,642.78
MAY 26 1.0018702515 35,013.51 MAY 26 1.0048946956 25,768.29
JUNE 1.0023499718 35,095.79 JUNE 30 1.0063355052 25,931.55
JULY 1.0018842963 35,161.92 JULY 28 1.0051479745 26,065.04
AUGUST 1.0018911022 35,228.42 AUGUST 25 1.0053889231 26,205.50
SEPTEMBER 1.0023580869 35,311.49 SEPTEMBER 29 1.0070892225 26,391.28
OCTOBER 1.0018923221 35,378.31 OCTOBER 27 1.0057568634 26,543.21
NOVEMBER 1.0019033038 35,445.65 NOVEMBER 23 1.0058321718 26,698.02
DECEMBER 1.0025346643 35,535.49 DECEMBER 30 1.0081124644 26,914.60
1994 JANUARY 1.0021206838 35,610.85 1989 JANUARY 26 1.0059145216 27,073.79
FEBRUARY 1.0019133243 35,678.98 FEBRUARY 23 1.0065257887 27,250.47
MARCH 1.0022194028 35,758.17 MARCH 30 1.0085452797 27,483.33
APRIL 1.0022764685 35,839.57 APRIL 27 1.0071505266 27,679.85
MAY 1.0026383286 35,934.13 MAY 25 1.0071686631 27,878.28
JUNE 1.0028158906 36,035.32 JUNE 29 1.0087491493 28,122.19
JULY 1.0029904160 36,143.08 JULY 27 1.0067230714 28,311.26
AUGUST 1.0031203380 36,255.86 AUGUST 31 1.0080765649 28,539.92
SEPTEMBER 1.0031876640 36,371.43 SEPTEMBER 28 1.0063516523 28,721.19
OCTOBER 1.0034373140 36,496.45 OCTOBER 26 1.0062902642 28,901.85
NOVEMBER 1.0035504273 36,626.03 NOVEMBER 30 1.0076986343 29,124.36
DECEMBER 1.0035117188 36,754.65 DECEMBER 31 1.0067184402 29,320.03
1995 JANUARY 1.0051183118 36,942.77 1990 JANUARY 25 1.0053489152 29,476.86
FEBRUARY 1.0040659632 37,092.98 FEBRUARY 22 1.0059205644 29,651.38
MARCH 1.0045422182 37,261.46 MARCH 29 1.0073966244 29,870.70
APRIL 1.0044046172 37,425.58 APRIL 26 1.0059415624 30,048.18
MAY 1.0045176868 37,594.66 MAY 31 1.0074763588 30,272.83
JUNE 1.0044180548 37,760.75 JUNE 28 1.0059506824 30,452.97
JULY 1.0044361383 37,928.27 JULY 26 1.0058904658 30,632.36
AUGUST 1.0042114260 38,088.00 AUGUST 30 1.0072536780 30,854.55
SEPTEMBER 1.0041660839 38,246.68 SEPTEMBER 27 1.0057448610 31,031.81
OCTOBER 1.0041267665 38,404.51 OCTOBER 25 1.0057550686 31,210.40
NOVEMBER 1.0040991260 38,561.94 NOVEMBER 29 1.0071565431 31,433.76
DECEMBER 1.0036461630 38,702.54 DECEMBER 31 1.0064941167 31,637.89
1996 JANUARY 1.0041280470 38,862.31 1991 JANUARY 31 1.0061467436 31,832.36
FEBRUARY 1.0037313500 39,007.31 FEBRUARY 28 1.0052592192 31,999.77
MARCH 1.0038668900 39,158.15 MARCH 28 1.0049585829 32,158.45
APRIL 1.0036905550 39,302.67 APRIL 25 1.0047251849 32,310.40
MAY 1.0037881300 39,451.55 MAY 30 1.0055736372 32,490.49
JUNE 1.0036676260 39,596.24 JUNE 27 1.0042695398 32,629.21
