<PAGE>
As filed with the Securities and Exchange Commission Registration Nos. 2-38512
on December 1, 1995 811-2125
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-1A
REGISTRATION STATEMENT
UNDER THE SECURITIES ACT OF 1933 / /
Pre-Effective Amendment No. / /
Post-Effective Amendment No. 30 /X/
and/or
REGISTRATION STATEMENT
UNDER THE INVESTMENT COMPANY ACT OF 1940 / /
Amendment No. 30 /X/
FBL SERIES FUND, INC.
(Exact Name of Registrant as Specified in Charter)
5400 University Avenue (515) 225-5586
West Des Moines, Iowa 50266 (Registrant's Telephone Number,
(Address of Principal Executive including Area Code)
Offices) (Zip Code)
Stephen M. Morain, Esquire Copy to:
5400 University Avenue Charles F. Custer, Esquire
West Des Moines, Iowa 50266 Vedder, Price, Kaufman & Kammholz
(Name and Address of Agent 222 North LaSalle Street
for Service) Chicago, IL 60601
Pursuant to Rule 24f-2 under the Investment Company Act of 1940, the Registrant
has registered an indefinite amount of shares under the Securities Act of 1933.
The Rule 24f-2 Notice for the year ended July 31, 1995 was filed with the
Securities and Exchange Commission on or about September 26, 1995.
It is proposed that this filing will become effective (check appropriate box)
/X/ immediately upon filing pursuant to paragraph (b)
/ / on (date) pursuant to paragraph (b)
/ / 60 days after filing pursuant to paragraph (a)(1)
/ / on (date) pursuant to paragraph (a)(1)
/ / 75 days after filing pursuant to paragraph (a)(2)
/ / on (date) pursuant to paragraph (a)(2) of Rule 485.
<PAGE>
If appropriate, check the following box:
/ /
This post-effective amendment designates a new effective date for a
previously filed post-effective amendment
<PAGE>
FBL SERIES FUND, INC.
Registration Statement on Form N-1A
CROSS REFERENCE SHEET
Pursuant to Rule 481(a)
N-1A
ITEM No. CAPTION
- --------------------------------------- ---------------------------------------
PART A INFORMATION REQUIRED IN PROSPECTUS
1. Cover Page Cover Page
2. Synopsis Summary; Summary of Expenses
3. Condensed Financial Information Condensed Financial Information;
Performance Information
4. General Description of Registrant Organization of the Fund;
Investment Objectives and
Policies of the Portfolios;
Description of Certain
Investment Techniques; Principal
Risk Factors
5. Management of the Fund Management of the Fund; General
Information
5A. Management's Discussion of Fund Not Applicable
Performance
6. Capital Stock and Other Securities General Information; Organization
of the Fund; Dividends and Taxes
7. Purchase of Securities Being Offered How to Buy Shares
8. Redemption or Repurchase How to Redeem Shares
9. Pending Legal Proceedings Not Applicable
PART B INFORMATION REQUIRED IN STATEMENT OF ADDITIONAL INFORMATION
10. Cover Page Cover Page
11. Table of Contents Table of Contents
12. General Information and History Organization of the Fund (Part A)
13. Investment Objectives and Policies Investment Objectives, Policies and
Techniques; Investment
Restrictions
<PAGE>
N-1A
ITEM No. CAPTION
- --------------------------------------- ---------------------------------------
14. Management of the Fund Officers and Directors; Investment
Adviser; Underwriting and
Distribution Expenses
15. Control Persons and Principal Holders Other Information
of Securities
16. Investment Advisory and Other Services Investment Adviser; Other
Information; Underwriting and
Distribution Expenses
17. Brokerage Allocation and Other Portfolio Transactions and
Practices Brokerage Commissions
18. Capital Stock and Other Securities Shareholder Voting Rights
19. Purchase, Redemption and Pricing of Purchase and Redemptions;
Securities Being Offered Net Asset Value
20. Tax Status Taxes
21. Underwriters Underwriting and Distribution
Expenses
22. Calculation of Performance Data Performance Information
23. Financial Statements Financial Statements
<PAGE>
FBL SERIES FUND, INC.
Prospectus dated December 1, 1995
FBL Series Fund, Inc. (the "Fund") is an open-end, diversified series
management investment company consisting of six Portfolios, each with its own
investment objectives and policies. For most purposes, each Portfolio operates
like a separate mutual fund issuing its own shares.
Growth Common Stock Portfolio
High Grade Bond Portfolio
High Yield Bond Portfolio
Managed Portfolio
Money Market Portfolio
Blue Chip Portfolio
The Fund is designed for long-term investors, including those funding
tax-qualified investment plans such as IRAs or other retirement plans. The
Fund's investment adviser is FBL Investment Advisory Services, Inc.
THE HIGH YIELD BOND PORTFOLIO INVESTS PRIMARILY IN LOWER-RATED BONDS, COMMONLY
REFERRED TO AS "JUNK BONDS," WHICH ENTAIL GREATER RISKS, INCLUDING DEFAULT
RISKS, THAN THOSE ASSOCIATED WITH HIGHER-RATED SECURITIES. PURCHASERS SHOULD
CAREFULLY ASSESS THE RISKS ASSOCIATED WITH AN INVESTMENT IN THIS PORTFOLIO. SEE
"INVESTMENT OBJECTIVES AND POLICIES OF THE PORTFOLIOS--HIGH YIELD BOND
PORTFOLIO," P. 13-14; "PRINCIPAL RISK FACTORS--SPECIAL CONSIDERATIONS--HIGH
YIELD BONDS," P. 16-19; "APPENDIX B--PORTFOLIO COMPOSITION FOR HIGH YIELD
BONDS," P. B-1-B-2 AND "APPENDIX C--DESCRIPTION OF CORPORATE BOND RATINGS," P.
C-1-C-2.
AN INVESTMENT IN THE MONEY MARKET PORTFOLIO IS NEITHER INSURED NOR GUARANTEED
BY THE U.S. GOVERNMENT. THERE CAN BE NO ASSURANCE THAT THE MONEY MARKET
PORTFOLIO WILL BE ABLE TO MAINTAIN A STABLE NET ASSET VALUE OF $1.00 PER SHARE.
This Prospectus contains information about the Fund that a prospective
investor should know before investing. Please read it carefully and retain it
for future reference. A Statement of Additional Information for the Fund, dated
December 1, 1995, has been filed with the Securities and Exchange Commission and
is incorporated herein by reference. The Statement of Additional Information is
available upon request and without charge from the Fund by writing or calling
the Fund at the address or telephone numbers set forth on the following page.
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.
NO DEALER, SALESMAN, OR OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATIONS, OTHER THAN THOSE CONTAINED IN THIS
PROSPECTUS, IN CONNECTION WITH THE OFFER CONTAINED IN THE PROSPECTUS, AND, IF
GIVEN OR MADE, SUCH OTHER INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON
AS HAVING BEEN AUTHORIZED BY THE FUND, THE ADVISER OR THE DISTRIBUTOR. THIS
PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL, OR A SOLICITATION OF AN OFFER
TO BUY, THE SECURITIES OF THE FUND IN ANY JURISDICTION IN WHICH SUCH SALE, OFFER
TO SELL OR SOLICITATION MAY NOT BE LAWFULLY MADE.
PLEASE READ THIS PROSPECTUS CAREFULLY AND RETAIN IT FOR FUTURE REFERENCE.
<PAGE>
- --------------------------------------------------------------------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE NO.
<S> <C>
Summary................................................................................................ 1
Summary of Expenses.................................................................................... 3
Condensed Financial Information........................................................................ 5
Investment Objectives and Policies of the Portfolios................................................... 11
Principal Risk Factors................................................................................. 15
Description of Certain Investment Techniques........................................................... 19
How to Buy Shares...................................................................................... 22
How to Redeem Shares................................................................................... 22
Other Shareholder Services............................................................................. 25
Net Asset Value Information............................................................................ 26
Performance Information................................................................................ 27
Management of the Fund................................................................................. 28
Portfolio Transactions................................................................................. 30
Dividends and Taxes.................................................................................... 30
Organization of the Fund............................................................................... 32
General Information.................................................................................... 32
Appendix A............................................................................................. A-1
Appendix B............................................................................................. B-1
Appendix C............................................................................................. C-1
</TABLE>
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<TABLE>
<S> <C>
R YIELD AND PURCHASE INFORMATION
FARM BUREAU MUTUAL FUNDS U.S. Toll Free (800) 247-4170
5400 University Avenue, West Des Moines, Iowa 50266 Iowa Toll Free (800) 422-3175
Des Moines (515) 225-5586
</TABLE>
<PAGE>
- --------------------------------------------------------------------------------
SUMMARY
-----------
THE FUND. FBL Series Fund, Inc. (the "Fund") is an open-end, diversified
series management investment company. The Fund is designed to provide an
opportunity for investors to pool their money to achieve economies of scale and
diversification and to permit investors whose portfolios may not be large enough
to qualify for individual management services to take advantage of the
professional investment expertise of FBL Investment Advisory Services, Inc.