JULY 1.0000000000 39,596.24 JULY 25 1.0042254361 32,767.08
AUGUST 1.0000000000 39,596.24 AUGUST 29 1.0051996982 32,937.46
SEPTEMBER 1.0000000000 39,596.24 SEPTEMBER 26 1.0040480845 33,070.79
OCTOBER 1.0000000000 39,596.24 OCTOBER 31 1.0049042590 33,232.98
NOVEMBER 1.0000000000 39,596.24 NOVEMBER 27 1.0037520450 33,357.67
DECEMBER 1.0000000000 39,596.24 DECEMBER 31 1.0042229268 33,498.54
1992 JANUARY 29 1.0034617431 33,614.50
FEBRUARY 26 1.0030563926 33,717.24
MARCH 25 1.0029678556 33,817.31
APRIL 29 1.0036401355 33,940.41
MAY 27 1.0027458373 34,033.61
JUNE 24 1.0026862151 34,125.03
JULY 29 1.0032256178 34,235.10
AUGUST 26 1.0023936859 34,317.05
SEPTEMBER 30 1.0028226581 34,413.91
OCTOBER 28 1.0021193574 34,486.85
NOVEMBER 25 1.0021808950 34,562.06
DECEMBER 1.0026911041 34,655.07
</TABLE>
TNE CASH MANAGEMENT TRUST, MONEY MARKET SERIES
* COMMENCED OPERATIONS 7-10-78
<TABLE>
<CAPTION>
1. PLUS VALUE OF 1. PLUS VALUE OF
MONTHLY DIV. PRINCIPAL + MONTHLY DIV. PRINCIPAL +
FACTOR REINV. DIVS. FACTOR REINV. DIVS.
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
1983 JANUARY 1.0071161745 $17,277.58 1978 JANUARY
FEBRUARY 1.0062259025 17,385.15 FEBRUARY
MARCH 1.0068494430 17,504.23 MARCH
APRIL 1.0067839053 17,622.98 APRIL
MAY 1.0069616048 17,745.66 MAY
JUNE 1.0066830974 17,864.26 JUNE $10,000.00
JULY 1.0072955410 17,994.59 JULY * 1.0050748136 10,050.75
AUGUST 1.0076081551 18,131.49 AUGUST 1.0059352737 10,110.40
SEPTEMBER 1.0074662719 18,266.87 SEPTEMBER 1.0055481758 10,166.50
OCTOBER 1.0076208694 18,406.08 OCTOBER 1.0056092146 10,223.52
NOVEMBER 1.0072531175 18,539.58 NOVEMBER 1.0070936868 10,296.04
DECEMBER 1.0075871867 18,680.24 DECEMBER 1.0086634298 10,385.24
1984 JANUARY 1.0077361407 18,824.75 1979 JANUARY 1.0082124545 10,470.53
FEBRUARY 1.0071896719 18,960.10 FEBRUARY 1.0072682632 10,546.63
MARCH 1.0077806363 19,107.62 MARCH 1.0079398754 10,630.37
APRIL 1.0078548035 19,257.71 APRIL 1.0076309127 10,711.49
MAY 1.0084309151 19,420.07 MAY 1.0079179427 10,796.31
JUNE 1.0086009658 19,587.10 JUNE 1.0077124044 10,879.57
JULY 1.0091322896 19,765.97 JULY 1.0077095928 10,963.45
AUGUST 1.0091836120 19,947.49 AUGUST 1.0078156691 11,049.14
SEPTEMBER 1.0089670368 20,126.36 SEPTEMBER 1.0084837809 11,142.87
OCTOBER 1.0089816367 20,307.13 OCTOBER 1.0097556280 11,251.58
NOVEMBER 1.0080380048 20,470.36 NOVEMBER 1.0108179984 11,373.30
DECEMBER 1.0076836507 20,627.65 DECEMBER 1.0114536127 11,503.56
1985 JANUARY 1.0070911908 20,773.92 1980 JANUARY 1.0112068079 11,632.48
FEBRUARY 1.0061283030 20,901.23 FEBRUARY 1.0104031653 11,753.50
MARCH 1.0069454217 21,046.40 MARCH 1.0119092902 11,893.47
APRIL 1.0067778789 21,189.05 APRIL 1.0127698345 12,045.35
MAY 1.0067660285 21,332.42 MAY 1.0119566314 12,189.37
JUNE 1.0060857516 21,462.24 JUNE 1.0088015174 12,296.66
JULY 1.0060669740 21,592.45 JULY 1.0077111389 12,391.48
AUGUST 1.0060731668 21,723.58 AUGUST 1.0072948060 12,481.87
SEPTEMBER 1.0059201726 21,852.19 SEPTEMBER 1.0075424030 12,576.02
OCTOBER 1.0061653213 21,986.92 OCTOBER 1.0087079752 12,685.53
NOVEMBER 1.0059734950 22,118.26 NOVEMBER 1.0095527876 12,806.71
DECEMBER 1.0063818438 22,259.41 DECEMBER 1.0128293183 12,971.01
1986 JANUARY 1.0063639429 22,401.07 1981 JANUARY 1.0138457748 13,150.60
FEBRUARY 1.0055246251 22,524.83 FEBRUARY 1.0124396659 13,314.19
MARCH 1.0056015048 22,651.00 MARCH 1.0128237909 13,484.93
APRIL 1.0055437335 22,776.57 APRIL 1.0117721958 13,643.68
MAY 1.0055849806 22,903.78 MAY 1.0133416103 13,825.71
JUNE 1.0049290689 23,016.67 JUNE 1.0141698057 14,021.62
JULY 1.0051898071 23,136.12 JULY 1.0148873900 14,230.36
AUGUST 1.0051812664 23,256.00 AUGUST 1.0150058619 14,443.90
SEPTEMBER 1.0044403150 23,359.26 SEPTEMBER 1.0142540255 14,649.78
OCTOBER 1.0048455646 23,472.45 OCTOBER 1.0136287937 14,849.44
NOVEMBER 1.0040412913 23,567.31 NOVEMBER 1.0119437081 15,026.80
DECEMBER 1.0045985984 23,675.69 DECEMBER 1.0111251092 15,193.97
1987 JANUARY 1.0044534295 23,781.12 1982 JANUARY 1.0106770388 15,356.20
FEBRUARY 1.0040197857 23,876.72 FEBRUARY 1.0101897011 15,512.68
MARCH 1.0043852931 23,981.43 MARCH 1.0117306899 15,694.65
APRIL 1.0044878864 24,089.05 APRIL 1.0114829855 15,874.87
MAY 1.0048752958 24,206.49 MAY 1.0118330997 16,062.72
JUNE 1.0048981344 24,325.06 JUNE 1.0115357236 16,248.02
JULY 1.0054734649 24,458.20 JULY 1.0116556755 16,437.40
AUGUST 1.0047635385 24,574.71 AUGUST 1.0104530031 16,609.22
SEPTEMBER 1.0048898287 24,694.88 SEPTEMBER 1.0088231414 16,755.76
OCTOBER 1.0055857578 24,832.82 OCTOBER 1.0085416675 16,898.89
NOVEMBER 1.0054438531 24,968.00 NOVEMBER 1.0076634158 17,028.39
DECEMBER 1.0056898817 25,110.07 DECEMBER 1.0074647108 17,155.50
</TABLE>
<PAGE>
TNE CASH MANAGEMENT TRUST, U.S. GOVERNMENT SERIES
*COMMENCED OPERATIONS 6-2-82
EARNINGS CALCULATION
DIVIDENDS REINVESTED
====================
<TABLE>
<CAPTION>
1. PLUS VALUE OF 1. PLUS VALUE OF
MONTHLY DIV. PRINCIPAL + MONTHLY DIV. PRINCIPAL +
FACTOR REINV. DIVS. FACTOR REINV. DIVS.