("FBL" or the "Adviser"). The Fund currently issues shares in six investment
series (a "Portfolio" or the "Portfolios"), and the Board of Directors of the
Fund (the "Board of Directors") may establish additional Portfolios at any time.
The Fund is designed for long-term investors, including those who wish to
use shares of one or more Portfolios as a funding vehicle for tax-deferred
retirement plans (including tax-qualified retirement plans and Individual
Retirement Account (IRA) plans), and not for investors who intend to liquidate
their investments after a short period of time. A contingent deferred sales
charge (described below) is generally imposed on redemptions of shares within
six years of the date of purchase.
INVESTMENT OBJECTIVES. The Fund currently offers a choice of six investment
Portfolios, having the following investment objectives:
GROWTH COMMON STOCK PORTFOLIO. This Portfolio seeks long-term capital
appreciation with current income as a secondary objective. The Portfolio
pursues these objectives by investing primarily in common stocks that appear
to the Fund's investment adviser to possess above-average potential for
appreciation in market value.
HIGH GRADE BOND PORTFOLIO. This Portfolio seeks as high a level of
current income as is consistent with investment in a portfolio of debt
securities deemed to be of high quality by the Fund's investment adviser.
The Portfolio pursues this objective by investing primarily in debt
securities rated AAA, AA or A by Standard & Poor's Corporation or Aaa, Aa or
A by Moody's Investors Service, Inc. and in U.S. Government securities and
government agency securities.
HIGH YIELD BOND PORTFOLIO. This Portfolio seeks, as a primary
objective, as high a level of current income as is consistent with
investment in a portfolio of fixed-income securities rated in the lower
categories of established rating services. As a secondary objective, the
Portfolio seeks capital appreciation when consistent with its primary
objective. The Portfolio pursues these objectives by investing primarily in
fixed-income securities rated Baa or lower by Moody's Investors Service,
Inc. and/or BBB or lower by Standard & Poor's Corporation, or unrated
securities of comparable quality. AN INVESTMENT IN THIS PORTFOLIO MAY ENTAIL
GREATER THAN ORDINARY FINANCIAL RISK.
MANAGED PORTFOLIO. This Portfolio seeks the highest total investment
return of income and capital appreciation. The Portfolio pursues this
objective through a fully managed investment policy consisting of investment
in the following three market sectors: (i) common stocks and other equity
securities of the type in which the Growth Common Stock Portfolio may
invest; (ii) high quality debt securities and preferred stocks of the type
in which the High Grade Bond Portfolio may invest; and (iii) high quality
short-term money market instruments of the type in which the Money Market
Portfolio may invest.
MONEY MARKET PORTFOLIO. This Portfolio seeks maximum current income
consistent with liquidity and stability of principal. The Portfolio pursues
this objective by investing in high quality
1
<PAGE>
short-term money market instruments. In light of the distribution services
fee (see "General Information--Distributor") and the contingent deferred
sales charge (see "How to Redeem Shares"), the Money Market Portfolio should
be viewed as part of a long-term investment in the Fund to be used in
conjunction with the other Portfolios, rather than as a typical money market
fund.
BLUE CHIP PORTFOLIO. This Portfolio seeks growth of capital and income.
The Portfolio pursues this objective by investing primarily in common stocks
of well-capitalized, established companies. Because this Portfolio may be
invested heavily in particular stocks or industries, an investment in this
Portfolio may entail relatively greater risk of loss.
There can be no assurance that the objectives of any Portfolio will be
realized. During periods when the investment adviser believes that the equity
market is overvalued, or, when warranted by other prevailing market or economic
conditions, the Growth Common Stock Portfolio may hold substantial amounts of
non-equity investments. For further information regarding the investment
practices of the various Portfolios, see "Investment Objectives and Policies of
the Portfolios." For further information regarding the principal risk factors
associated with investment in any of the Fund's Portfolios, see "Principal Risk
Factors."
PURCHASES AND REDEMPTIONS. Shares of the Portfolios are available through
selected financial services firms such as broker/dealers, through registered
representatives of FBL Marketing Services, Inc. or directly from the Fund. The
minimum initial investment is $250, and subsequent investments may be in any
amount. Shares of a Portfolio are redeemable at the net asset value per share of
the Portfolio next determined after the Fund's receipt of a request in proper
form. There may be a contingent deferred sales charge imposed upon the
redemption of shares during the first six years after purchase, ranging from 5%
the first year to 1% during the sixth year. There is no contingent deferred
sales charge once shares have been held six years. Shares of a Portfolio may be
exchanged for shares of another Portfolio for a $5.00 exchange fee without any
contingent deferred sales charge. There is a distribution services fee of .50%
of the average daily net assets of the Fund. See "How to Buy Shares" and "How to
Redeem Shares."
INVESTMENT ADVISER AND DISTRIBUTOR. FBL Investment Advisory Services, Inc.
serves as the investment adviser for each of the Portfolios for an annual fee
that is based on the average daily net assets of each Portfolio and varies among
the Portfolios. The maximum annual fee rate is .25% of average daily net assets
for the Blue Chip Portfolio, .40% of average daily net assets for the High Grade
Bond and Money Market Portfolios, .50% of average daily net assets for the
Growth Common Stock Portfolio, .55% of average daily net assets for the High
Yield Bond Portfolio and .60% of average daily net assets for the Managed
Portfolio. These fee rates are reduced when asset levels in a Portfolio exceed
$200 million (except for the Blue Chip Portfolio). See "Management of the
Fund--Investment Adviser." FBL also serves as distributor and principal
underwriter for the Fund. FBL pays securities dealers a commission of up to 4%
for sales of Portfolio shares and a service fee, payable monthly, at the annual
rate of .15% on assets maintained and serviced in Fund accounts. FBL receives
from the Fund the .50% annual distribution services fee and a .25% annual
administrative services fee, and receives directly any contingent deferred sales
charge paid on the redemption of shares. Firms to which commissions and service
fees may be paid include FBL Marketing Services, Inc., which is affiliated with
FBL. See "General Information--Distributor."
2
<PAGE>
- --------------------------------------------------------------------------------
SUMMARY OF
EXPENSES
---------------
<TABLE>
<S> <C>
SHAREHOLDER TRANSACTION EXPENSES
Maximum Sales Load Imposed on Purchases......................................... None
Maximum Sales Load Imposed on Reinvested Dividends.............................. None
Deferred Sales Load (As a percentage of redemption proceeds):
Year 1...................................................................... 5%
Year 2...................................................................... 4%
Year 3...................................................................... 4%
Year 4...................................................................... 3%
Year 5...................................................................... 2%
Year 6...................................................................... 1%
Year 7 and following........................................................ 0%
Redemption Fee.................................................................. None
Exchange Fee.................................................................... $5.00
</TABLE>
<TABLE>
<CAPTION>
GROWTH HIGH HIGH
COMMON GRADE YIELD
STOCK BOND BOND
------------- ----------- -----------
<S> <C> <C> <C>
ANNUAL FUND OPERATING EXPENSES
(AS A PERCENTAGE OF NET ASSETS)
Management Fees................................................................ 0.50% 0.40% 0.55%
12b-1 Fees..................................................................... 0.50 0.50 0.50
Other Expenses................................................................. 0.62 1.09 0.95
--- --- ---
Total Fund Operating Expenses.............................................. 1.62% 1.99% 2.00%
--- --- ---
--- --- ---
<CAPTION>
MONEY BLUE
MANAGED MARKET CHIP
------------- ----------- -----------
<S> <C> <C> <C>
ANNUAL FUND OPERATING EXPENSES
(AS A PERCENTAGE OF NET ASSETS)
Management Fees................................................................ 0.60% 0.40% 0.25%
12b-1 Fees..................................................................... 0.50 0.50 0.50
Other Expenses................................................................. 0.84 1.10 1.03
--- --- ---
Total Fund Operating Expenses.............................................. 1.94% 2.00% 1.78%
--- --- ---
--- --- ---
</TABLE>
3
<PAGE>
EXAMPLE
You would pay the following expenses on a $1,000 investment, assuming (1) 5%
annual return and (2) redemption at the end of each time period:
<TABLE>
<CAPTION>
PORTFOLIO 1 YEAR 3 YEARS 5 YEARS 10 YEARS
- -------------------------------------------------------------------------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Growth Common Stock....................................................... $ 66 $ 91 $ 108 $ 192
High Grade Bond........................................................... $ 70 $ 102 $ 127 $ 232
High Yield Bond........................................................... $ 70 $ 103 $ 128 $ 233
Managed................................................................... $ 70 $ 101 $ 125 $ 226
Money Market.............................................................. $ 70 $ 103 $ 128 $ 233
Blue Chip................................................................. $ 68 $ 96 $ 116 $ 209
</TABLE>
You would pay the following expenses on the same investment, assuming no
redemption.
<TABLE>
<CAPTION>
PORTFOLIO 1 YEAR 3 YEARS 5 YEARS 10 YEARS
- -------------------------------------------------------------------------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Growth Common Stock....................................................... $ 16 $ 51 $ 88 $ 192
High Grade Bond........................................................... $ 20 $ 62 $ 107 $ 232
High Yield Bond........................................................... $ 20 $ 63 $ 108 $ 233
Managed................................................................... $ 20 $ 61 $ 105 $ 226
Money Market.............................................................. $ 20 $ 63 $ 108 $ 233
Blue Chip................................................................. $ 18 $ 56 $ 96 $ 209
</TABLE>
The purpose of the preceding table is to assist investors in understanding
the various costs and expenses that an investor in the Fund will bear directly
or indirectly. Long-term shareholders may pay more in total sales charges than
the economic equivalent of the maximum front-end sales charges permitted by the
National Association of Securities Dealers, Inc. The example should not be
considered to be a representation of past or future expenses. Actual expenses
may be greater or lesser than those shown. The example assumes a 5% annual rate
of return pursuant to the requirements of the Securities and Exchange Commission
and is not intended to be representative of past or future performance of the
Portfolios.
4
<PAGE>
- --------------------------------------------------------------------------------
CONDENSED
FINANCIAL
INFORMATION
---------------
The condensed financial information set forth below has been derived from
the financial statements and financial highlights of the Fund, which have been
audited by independent auditors. This table should be read in conjunction with
the financial statements and notes thereto included in the Annual Report to
Shareholders, which financial statements and notes are incorporated herein by
reference.
Selected data for a share of capital stock outstanding throughout each year:
GROWTH COMMON STOCK PORTFOLIO
<TABLE>
<CAPTION>
YEAR ENDED JULY 31,
----------------------------------------------------------------------------------------
1995 1994 1993 1992 1991 1990 1989 1988 1987 1986
------- ------- ------- ------- ------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net asset value,
beginning of year...... $ 13.07 $ 15.13 $ 12.48 $ 11.64 $ 11.02 $ 11.01 $ 10.48 $ 15.91 $ 15.56 $ 15.10
Income From Investment
Operations
Net investment
income.............. 0.43 0.60 0.51 0.48 0.58 0.58 0.57 0.32 0.30 0.35
Net gains or losses
on securities (both
realized and
unrealized)......... 0.65 (0.49) 2.75 0.93 0.65 0.05 0.57 (1.56) 2.18 1.36
------- ------- ------- ------- ------- ------- ------- ------- ------- -------
Total from investment
operations............ 1.08 0.11 3.26 1.41 1.23 0.63 1.14 (1.24) 2.48 1.71
Less Distributions
Dividends (from net
investment
income)............. (0.39) (0.60) (0.48) (0.57) (0.61) (0.62) (0.61) (0.96) (0.40) (0.40)
Distributions (from
capital gains)...... (0.72) (1.57) (0.13) (3.23) (1.73) (0.85)
Distributions in
excess of net
realized gains......
------- ------- ------- ------- ------- ------- ------- ------- ------- -------
Total distributions.... (1.11) (2.17) (0.61) (0.57) (0.61) (0.62) (0.61) (4.19) (2.13) (1.25)
------- ------- ------- ------- ------- ------- ------- ------- ------- -------
Net asset value, end of
year................... $ 13.04 $ 13.07 $ 15.13 $ 12.48 $ 11.64 $ 11.02 $ 11.01 $ 10.48 $ 15.91 $ 15.56
------- ------- ------- ------- ------- ------- ------- ------- ------- -------
------- ------- ------- ------- ------- ------- ------- ------- ------- -------
Total Return:
Total investment return
based on net asset
value (1)............. 9.36% 0.34% 27.25% 12.51% 11.67% 5.90% 11.49% (11.70%) 17.67% 12.57%
Ratios/Supplemental Data:
Net assets, end of year
($000's omitted)...... 70,947 64,315 51,732 39,418 36,193 35,285 37,435 48,060 57,279 42,932
Ratio of net expenses
to average net
assets................ 1.62% 1.60% 1.61% 1.69% 1.59% 1.62% 1.56% 1.39% 1.04% 0.99%
Ratio of net income to
average net assets.... 3.43% 4.05% 3.80% 3.99% 5.19% 5.31% 5.34% 2.98% 2.02% 2.32%
Portfolio turnover
rate.................. 85% 93% 92% 87% 59% 109% 172% 305% 262% 30%
</TABLE>
- ---------
Note: Per share amounts have been calculated on the basis of monthly per share
amounts (using average monthly outstanding shares) accumulated for the
period.
(1) Total investment return is calculated assuming an initial investment made at
the net asset value at the beginning of the year, reinvestment of all
dividends and distributions at net asset value during the year, and
redemption on the last day of the year. Contingent deferred sales charge is
not reflected in the calculation of total investment return.
5
<PAGE>
HIGH GRADE BOND PORTFOLIO
<TABLE>
<CAPTION>
YEAR ENDED JULY 31 (EXCEPT AS INDICATED),
-------------------------------------------------------------------------
1995 1994 1993 1992 1991 1990 1989 1988(1)
------- ------- ------- ------- ------- ------- ------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of
year.............................. $ 10.13 $ 10.69 $ 10.68 $ 10.15 $ 9.95 $ 10.11 $ 9.85 $ 10.00
Income From Investment Operations
Net investment income.......... 0.63 0.64 0.70 0.73 0.78 0.75 0.74 0.45
Net gains or losses on
securities (both realized and
unrealized)................... 0.16 (0.40) 0.13 0.62 0.20 (0.16) 0.26 (0.15)
------- ------- ------- ------- ------- ------- ------- ----------
Total from investment
operations...................... 0.79 0.24 0.83 1.35 0.98 0.59 1.00 0.30
Less Distributions
Dividends (from net investment
income)....................... (0.63) (0.64) (0.70) (0.73) (0.78) (0.75) (0.74) (0.45)
Distributions (from capital
gains)........................ (0.16) (0.12) (0.09)
Distributions in excess of net
realized gains................ (0.03)
------- ------- ------- ------- ------- ------- ------- ----------
Total distributions.............. (0.66) (0.80) (0.82) (0.82) (0.78) (0.75) (0.74) (0.45)
------- ------- ------- ------- ------- ------- ------- ----------
Net asset value, end of year....... $ 10.26 $ 10.13 $ 10.69 $ 10.68 $ 10.15 $ 9.95 $ 10.11 $ 9.85
------- ------- ------- ------- ------- ------- ------- ----------
------- ------- ------- ------- ------- ------- ------- ----------
Total Return:
Total investment return based on
net asset value (2)............. 8.23% 1.77% 8.10% 13.71% 10.29% 6.15% 10.68% 4.48%(3)
Ratios/Supplemental Data:
Net assets, end of year ($000's
omitted)........................ 8,345 7,596 8,047 7,676 4,276 3,635 3,317 2,968
Ratio of net expenses to average
net assets...................... 1.99% 1.90% 1.79% 1.88% 1.62% 1.68% 1.84% 1.18%
Ratio of net income to average
net assets...................... 6.29% 6.12% 6.59% 6.94% 7.78% 7.57% 7.57% 4.41%
Portfolio turnover rate.......... 18% 42% 54% 45% 40% 66% 27% 19%
</TABLE>
- ---------
Note: Per share amounts have been calculated on the basis of monthly per share
amounts (using average monthly outstanding shares) accumulated for the
period.
(1) Period from December 1, 1987, date operations commenced, through July 31,
1988.
(2) Total investment return is calculated assuming an initial investment made at
the net asset value at the beginning of the period, reinvestment of all
dividends and distributions at net asset value during the period, and
redemption on the last day of the period. Contingent deferred sales charge
is not reflected in the calculation of total investment return.
(3) Computed on an annualized basis.