<S> <C> <C> <C> <C> <C> <C> <C>
1994 JANUARY 1.0020080113 $21,254.39 1991 JANUARY 31 1.0055585995 $19,029.93
FEBRUARY 1.0019135001 21,295.06 FEBRUARY 28 1.0047700167 19,120.70
MARCH 1.0021313779 21,340.44 MARCH 28 1.0046792418 19,210.17
APRIL 1.0022508353 21,388.48 APRIL 25 1.0046184997 19,298.89
MAY 1.0025885031 21,443.84 MAY 30 1.0056118774 19,407.19
JUNE 1.0025790675 21,499.15 JUNE 27 1.0044388978 19,493.34
JULY 1.0029047083 21,561.60 JULY 25 1.0043225545 19,577.60
AUGUST 1.0030708873 21,627.81 AUGUST 29 1.0052036929 19,679.48
SEPTEMBER 1.0033445999 21,700.15 SEPTEMBER 26 1.0039888907 19,757.98
OCTOBER 1.0033310297 21,772.43 OCTOBER 31 1.0048447117 19,853.70
NOVEMBER 1.0034065781 21,846.60 NOVEMBER 27 1.0036764180 19,926.69
DECEMBER 1.0032770441 21,918.19 DECEMBER 31 1.0041216742 20,008.82
1995 JANUARY 1.0047945544 22,023.28 1992 JANUARY 29 1.0032835450 20,074.52
FEBRUARY 1.0038979850 22,109.13 FEBRUARY 26 1.0031105017 20,136.96
MARCH 1.0043610131 22,205.54 MARCH 25 1.0030909805 20,199.21
APRIL 1.0042576435 22,300.09 APRIL 29 1.0037552403 20,275.06
MAY 1.0043393896 22,396.86 MAY 27 1.0027818699 20,331.46
JUNE 1.0044119467 22,495.67 JUNE 24 1.0026179163 20,384.69
JULY 1.0043561739 22,593.66 JULY 29 1.0030959645 20,447.80
AUGUST 1.0041500479 22,687.43 AUGUST 26 1.0023620751 20,496.10
SEPTEMBER 1.0041937810 22,782.58 SEPTEMBER 30 1.0028084673 20,553.66
OCTOBER 1.0041015905 22,876.02 OCTOBER 28 1.0021310663 20,597.46
NOVEMBER 1.0040827060 22,969.42 NOVEMBER 25 1.0021332727 20,641.40
DECEMBER 1.0035860810 23,051.79 DECEMBER 31 1.0025327426 20,693.68
1996 JANUARY 1.0039318590 23,142.42 1993 JANUARY 27 1.0019287936 20,733.59
FEBRUARY 1.0036319540 23,226.48 FEBRUARY 24 1.0019686436 20,774.41
MARCH 1.0038063110 23,314.88 MARCH 31 1.0024580131 20,825.47
APRIL 1.0036562340 23,400.13 APRIL 28 1.0019624703 20,866.34
MAY 1.0037243910 23,487.28 MAY 26 1.0018847951 20,905.67
JUNE 1.0035187200 23,569.92 JUNE 1.0023657012 20,955.13
JULY 1.0000000000 23,569.92 JULY 1.0018940022 20,994.82
AUGUST 1.0000000000 23,569.92 AUGUST 1.0018875062 21,034.45
SEPTEMBER 1.0000000000 23,569.92 SEPTEMBER 1.0023432995 21,083.74
OCTOBER 1.0000000000 23,569.92 OCTOBER 1.0018598258 21,122.95
NOVEMBER 1.0000000000 23,569.92 NOVEMBER 1.0018425222 21,161.87
DECEMBER 1.0000000000 23,569.92 DECEMBER 1.0023592028 21,211.79
</TABLE>
TNE CASH MANAGEMENT TRUST, U.S. GOVERNMENT SERIES
*COMMENCED OPERATIONS 6-2-82
<TABLE>
<CAPTION>
1. PLUS VALUE OF 1. PLUS VALUE OF
MONTHLY DIV. PRINCIPAL + MONTHLY DIV. PRINCIPAL +
FACTOR REINV. DIVS. FACTOR REINV. DIVS.
<S> <C> <C> <C> <C> <C> <C> <C>
1988 JANUARY 1.0049831977 $15,289.25 1985 JANUARY 1.0072908736 $12,650.51
FEBRUARY 1.0045564433 15,358.92 FEBRUARY 1.0064785144 12,732.47
MARCH 1.0048634633 15,433.61 MARCH 1.0068446745 12,819.62
APRIL 28 1.0044780248 15,502.73 APRIL 1.0063238174 12,900.69
MAY 26 1.0045371000 15,573.06 MAY 1.0063385247 12,982.46
JUNE 30 1.0059889929 15,666.33 JUNE 1.0060002481 13,060.35
JULY 28 1.0049264952 15,743.51 JULY 1.0062039289 13,141.38
AUGUST 25 1.0051241312 15,824.18 AUGUST 1.0062756631 13,223.85
SEPTEMBER 29 1.0066769500 15,929.84 SEPTEMBER 1.0059836861 13,302.98
OCTOBER 27 1.0056028318 16,019.09 OCTOBER 1.0061376951 13,384.63
NOVEMBER 23 1.0056297036 16,109.27 NOVEMBER 1.0059526128 13,464.30
DECEMBER 30 1.0076639382 16,232.74 DECEMBER 1.0063707189 13,550.08
1989 JANUARY 26 1.0056605728 16,324.62 1986 JANUARY 1.0062665908 13,634.99
FEBRUARY 23 1.0061548925 16,425.10 FEBRUARY 1.0055900537 13,711.21
MARCH 30 1.0082131587 16,560.00 MARCH 1.0055330039 13,787.08
APRIL 27 1.0066334719 16,669.85 APRIL 1.0053171097 13,860.38
MAY 25 1.0066149757 16,780.12 MAY 1.0054249338 13,935.58
JUNE 29 1.0082155885 16,917.98 12.07711671 1.0049276094 14,004.24
JULY 27 1.0063452796 17,025.33 JULY 1.0051887043 14,076.91
AUGUST 31 1.0076688059 17,155.89 AUGUST 1.0049232076 14,146.21
SEPTEMBER 28 1.0062443100 17,263.02 SEPTEMBER 1.0042597168 14,206.47
OCTOBER 26 1.0061588313 17,369.34 OCTOBER 1.0048042940 14,274.72
NOVEMBER 30 1.0074174770 17,498.18 NOVEMBER 1.0040421446 14,332.42
DECEMBER 31 1.0063951960 17,610.08 DECEMBER 1.0048372104 14,401.75
1990 JANUARY 25 1.0050652758 17,699.28 1987 JANUARY 1.0044071278 14,465.22
FEBRUARY 22 1.0056022231 17,798.44 FEBRUARY 1.0039050250 14,521.71
MARCH 29 1.0070061167 17,923.13 MARCH 1.0042258438 14,583.08
APRIL 26 1.0055894639 18,023.31 APRIL 1.0042079669 14,644.44
MAY 31 1.0069593427 18,148.74 MAY 1.0046160124 14,712.04
JUNE 28 1.0056645668 18,251.55 JUNE 1.0045504219 14,778.99
JULY 26 1.0055739365 18,353.28 JULY 1.0050218563 14,853.20
AUGUST 30 1.0069135637 18,480.17 AUGUST 1.0045063414 14,920.14
SEPTEMBER 27 1.0055030987 18,581.87 SEPTEMBER 1.0046691152 14,989.80
OCTOBER 25 1.0054854134 18,683.80 OCTOBER 1.0049628268 15,064.19
NOVEMBER 29 1.0067753935 18,810.39 NOVEMBER 1.0048085537 15,136.63
DECEMBER 31 1.0060787826 18,924.73 DECEMBER 1.0050744715 15,213.44
</TABLE>
TNE CASH MANAGEMENT TRUST, U.S. GOVERNMENT SERIES
*COMMENCED OPERATIONS 6-2-82
<TABLE>
<CAPTION>
1. PLUS VALUE OF
MONTHLY DIV. PRINCIPAL +
FACTOR REINV. DIVS.