6
<PAGE>
HIGH YIELD BOND PORTFOLIO
<TABLE>
<CAPTION>
YEAR ENDED JULY 31 (EXCEPT AS INDICATED),
---------------------------------------------------------------------------
1995 1994 1993 1992 1991 1990 1989 1988(1)
-------- -------- ------- ------- ------- ------- ------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of
year.............................. $ 10.00 $ 10.76 $ 10.47 $ 9.82 $ 9.62 $ 9.95 $ 9.86 $ 10.00
Income From Investment Operations
Net investment income.......... 0.78 0.81 0.83 0.90 0.95 0.98 0.93 0.45
Net gains or losses on
securities (both realized and
unrealized)................... 0.13 (0.60) 0.46 0.65 0.19 (0.33) 0.09 (0.14)
-------- -------- ------- ------- ------- ------- ------- ----------
Total from investment
operations...................... 0.91 0.21 1.29 1.55 1.14 0.65 1.02 0.31
Less Distributions
Dividends (from net investment
income)....................... (0.78) (0.81) (0.83) (0.90) (0.94) (0.98) (0.93) (0.45)
Distributions (from capital
gains)........................ (0.09) (0.16) (0.17)
Distributions in excess of net
realized gains................ (0.01)
-------- -------- ------- ------- ------- ------- ------- ----------
Total distributions.............. (0.88) (0.97) (1.00) (0.90) (0.94) (0.98) (0.93) (0.45)
-------- -------- ------- ------- ------- ------- ------- ----------
Net asset value, end of year....... $ 10.03 $ 10.00 $ 10.76 $ 10.47 $ 9.82 $ 9.62 $ 9.95 $ 9.86
-------- -------- ------- ------- ------- ------- ------- ----------
-------- -------- ------- ------- ------- ------- ------- ----------
Total Return:
Total investment return based on
net asset value (2)............. 9.71% 1.88% 12.95% 16.44% 12.83% 6.92% 10.82% 4.71%(3)
Ratios/Supplemental Data:
Net assets, end of year ($000's
omitted)........................ 6,691 6,425 5,758 4,835 4,029 3,399 3,013 2,648
Ratio of net expenses to average
net assets...................... 2.00% 2.00% 2.00% 1.98% 1.77% 1.83% 2.01% 1.32%
Ratio of net income to average
net assets...................... 7.83% 7.68% 7.84% 8.79% 9.98% 10.00% 9.41% 4.47%
Portfolio turnover rate.......... 23% 26% 56% 56% 78% 89% 70% 26%
Information assuming no voluntary
reimbursment by FBL Investment
Advisory Services, Inc. of excess
operating expenses:
Per share net investment
income.......................... $ 0.75 $ 0.79 $ 0.82
Ratio of expenses to average net
assets.......................... 2.29% 2.17% 2.05%
Amount reimbursed................ $ 18,810 $ 10,754 $ 3,147
</TABLE>
- ---------
Note: Per share amounts have been calculated on the basis of monthly per share
amounts (using average monthly outstanding shares) accumulated for the
period.
(1) Period from December 1, 1987, date operations commenced, through July 31,
1988.
(2) Total investment return is calculated assuming an initial investment made at
the net asset value at the beginning of the period, reinvestment of all
dividends and distributions at net asset value during the period, and
redemption on the last day of the period. Contingent deferred sales charge
is not reflected in the calculation of total investment return.
(3) Computed on an annualized basis.
7
<PAGE>
MANAGED PORTFOLIO
<TABLE>
<CAPTION>
YEAR ENDED JULY 31 (EXCEPT AS INDICATED),
-----------------------------------------------------------------------------
1995 1994 1993 1992 1991 1990 1989 1988(1)
------ ------ ------ ------ ------ ------ ------ -------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of year........... $11.62 $12.51 $10.77 $ 9.95 $ 9.92 $ 9.93 $ 9.93 $10.00
Income From Investment Operations
Net investment income.................... 0.56 0.55 0.54 0.61 0.66 0.68 0.65 0.42
Net gains or losses on securities (both
realized and unrealized)................ 0.47 (0.62) 1.87 0.82 0.03 (0.01) (0.10)
------ ------ ------ ------ ------ ------ ------ -------
Total from investment operations........... 1.03 (0.07) 2.41 1.43 0.69 0.67 0.65 0.32
Less Distributions
Dividends (from net investment income)... (0.56) (0.50) (0.52) (0.61) (0.66) (0.68) (0.65) (0.39)
Distributions (from capital gains)....... (0.14) (0.32) (0.15)
Distributions in excess of net realized
gains................................... (0.10)
------ ------ ------ ------ ------ ------ ------ -------
Total distributions........................ (0.80) (0.82) (0.67) (0.61) (0.66) (0.68) (0.65) (0.39)
------ ------ ------ ------ ------ ------ ------ -------
Net asset value, end of year................. $11.85 $11.62 $12.51 $10.77 $ 9.95 $ 9.92 $ 9.93 $ 9.93
------ ------ ------ ------ ------ ------ ------ -------
------ ------ ------ ------ ------ ------ ------ -------
Total Return:
Total investment return based on net asset
value (2)................................. 9.40% (0.61)% 23.02% 14.79% 7.05% 6.96% 4.88% 4.81%(3)
Ratios/Supplemental Data:
Net assets, end of year ($000's omitted)... 21,105 19,100 8,257 3,887 3,935 3,594 3,399 3,301
Ratio of net expenses to average net
assets.................................... 1.94% 1.96% 1.96% 2.07% 1.84% 1.84% 2.05% 1.29%
Ratio of net income to average net
assets.................................... 4.86% 4.42% 4.54% 5.93% 6.51% 6.83% 6.42% 4.05%
Portfolio turnover rate.................... 69 % 29 % 52 % 77 % 31 % 73 % 119 % 53 %
Information assuming no voluntary
reimbursment by FBL Investment Advisory
Services, Inc. of excess operating expenses:
Per share net investment income............ $ 0.53
Ratio of expenses to average net assets.... 2.02%
Amount reimbursed.......................... $3,497
</TABLE>
- ---------
Note: Per share amounts have been calculated on the basis of monthly per share
amounts (using average monthly outstanding shares) accumulated for the
period.
(1) Period from December 1, 1987, date operations commenced, through July 31,
1988.
(2) Total investment return is calculated assuming an initial investment made at
the net asset value at the beginning of the period, reinvestment of all
dividends and distributions at net asset value during the period, and
redemption on the last day of the period. Contingent deferred sales charge
is not reflected in the calculation of total investment return.
(3) Computed on an annualized basis.
8
<PAGE>
MONEY MARKET PORTFOLIO
<TABLE>
<CAPTION>
YEAR ENDED JULY 31 (EXCEPT AS INDICATED),
---------------------------------------------------------------
1995 1994 1993 1992 1991 1990 1989 1988(1)
------ ------ ------ ------ ------ ------ ------ -------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of year........... $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
Income From Investment Operations
Net investment income.................... 0.04 0.02 0.01 0.03 0.05 0.07 0.07 0.03
Net gains or losses on securities (both
realized and unrealized)................
------ ------ ------ ------ ------ ------ ------ -------
Total from investment operations........... (0.04) 0.02 0.01 0.03 0.05 0.07 0.07 0.03
Less Distributions
Dividends (from net investment income)... (0.04) (0.02) (0.01) (0.03) (0.05) (0.07) (0.07) (0.03)
Distributions (from capital gains).......
Distributions in excess of net realized
gains...................................
------ ------ ------ ------ ------ ------ ------ -------
Total distributions........................ (0.04) (0.02) (0.01) (0.03) (0.05) (0.07) (0.07) (0.03)
------ ------ ------ ------ ------ ------ ------ -------
Net asset value, end of year................. $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
------ ------ ------ ------ ------ ------ ------ -------
------ ------ ------ ------ ------ ------ ------ -------
Total Return:
Total investment return based on net asset
value (2)................................. 3.60% 1.47% 1.33% 2.82% 5.52% 6.93% 7.25% 4.93%(3)
Ratios/Supplemental Data:
Net assets, end of year ($000's omitted)... 2,439 2,627 2,555 2,861 3,672 3,604 2,925 2,478
Ratio of net expenses to average net
assets.................................... 2.00% 1.93% 1.94% 2.00% 1.70% 1.65% 1.88% 1.79%(3)
Ratio of net income to average net
assets.................................... 3.51% 1.45% 1.33% 2.83% 5.42% 6.65% 7.08% 4.74%(3)
Portfolio turnover rate.................... 0 % 0 % 0 % 0 % 0 % 0 % 0 % 0 %
Information assuming no voluntary
reimbursement by FBL Investment Advisory
Services, Inc. of excess operating expenses:
Per share net investment income............ $ 0.03
Ratio of expenses to average net assets.... 2.20%
Amount reimbursed.......................... $4,948
</TABLE>
- ---------
Note: Per share amounts have been calculated on the basis of monthly per share
amounts (using average monthly outstanding shares) accumulated for the
period.
(1) Period from December 1, 1987, date operations commenced, through July 31,
1988.
(2) Total investment return is calculated assuming an initial investment made at
the net asset value at the beginning of the period, reinvestment of all
dividends and distributions at net asset value during the period, and
redemption on the last day of the period. Contingent deferred sales charge
is not reflected in the calculation of total investment return.
(3) Computed on an annualized basis.
9
<PAGE>
BLUE CHIP PORTFOLIO
<TABLE>
<CAPTION>
YEAR ENDED JULY 31 (EXCEPT AS INDICATED),
---------------------------------------------------------------
1995 1994 1993 1992 1991 1990 1989 1988(1)
------ ------ ------ ------ ------ ------ ------ -------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of year........... $18.75 $17.69 $16.78 $15.38 $15.61 $14.56 $11.57 $10.00
Income From Investment Operations
Net investment income.................... 0.19 0.14 0.13 0.17 0.30 0.32 0.29 0.09(4)
Net gains or losses on securities (both
realized and unrealized)................ 4.05 1.06 0.90 1.47 0.77 1.02 2.90 1.48
------ ------ ------ ------ ------ ------ ------ -------
Total from investment operations........... 4.24 1.20 1.03 1.64 1.07 1.34 3.19 1.57
Less Distributions
Dividends (from net investment income)... (0.14) (0.14) (0.12) (0.24) (0.31) (0.28) (0.20)
Distributions (from capital gains)....... (0.99) (0.01)
Distributions in excess of net realized
gains...................................
------ ------ ------ ------ ------ ------ ------ -------
Total distributions........................ (0.14) (0.14) (0.12) (0.24) (1.30) (0.29) (0.20) 0.00
------ ------ ------ ------ ------ ------ ------ -------
Net asset value, end of year................. $22.85 $18.75 $17.69 $16.78 $15.38 $15.61 $14.56 $11.57
------ ------ ------ ------ ------ ------ ------ -------
------ ------ ------ ------ ------ ------ ------ -------
Total Return:
Total investment return based on net asset
value (2)................................. 22.77% 6.75% 6.21% 10.77% 8.36% 9.26% 27.94% 24.45%(3)
Ratios/Supplemental Data:
Net assets, end of year ($000's omitted)... 9,657 6,745 5,415 4,405 3,883 3,166 2,001 1,358
Ratio of net expenses to average net
assets.................................... 1.78 % 1.83 % 1.90 % 1.92 % 1.63 % 1.74 % 2.02 % 1.45 %
Ratio of net income to average net
assets.................................... 0.92% 0.75% 0.73% 1.09% 2.06% 2.14% 2.25% 0.73%
Portfolio turnover rate.................... 1 % 1 % 0 % 0 % 5 % 37 % 0 % 4 %
</TABLE>
- ------------
Note: Per share amounts have been calculated on the basis of monthly per share
amounts (using average monthly outstanding shares) accumulated for the
period.
(1) Period from December 1, 1987, date operations commenced, through July 31,
1988.
(2) Total investment return is calculated assuming an initial investment made at
the net asset value at the beginning of the period, reinvestment of all
dividends and distributions at net asset value during the period, and
redemption on the last day of the period. Contingent deferred sales charge
is not reflected in the calculation of total investment return.
(3) Computed on an annualized basis.
(4) FBL Investment Advisory Services Inc. reimbursed $548 under the terms of its
investment advisory and management services agreement.
10
<PAGE>
- --------------------------------------------------------------------------------
INVESTMENT OBJECTIVES
AND POLICIES
OF THE PORTFOLIOS
----------------------------
Each Portfolio of the Fund has distinct investment objectives which it
pursues through separate investment policies as described below. There can be no
assurance that the objectives of any Portfolio will be achieved. The differences
in objectives and policies among the Portfolios can be expected to affect the
return of each Portfolio and the degree of market and financial risk to which
each Portfolio is subject.
The Statement of Additional Information contains specific investment
restrictions that govern the Portfolios' investments. Those restrictions
identified as fundamental policies, as well as the investment objectives and
investment policies described below in the first paragraph for each Portfolio,
are fundamental policies and may not be changed without a majority vote of the
outstanding shares of the affected Portfolio. See "General
Information--Shareholder Voting Rights." All other investment policies and
practices described in this Prospectus and in the Statement of Additional
Information are not fundamental and may be changed by the Board of Directors
without approval of the shareholders. Each Portfolio may engage in certain of
the portfolio strategies described in this Prospectus under "Description of
Certain Investment Techniques" and in the Statement of Additional Information.
"Appendix C--Description of Corporate Bond Ratings" describes the ratings of
Moody's Investors Service, Inc. ("Moody's") and Standard & Poor's Corporation
("Standard & Poor's") that are referred to herein.
The portfolio turnover rates for the Portfolios are set forth under
"Condensed Financial Information." Portfolio turnover is calculated by dividing
the lesser of purchases or sales of a Portfolio's securities during a fiscal
year by the average monthly value of the Portfolio's securities during such
fiscal year. In determining the portfolio turnover rate, all securities whose
maturities or expiration dates at the time of acquisition were one year or less
are excluded. Turnover rates may be affected by factors such as purchase and
redemption requirements and market volatility, and may vary greatly from time to
time. Frequency of portfolio turnover will not be a limiting factor if the
investment adviser deems it desirable to purchase or sell securities. Increased
portfolio turnover may result in greater brokerage commissions and consequent
expense to the Portfolio. If any Portfolio were to derive more than 30% of its
gross income from the sale of securities held less than three months, it might
fail to qualify under the tax laws as a regulated investment company in
particular years and consequently would lose certain beneficial tax treatment of
its income; however, each Portfolio intends to continue to qualify as a
regulated investment company each year. See "Dividends and Taxes."
Following is a description of the investment objectives and certain of the
investment practices of each of the Fund's Portfolios. For a further description
of the investment practices of the various Portfolios, see "Description of
Certain Investment Techniques."
GROWTH COMMON STOCK PORTFOLIO
The primary investment objective of the Growth Common Stock Portfolio is
long-term capital appreciation. Current income is a secondary objective. The
Portfolio pursues its objectives by investing primarily in growth common stocks
and securities convertible or exchangeable into growth common stocks, including
warrants and rights.
11
<PAGE>
A growth common stock is one which, in the opinion of the Fund's investment
adviser, appears to possess above-average potential for appreciation in market
value, usually as a result of the issuer's relatively favorable prospects for
improvement in earnings. Such securities generally include those of companies
with established records of growth in sales or earnings, and companies with
promising new products, services or processes.
The Portfolio may also invest in companies in cyclical industries during
periods when the common stock of such companies appears to the Fund's investment
adviser to have good potential for capital appreciation. The Portfolio may also
invest up to 35% of its total assets in preferred stocks and debt securities
including investment-grade commercial paper, corporate bonds, debentures,
obligations of banks and savings institutions, U.S. Government securities,
government agency securities and repurchase agreements.
The investment adviser's strategy for the Growth Common Stock Portfolio is
based on a value-oriented analysis of common stocks where it evaluates price to
book value, price to earnings, debt to total capital ratio, price to cash flow
and other similar measures relative to historic standards. When in the opinion
of the investment adviser, the equity market reaches periods of overvaluation by
such measures, or, when warranted by other prevailing market or economic
conditions, the Portfolio for temporary defensive purposes may invest up to 100%
of its assets in other types of securities, including investment-grade
commercial paper, corporate bonds, debentures, preferred stocks, obligations of
banks and savings institutions, U.S. Government securities, government agency
securities and repurchase agreements, or it may retain funds in cash.
"Investment-grade commercial paper" is commercial paper rated A-2 or better by
Standard & Poor's or Prime-2 or better by Moody's.
Through careful selection of individual securities, diversification of
investments by industry and type of security and constant supervision of the
investment portfolio, the investment adviser strives to reduce risk and thereby
conserve principal. However, the Portfolio's investments are subject to market
fluctuations and the risks inherent in all securities.
HIGH GRADE BOND PORTFOLIO
The investment objective of the High Grade Bond Portfolio is to provide as
high a level of current income as is consistent with investment in a portfolio
of debt securities deemed to be of high quality by the Fund's investment
adviser. The Portfolio pursues its objective by investing primarily in debt
securities rated AAA, AA or A by Standard & Poor's or Aaa, Aa or A by Moody's
and in U.S. Government securities and government agency securities.
From time to time, up to 20% of the Portfolio's total assets may be invested
in unrated debt securities or debt securities rated lower than the three highest
grades of Standard & Poor's or Moody's as described above, or in convertible
debt securities, convertible preferred stocks, or non-convertible preferred
stocks rated within the three highest grades of Standard & Poor's or Moody's
applicable to such securities. To the extent that the Portfolio does invest in
debt securities that are rated lower than A by Moody's or Standard & Poor's (or
are unrated but equivalent in quality to such securities), the Fund's investment
portfolio will be subject to relatively greater risk of loss of income and
principal as discussed under "Principal Risk Factors--Special
Considerations--High Yield Bonds." Securities rated Baa or lower by Moody's and
BBB or lower by Standard & Poor's are considered by those rating agencies to
have varying degrees of speculative characteristics. Consequently, although they
can be expected to provide higher yields, such securities may be subject to
greater market fluctuations and risk of loss of income and principal than
lower-yielding, higher-rated fixed-income securities. It is intended that at
least 65% of the Portfolio's total assets will be invested in medium- and
long-term debt securities that are rated A or better or that are unrated but of
equivalent quality.