<S> <C> <C> <C>
1982 JANUARY
FEBRUARY
MARCH
APRIL
MAY $10,000.00
JUNE * 1.0096673639 10,096.67
JULY 1.0086838509 10,184.35
AUGUST 1.0075222478 10,260.96
SEPTEMBER 1.0070388207 10,333.19
OCTOBER 1.0070053773 10,405.57
NOVEMBER 1.0064724463 10,472.92
DECEMBER 1.0067112603 10,543.21
1983 JANUARY 1.0066073045 10,612.87
FEBRUARY 1.0058524963 10,674.98
MARCH 1.0065386145 10,744.78
APRIL 1.0064579044 10,814.17
MAY 1.0065947113 10,885.49
JUNE 1.0065586260 10,956.88
JULY 1.0069925047 11,033.50
AUGUST 1.0071476969 11,112.36
SEPTEMBER 1.0070324137 11,190.51
OCTOBER 1.0073246102 11,272.48
NOVEMBER 1.0069775576 11,351.13
DECEMBER 1.0074188533 11,435.34
1984 JANUARY 1.0073511922 11,519.41
FEBRUARY 1.0068593370 11,598.42
MARCH 1.0075131366 11,685.56
APRIL 1.0074545120 11,772.67
MAY 1.0077439795 11,863.84
JUNE 1.0078565909 11,957.05
JULY 1.0085051376 12,058.74
AUGUST 1.0089309696 12,166.44
SEPTEMBER 1.0086176507 12,271.29
OCTOBER 1.0082146687 12,372.09
NOVEMBER 1.0076573890 12,466.83
DECEMBER 1.0073888036 12,558.94
</TABLE>
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 0000317947
<NAME> CASH MGMT. TRUST
<SERIES>
<NUMBER> 01
<NAME> CLASS A
<S> <C>
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<PERIOD-END> JUN-30-1996
<INVESTMENTS-AT-COST> 662,426,176
<INVESTMENTS-AT-VALUE> 662,426,176
<RECEIVABLES> 6,346,363
<ASSETS-OTHER> 544,643
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 669,317,182
<PAYABLE-FOR-SECURITIES> 5,287,903
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 408,693
<TOTAL-LIABILITIES> 5,696,596
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 655,516,274
<SHARES-COMMON-STOCK> 655,516,274
<SHARES-COMMON-PRIOR> 656,142,246
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 0
<NET-ASSETS> 663,620,586
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 38,072,583
<OTHER-INCOME> 0
<EXPENSES-NET> 5,944,590
<NET-INVESTMENT-INCOME> 32,127,993
<REALIZED-GAINS-CURRENT> 118,639
<APPREC-INCREASE-CURRENT> 0
<NET-CHANGE-FROM-OPS> 32,246,632
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 32,127,993
<DISTRIBUTIONS-OF-GAINS> 3,574
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 1,049,919,978
<NUMBER-OF-SHARES-REDEEMED> 1,067,615,550
<SHARES-REINVESTED> 31,392,637
<NET-CHANGE-IN-ASSETS> 13,812,130
<ACCUMULATED-NII-PRIOR> 16,699,031
<ACCUMULATED-GAINS-PRIOR> 78
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 2,784,663
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 5,944,590
<AVERAGE-NET-ASSETS> 674,391,484
<PER-SHARE-NAV-BEGIN> 1.00
<PER-SHARE-NII> .048
<PER-SHARE-GAIN-APPREC> .000
<PER-SHARE-DIVIDEND> 0
<PER-SHARE-DISTRIBUTIONS> .048
<RETURNS-OF-CAPITAL> 4.95
<PER-SHARE-NAV-END> 1.00
<EXPENSE-RATIO> 0.90
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 0000317947
<NAME> CASH MGMT. TRUST
<SERIES>
<NUMBER> 02
<NAME> CLASS B
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> JUN-30-1996
<PERIOD-START> JUL-01-1995
<PERIOD-END> JUN-30-1996
<INVESTMENTS-AT-COST> 662,426,176
<INVESTMENTS-AT-VALUE> 662,426,176
<RECEIVABLES> 6,346,363
<ASSETS-OTHER> 544,643
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 669,317,182
<PAYABLE-FOR-SECURITIES> 5,287,903
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 408,693
<TOTAL-LIABILITIES> 5,696,596
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 7,898,246
<SHARES-COMMON-STOCK> 7,898,246
<SHARES-COMMON-PRIOR> 6,607,732
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 0
<NET-ASSETS> 663,620,586
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 38,072,583
<OTHER-INCOME> 0
<EXPENSES-NET> 5,944,590
<NET-INVESTMENT-INCOME> 32,127,993
<REALIZED-GAINS-CURRENT> 118,639
<APPREC-INCREASE-CURRENT> 0
<NET-CHANGE-FROM-OPS> 32,246,632
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 32,127,993
<DISTRIBUTIONS-OF-GAINS> 3,574
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 1,049,919,978