12
<PAGE>
The Portfolio will not directly purchase common stocks. However, it may
retain up to 10% of the value of its assets in common stocks acquired either by
conversion of debt securities or by the exercise of warrants attached to debt
securities.
When warranted, in the opinion of the investment adviser, by prevailing
market or economic conditions, the Portfolio for temporary defensive purposes
may invest up to 100% of its assets in other types of securities, including
investment-grade commercial paper, obligations of banks and savings
institutions, U.S. Government securities, government agency securities and
repurchase agreements, or it may retain funds in cash.
Although in the opinion of the Fund's investment adviser, the risk of loss
of principal should be minimized by the quality of the investments in which the
Portfolio will invest primarily, the long maturities that typically provide the
best yields may subject the Portfolio to substantial price changes resulting
from market yield fluctuations. The market price of fixed-income securities such
as those purchased by the Portfolio is affected by changes in interest rates,
generally. The market value of fixed-income securities generally will fall as
interest rates rise, and rise as interest rates fall.
HIGH YIELD BOND PORTFOLIO
The primary investment objective of the High Yield Bond Portfolio is to
obtain as high a level of current income as is consistent with investment in a
portfolio of fixed-income securities rated in the lower categories of
established rating services. As a secondary objective, the Portfolio seeks
capital appreciation when consistent with its primary objective. The Portfolio
pursues its investment objectives by investing primarily in fixed-income
securities, including corporate bonds and notes, convertible debt securities and
preferred stocks that are rated in the lower categories of established rating
services (Baa or lower by Moody's and BBB or lower by Standard & Poor's), or in
unrated securities of comparable quality. Such securities are commonly known as
"junk bonds."
Securities rated Ba or lower by Moody's and BB or lower by Standard & Poor's
are considered by those rating services to have varying degrees of speculative
characteristics. Consequently, although they can be expected to provide higher
yields, such securities may be subject to greater market fluctuations and risk
of loss of income and principal than lower-yielding, higher-rated fixed-income
securities. See "Principal Risk Factors--Special Considerations--High Yield
Bonds" for discussion of various risk factors relating to high yield bonds. The
investment adviser will not rely solely on the ratings assigned by the rating
services, and the Portfolio may invest, without limit, in unrated securities if
such securities offer, in the opinion of the investment adviser, a relatively
high yield without undue risk. Although the Portfolio will invest primarily in
lower-rated securities, it will not invest in securities in the lowest rating
categories (Ca or lower for Moody's and CC or lower for Standard & Poor's)
unless the investment adviser believes that the financial condition of the
issuer or the protection afforded to the particular securities is stronger than
would otherwise be indicated by such low ratings.
The Portfolio anticipates that under normal circumstances more than 80% of
its assets will be invested in fixed-income securities, including convertible
and non-convertible debt securities and preferred stock, and that at least 65%
of its assets will be invested in debt securities. The remaining assets of the
Portfolio may be held in cash or investment-grade commercial paper, obligations
of banks and savings institutions, U.S. Government securities, government agency
securities and repurchase agreements. The Portfolio does not intend to invest in
common stocks, rights or other equity securities, but it may acquire or hold
such securities (if consistent with its objectives) when they are acquired in
unit offerings with fixed-income securities or in connection with an actual or
proposed conversion or exchange of fixed-income securities.
13
<PAGE>
When changing economic conditions and other factors cause the yield
difference between lower-rated and higher-rated securities to narrow, the
Portfolio may purchase higher-rated securities if the investment adviser
believes that the risk of loss of income and principal may be substantially
reduced with only a relatively small reduction in yield. In addition, when
warranted, in the opinion of the investment adviser, by prevailing market or
economic conditions, the Portfolio for temporary defensive purposes may invest
up to 100% of its assets in investment-grade commercial paper, obligations of
banks and savings institutions, U.S. Government securities, government agency
securities and repurchase agreements, or it may retain funds in cash. The yield
on such securities may be lower than the yield on lower-rated fixed-income
securities.
Because an investment in high-yield securities entails relatively greater
risk of loss of income and principal, an investment in the Portfolio may not
constitute a complete investment program and may not be appropriate for all
investors.
MANAGED PORTFOLIO
The investment objective of the Managed Portfolio is to seek the highest
total investment return of income and capital appreciation. The Portfolio
pursues its objective through a fully managed investment policy consisting of
investment in the following three market sectors: (i) common stocks and other
equity securities of the type in which the Growth Common Stock Portfolio may
invest; (ii) high quality debt securities and preferred stocks of the type in
which the High Grade Bond Portfolio may invest; and (iii) high quality
short-term money market instruments of the type in which the Money Market
Portfolio may invest.
The Portfolio's investment policies for the stock, debt and money market
sectors are substantially identical to those of the Growth Common Stock
Portfolio, High Grade Bond Portfolio and Money Market Portfolio, respectively.
The Managed Portfolio will, from time to time, adjust the mix of investments
among the three market sectors to capitalize on perceived variations in return
potential produced by the interaction of changing financial markets and economic
conditions. There are no restrictions as to the proportion of one or another
type of security which the Portfolio may hold. Accordingly, the Portfolio may,
at any given time, be substantially invested in equity securities, in high
quality debt securities, or in high quality short-term money market instruments.
Major changes in the investment mix may occur over several years or during a
single year or shorter period depending upon market and economic conditions. The
fact that the investment mix may be adjusted from time to time may result in
high portfolio turnover and, consequently, high brokerage charges to the
Portfolio.
Achievement of the Portfolio's objective depends on the investment adviser's
ability to assess the effect of economic and market trends on different sectors
of the market.
MONEY MARKET PORTFOLIO
The investment objective of the Money Market Portfolio is to obtain maximum
current income consistent with liquidity and stability of principal. The
Portfolio pursues its objective by investing in high quality short-term debt
obligations denominated in U.S. dollars that are deemed to present minimal
credit risk.
Money market instruments which the Money Market Portfolio may purchase
include U.S. Government securities, government agency securities, obligations of
banks and savings institutions, commercial paper, short-term corporate debt
securities and repurchase agreements. Appendix A contains a more detailed
description of the money market instruments in which the Portfolio may invest.
The Portfolio's investments will be limited to money market instruments which
mature in thirteen months or less from the date of purchase; however, the
Portfolio may invest in repurchase agreements in which the
14
<PAGE>
underlying securities have maturities in excess of one year from the date of
purchase. In addition, the Portfolio limits its investments to securities that
meet the quality and diversification requirements of Rule 2a-7 under the
Investment Company Act of 1940 (the "Investment Company Act"). See Appendix A.
The dollar-weighted average maturity of the Portfolio will not exceed 90
days. The Portfolio seeks to maintain a constant net asset value of $1.00 per
share, and will use the amortized cost method of securities valuation. However,
there can be no guarantee that the Portfolio will be able to maintain a stable
net asset value of $1.00 per share. See "Net Asset Value Information." Because
of the short-term nature of the investments of this Portfolio, a portfolio
turnover rate is not applicable.
BLUE CHIP PORTFOLIO
The investment objective of the Blue Chip Portfolio is growth of capital and
income. The Portfolio pursues its objective by investing primarily in common
stocks of well-capitalized, established companies.
In pursuing its objective, the Portfolio will invest in stocks of
approximately 40 large, well-known companies that the Fund's investment adviser
believes to collectively comprise a representative cross-section of major
industries. Companies of this type are commonly referred to as "blue chip." Blue
chip companies are generally identified by their substantial capitalization,
established history of earnings and superior management structure. The
investment adviser will base its determination of the companies to be included
or retained in the Portfolio, not on the basis of any analysis of the companies'
underlying economic or financial fundamentals or of the relative value of the
securities, but rather on whether the companies in the Portfolio, taken
together, reasonably represent a cross-section of major industries. The Adviser
anticipates that the Portfolio will purchase approximately equal dollar amounts
of shares of each company. However, the Portfolio will not own positions of
equal value in the various companies, partly because of price fluctuations after
purchases by the Portfolio.
The Portfolio may, from time to time, have more than 5% of the value of its
total assets invested in each of one or more particular companies. However, as
to 75% of the Portfolio's total assets, no more than 5% of the Portfolio's total
assets (at the time of purchase) will be invested in securities of any one
issuer (other than the U.S. Government and its agencies and instrumentalities).
The concentration of a significant portion of its assets in stocks of one or a
few companies (or in a relatively limited number of industries) may subject the
Portfolio to increased risk of loss if those stocks (or stocks in those
industries) were to decline in value.