<NUMBER-OF-SHARES-REDEEMED> 1,067,615,550
<SHARES-REINVESTED> 31,392,637
<NET-CHANGE-IN-ASSETS> 13,812,130
<ACCUMULATED-NII-PRIOR> 16,699,031
<ACCUMULATED-GAINS-PRIOR> 78
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 2,784,663
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 5,944,590
<AVERAGE-NET-ASSETS> 674,391,484
<PER-SHARE-NAV-BEGIN> 1.00
<PER-SHARE-NII> .048
<PER-SHARE-GAIN-APPREC> .000
<PER-SHARE-DIVIDEND> 0
<PER-SHARE-DISTRIBUTIONS> .048
<RETURNS-OF-CAPITAL> 4.95
<PER-SHARE-NAV-END> 1.00
<EXPENSE-RATIO> 0.90
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 0000317947
<NAME> CASH MGMT. TRUST
<SERIES>
<NUMBER> 01
<NAME> CLASS A
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> JUN-30-1996
<PERIOD-START> JUL-01-1995
<PERIOD-END> JUN-30-1996
<INVESTMENTS-AT-COST> 51,708,078
<INVESTMENTS-AT-VALUE> 51,708,078
<RECEIVABLES> 950,726
<ASSETS-OTHER> 205,175
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 52,863,979
<PAYABLE-FOR-SECURITIES> 238,705
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 78,330
<TOTAL-LIABILITIES> 317,035
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 51,675,020
<SHARES-COMMON-STOCK> 51,675,020
<SHARES-COMMON-PRIOR> 55,027,352
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 0
<NET-ASSETS> 52,546,944
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 3,281,373
<OTHER-INCOME> 0
<EXPENSES-NET> 531,300
<NET-INVESTMENT-INCOME> 2,750,073
<REALIZED-GAINS-CURRENT> 60,941
<APPREC-INCREASE-CURRENT> 0
<NET-CHANGE-FROM-OPS> 2,811,014
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 2,750,073
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 96,446,537
<NUMBER-OF-SHARES-REDEEMED> 106,394,965
<SHARES-REINVESTED> 2,691,938
<NET-CHANGE-IN-ASSETS> (7,256,490)
<ACCUMULATED-NII-PRIOR> 1,492,040
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 245,885
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 553,344
<AVERAGE-NET-ASSETS> 53,605,205
<PER-SHARE-NAV-BEGIN> 1.00
<PER-SHARE-NII> .047
<PER-SHARE-GAIN-APPREC> .001
<PER-SHARE-DIVIDEND> 0
<PER-SHARE-DISTRIBUTIONS> .048
<RETURNS-OF-CAPITAL> 4.86
<PER-SHARE-NAV-END> 1.00
<EXPENSE-RATIO> 0.93
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 0000317947
<NAME> CASH MGMT. TRUST
<SERIES>
<NUMBER> 02
<NAME> CLASS B
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> JUN-30-1996
<PERIOD-START> JUL-01-1995
<PERIOD-END> JUN-30-1996
<INVESTMENTS-AT-COST> 51,708,078
<INVESTMENTS-AT-VALUE> 51,708,078
<RECEIVABLES> 950,726
<ASSETS-OTHER> 205,175
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 52,863,979
<PAYABLE-FOR-SECURITIES> 238,705
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 78,330
<TOTAL-LIABILITIES> 317,035
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 810,983
<SHARES-COMMON-STOCK> 810,983
<SHARES-COMMON-PRIOR> 794,108
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 0
<NET-ASSETS> 52,546,944
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 3,281,373
<OTHER-INCOME> 0
<EXPENSES-NET> 531,300
<NET-INVESTMENT-INCOME> 2,750,073
<REALIZED-GAINS-CURRENT> 60,941
<APPREC-INCREASE-CURRENT> 0
<NET-CHANGE-FROM-OPS> 2,811,014
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 2,750,073
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 96,446,537
<NUMBER-OF-SHARES-REDEEMED> 106,394,965
<SHARES-REINVESTED> 2,691,938
<NET-CHANGE-IN-ASSETS> (7,256,490)
<ACCUMULATED-NII-PRIOR> 1,492,040
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 245,885
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 553,344
<AVERAGE-NET-ASSETS> 53,605,205
<PER-SHARE-NAV-BEGIN> 1.00
<PER-SHARE-NII> .047
<PER-SHARE-GAIN-APPREC> .001
<PER-SHARE-DIVIDEND> 0
<PER-SHARE-DISTRIBUTIONS> .048
<RETURNS-OF-CAPITAL> 4.86
<PER-SHARE-NAV-END> 1.00
<EXPENSE-RATIO> 0.93
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