The Portfolio expects that it will remain substantially invested in stocks
at all times. However, at most times the Portfolio will hold a small portion of
its assets (not to exceed 15% of its total assets) in cash or cash equivalents
to accommodate redemptions and so as to avoid having to purchase stocks in small
quantities and thereby incur excessive brokerage costs. Any such cash balances
will be invested in high quality short-term money market instruments of the type
in which the Money Market Portfolio may invest, or retained in cash. The
Portfolio will not engage in the trading of securities for the purpose of
realizing short-term profits.
- --------------------------------------------------------------------------------
PRINCIPAL RISK
FACTORS
-----------------
GENERAL
In general, risk associated with the investments of a particular Portfolio
can be described in terms of current income volatility, financial risk and
market risk. Current income volatility refers to the degree and
15
<PAGE>
rapidity with which changes in overall market interest rates affect the level of
current income. Financial risk refers to the ability of an issuer of a debt
security to pay, on a timely basis, principal and interest on such security.
With respect to the issuer of an equity security, financial risk refers to its
earning stability and overall financial soundness. Market risk for debt
securities refers to the fact that, as a general matter, the current value of
debt securities varies inversely with changes in prevailing interest rates; if
interest rates rise, the value of a debt security will tend to fall. Market risk
for equity securities refers to overall stock market valuation levels.
The GROWTH COMMON STOCK PORTFOLIO and BLUE CHIP PORTFOLIO most likely will
be subject to moderate levels of both market and financial risk.
The HIGH GRADE BOND PORTFOLIO most likely will be subject to moderate levels
of market risk and relatively low levels of financial risk and current income
volatility.
The HIGH YIELD BOND PORTFOLIO most likely will be subject to moderate levels
of market risk, relatively high levels of financial risk and relatively low
levels of current income volatility.
The market value of fixed-income securities is affected by changes in
general market interest rates. If interest rates decline, the market value of
fixed-income securities tends to increase; while if interest rates increase, the
market value of fixed-income securities tends to decrease. Highly rated
fixed-income securities tend to have lower interest rates and yields, and less
market or financial risk, than do lower-rated fixed-income securities.
Lower-rated and unrated securities generally have a greater degree of market and
financial risk than higher-rated securities, for reasons including the greater
possibility that issuers of lower-rated or unrated securities may not be able to
pay the principal and interest when due, especially during periods of adverse
economic conditions.
The MANAGED PORTFOLIO most likely will be subject to moderate levels of
market and financial risk and relatively low levels of current income
volatility, although current income volatility could be higher if the Portfolio
is heavily invested in short-term money market instruments.
The MONEY MARKET PORTFOLIO should be subject to little market or financial
risk because it invests in high quality short-term investments that reflect
current market interest rates. Although these types of securities generally are
considered to have low financial risk, there is some possibility that issuers
may fail to meet their principal and interest obligations on a timely basis. The
Portfolio could experience a high level of current income volatility because the
level of its current income directly reflects short-term interest rates.
SPECIAL CONSIDERATIONS--HIGH YIELD BONDS
As reflected above, the High Yield Bond Portfolio intends to invest a
substantial portion of its assets in fixed-income securities offering high
current income. Additionally, subject to its specific investment objectives and
policies as described above, the High Grade Bond Portfolio may invest a portion
of its assets in such securities. Such high yielding fixed-income securities are
ordinarily in the lower rating categories of Moody's or Standard & Poor's (Ba/BB
or lower) or will be unrated securities of comparable quality. Such securities
are commonly known as "junk bonds." These lower-rated fixed-income securities
are considered, on balance, as predominantly speculative with respect to
capacity to pay interest and repay principal in accordance with the terms of the
obligation and will generally involve more credit risk than securities in the
higher rating categories. The market values of such securities tend to reflect
individual corporate developments to a greater extent than do higher-rated
securities, which react primarily to fluctuations in the general level of
interest rates. Such lower-rated securities also tend to be more sensitive to
economic conditions than are higher-rated securities. Adverse publicity and
investor perceptions, whether or not based on fundamental analysis, regarding
lower-rated bonds may depress
16
<PAGE>
prices and liquidity for such securities. Factors adversely affecting the market
value of high yielding securities will adversely affect a Portfolio's net asset
value. In addition, a Portfolio may incur additional expenses to the extent it
were required to seek recovery upon a default in the payment of principal or
interest on its portfolio holdings. Although some risk is inherent in all
securities ownership, holders of fixed-income securities have a claim on the
assets of the issuer prior to the holders of common stock. Therefore, an
investment in fixed-income securities generally entails less risk than an
investment in common stock of the same issuer.
The investment philosophy of the High Yield Bond Portfolio with respect to
high yield bonds is based on the premise that over the long-term a broadly
diversified portfolio of high yield fixed-income securities should, even taking
into account possible losses, provide a higher net return than that achievable
on a portfolio of higher-rated securities. The High Yield Bond Portfolio seeks
to achieve the highest yields possible while reducing relative risks through:
(a) broad diversification,
(b) credit analysis by the investment adviser of the issuers in which the
Portfolio invests,
(c) monitoring and seeking to anticipate changes and trends in the economy
and financial markets that might affect the prices of portfolio
securities.
The investment adviser's judgment as to the "reasonableness" of the risk
involved in any particular investment will be a function of its experience in
managing fixed-income investments and its evaluation of general economic and
financial conditions of a specific issuer.
In some circumstances, defensive strategies may be implemented to preserve
or enhance capital even at the sacrifice of current yield. Defensive strategies,
which may be used singly or in any combination, may include, but are not limited
to, investments in discount securities or investments in money market
instruments.
High yielding securities may be issued by corporations in the growth stage
of their development. They may also be issued in connection with a corporate
reorganization or as part of a corporate takeover. Companies that issue such
high yielding securities are often highly leveraged and may not have available
to them more traditional methods of financing. Therefore, the risk associated
with acquiring the securities of such issuers generally is greater than is the
case with higher-rated securities. For example, during an economic downturn or a
sustained period of rising interest rates, highly leveraged issuers of high
yielding securities may experience financial stress. During such periods, such
issuers may not have sufficient revenues to meet their interest payment
obligations. The issuer's ability to service its debt obligations may also be
adversely affected by specific corporate developments, or the issuer's inability
to meet specific projected business forecasts or the unavailability of
additional financing. The risk of loss due to default by the issuer is
significantly greater for the holders of high yielding securities because such
securities are generally unsecured and are often subordinated to other creditors
of the issuer.
High yielding securities frequently have call or buy-back features that
would permit an issuer to call or repurchase the security from the Portfolio. If
a call were exercised by the issuer during a period of declining interest rates,
a Portfolio would likely have to replace such called security with a lower
yielding security, thus decreasing the net investment income to the Portfolio.
The premature disposition of a high yielding security because of a call or
buy-back feature, the deterioration of the issuer's creditworthiness or a
default may also make it more difficult for a Portfolio to time its receipt of
income, which may have tax implications.
17
<PAGE>
A Portfolio may have difficulty disposing of certain high yielding
securities for which there is a thin trading market. Because not all dealers
maintain markets in all high yielding securities, there is no established retail
secondary market for many of these securities, and the Fund anticipates that
they could be sold only to a limited number of dealers or institutional
investors. To the extent there is a secondary trading market for high yielding
securities, it is generally not so liquid as that for higher-rated securities.
The lack of a liquid secondary market may have an adverse impact on market price
and a Portfolio's ability to dispose of particular issues when necessary to meet
the Portfolio's liquidity needs, or in response to a specific economic event
such as a deterioration in the creditworthiness of the issuer. The lack of a
liquid secondary market for certain securities may also make it more difficult
for the Fund to obtain accurate market quotations for purposes of valuing a
Portfolio's assets. Market quotations are generally available on many high yield
issues only from a limited number of dealers and may not necessarily represent
firm bids of such dealers or prices for actual sales.
It is likely that a major economic recession could severely affect the
market for and the values of high yielding securities, as well as the ability of
the issuers of such securities to repay principal and pay interest thereon.
A Portfolio may acquire high yielding securities that are sold without
registration under the federal securities laws and therefore carry restrictions
on resale. While many recent high yielding securities have been sold with
registration rights, covenants and penalty provisions for delayed registration,
if a Portfolio is required to sell such restricted securities before the
securities have been registered, it may be deemed an underwriter of such
securities as defined in the Securities Act of 1933, which entails special
responsibilities and liabilities. A Portfolio may incur special costs in
disposing of such securities, but will generally incur no costs when the issuer
is responsible for registering the securities.
A Portfolio may acquire high yielding securities during an initial
underwriting. Such securities involve special risks because they are new issues.
The Fund has no arrangement with any person concerning the acquisition of such
securities, and the investment adviser will carefully review the credit and
other characteristics pertinent to such new issues.
From time to time, there have been proposals for legislation designed to
limit the use of certain high yielding securities in connection with leveraged
buy-outs, mergers and acquisitions, or to limit the deductibility of interest
payments on such securities. Such proposals if enacted into law could reduce the
market for such securities generally, could negatively affect the financial
condition of issuers of high yield securities by removing or reducing a source
of future financing and could negatively affect the value of specific high yield
issues. However, the likelihood of any such legislation or the effect thereof is
uncertain.
Zero coupon securities and pay in-kind bonds involve additional special
obligations. Zero coupon securities are debt obligations that do not entitle the
holder to any periodic payments of interest prior to maturity or to a specified
cash payment date when the securities begin paying current interest (the "cash
payment date"), and therefore are issued and traded at a discount from their
face amounts or par value. The discount varies depending upon the time remaining
until maturity or cash payment date, prevailing interest rates, liquidity of the
security and the perceived credit quality of the issuer. The discount, absent
financial difficulties of the issuer, decreases as the final maturity or cash
payment date of the security approaches. The market prices of zero coupon
securities are generally more volatile than those of securities that pay
interest periodically, and they are more likely to respond to changes in
interest rates than non-zero coupon securities having similar maturities and
credit quality. The credit risk factors pertaining to lower-rated securities
generally also apply to lower-rated zero coupon bonds and pay in-kind bonds.
Such zero coupon, pay in-kind or delayed interest bonds carry an additional risk
in that,
18
<PAGE>
unlike bonds that pay interest throughout the period to maturity, a Portfolio
will realize no cash until the cash payment date unless a portion of such
securities is sold and, if the issuer defaults, a Portfolio may obtain no return
at all on its investment.
Federal income tax law requires the holder of zero coupon securities or of
certain pay in-kind bonds (bonds that pay interest through the issuance of
additional bonds) to accrue income with respect to these securities prior to the
receipt of cash payments. To maintain its qualification as a regulated
investment company and avoid liability for federal income and excise taxes, a
Portfolio will be required to distribute income accrued with respect to these
securities and may have to dispose of portfolio securities under disadvantageous
circumstances in order to generate cash to satisfy these distribution
requirements.
Additional information concerning high yielding securities appears under
"Appendix C--Description of Corporate Bond Ratings."
- --------------------------------------------------------------------------------
DESCRIPTION OF
CERTAIN INVESTMENT
TECHNIQUES
------------------------
Except as otherwise noted below, the following investment strategies and
techniques may be used by all Portfolios.
FOREIGN SECURITIES
The Growth Common Stock Portfolio and Managed Portfolio each may invest up
to 25% of its assets in equity securities of foreign issuers to the extent the
purchase of such foreign securities is otherwise consistent with the Portfolio's
investment objectives. Investments will be made only in foreign securities that
are publicly traded in the U.S. and payable in U.S. dollars. With respect to
quality and risk, the investment adviser will attempt to select investments in
foreign securities on the same basis as it selects investments in domestic
securities.
WHEN-ISSUED OR DELAYED DELIVERY TRANSACTIONS
From time to time, in the ordinary course of business, each of the
Portfolios may purchase newly-issued securities appropriate for the Portfolio on
a "when-issued" basis and may purchase or sell securities appropriate for the
Portfolio on a "delayed delivery" basis. When-issued or delayed delivery
transactions involve a commitment by a Portfolio to purchase or sell particular
securities with payment and delivery to take place at a future date. These
transactions allow the Portfolio to lock in an attractive purchase price or
yield on a security the Portfolio intends to purchase or an attractive sale
price on a security the Portfolio intends to sell. Normally, settlement occurs
within one month of the purchase or sale. During the period between purchase or
sale and settlement, no payment is made or received by a Portfolio and, for
delayed delivery purchases, no interest accrues to the Portfolio. A Portfolio
will only make commitments to purchase securities on a when-issued or delayed
delivery basis with the intention of actually acquiring the securities, but it
reserves the right to sell such securities before the settlement date if deemed
advisable.
At the time a Portfolio makes the commitment to purchase a security on a
when-issued or delayed delivery basis, it will record the transaction and
reflect the amount due and the value of the security in determining its net
asset value. Likewise, at the time a Portfolio makes the commitment to sell a
security on a delayed delivery basis, it will record the transaction and include
the proceeds to be received in
19
<PAGE>
determining its net asset value; accordingly, any fluctuations in the value of
the security sold pursuant to a delayed delivery commitment are ignored in
calculating net asset value so long as the commitment remains in effect. The
market value of the when-issued or delayed delivery securities at any time may
be more or less than the purchase price to be paid or the sale price to be
received at the settlement date. To the extent that a Portfolio engages in
when-issued or delayed delivery transactions, it will do so for the purpose of
acquiring or selling portfolio securities consistent with the Portfolio's
investment objectives and policies and not for the purpose of investment
leverage or to speculate on interest rate changes.
The investment adviser does not believe that a Portfolio's net asset value
or income will be adversely affected overall by the purchase of securities on a
when-issued or delayed delivery basis. Each Portfolio will establish a
segregated account with the Fund's custodian bank in which the Portfolio will
maintain cash or U.S. Government securities or other high-grade debt obligations
at least equal in value to commitments to purchase securities on a when-issued
or delayed delivery basis; subject to this requirement, a Portfolio may purchase
securities on a when-issued or delayed delivery basis without limit. To the
extent that assets of a Portfolio are held in cash pending the settlement of a
purchase of securities, that Portfolio would earn no income. In the case of a
commitment to sell portfolio securities on a delayed delivery basis, each
Portfolio will instruct the custodian to hold the portfolio securities
themselves in a segregated account while the commitment is outstanding.
LOANS OF PORTFOLIO SECURITIES
Each Portfolio may, from time to time, lend securities (but not in excess of
20% of its assets) from its Portfolio to brokers, dealers and financial
institutions, provided that: (i) the loan is secured continuously by collateral
consisting of U.S. Government securities, government agency securities, cash or
cash equivalents adjusted daily to have a market value at least equal to the
current market value of the securities loaned plus accrued interest; (ii) the
Portfolio may at any time call the loan and regain the securities loaned; and
(iii) the investment adviser (under the review of the Board of Directors) has
reviewed the creditworthiness of the borrower and has found such
creditworthiness satisfactory. The Portfolio will receive from the borrower
amounts equal to the dividends or interest paid on the securities loaned, and
will also earn income for having made the loan. Any cash collateral will be
invested in short-term securities, the income from which will increase the
return to the Portfolio.
WRITING COVERED CALL OPTIONS
Each Portfolio (other than the Money Market Portfolio) may write (sell)
covered call options on portfolio securities representing up to 100% of its net
assets in an attempt to enhance investment performance or to reduce the risks
associated with investments. A call option gives the purchaser the right to buy,
and the writer the obligation to sell, an underlying security at a particular
exercise price during the option period. A Portfolio will write call options
only on a covered basis, which means that the Portfolio will own the underlying
security subject to the call option at all times during the option period.
Options written by a Portfolio will normally have expiration dates between three
and nine months from the date written. Such options and the securities
underlying the options must both be listed on national securities exchanges,
except that debt securities and related options need not be so listed. The
advantage to a Portfolio of writing covered call options is that the Portfolio
receives a premium which constitutes additional income, which would serve both
to enhance investment performance and to offset in whole or in part any decline
in the value of the underlying security. However, the disadvantage is that
during the option period the Portfolio would give up the potential for capital
appreciation above the exercise price if the underlying security were to rise in
value; and that, unless a closing purchase transaction is effected, the
Portfolio will be required to continue to hold the underlying security for the
entire option period, and would bear the risk of loss if the price of the
securitiy were to decline.
20
<PAGE>
INVESTMENT COMPANY SECURITIES
Each of the Portfolios may invest, subject to the investment limitations
described below, in shares of other investment companies which seek to maintain
a $1.00 net asset value per share ("Money Market Funds"). The Portfolios intend
to invest available cash balances in such Money Market Funds. In addition, the
Portfolios may invest in such Money Market Funds for temporary defensive
purposes (for example, when FBL believes such a position is warranted by
uncertain or unusual market conditions, or when liquidity is required to meet
unusually high redemption requests) or for other purposes. No more than 5% of
the value of a Portfolio's total assets will be invested in securities of Money
Market Funds. In addition, a Portfolio may hold no more than 3% of the
outstanding voting stock of any Money Market Fund. As a shareholder of another
investment company, a Portfolio would bear, along with other shareholders, its
pro-rata portion of the Money Market Fund's expenses, including advisory fees.
REPURCHASE AGREEMENTS
Each Portfolio may enter into repurchase agreements as a means of earning
income for periods as short as overnight. A repurchase agreement is an agreement
under which the Portfolio purchases a security and the seller agrees, at the
time of sale, to repurchase the security at a specified time and price, thereby
determining the yield during the Portfolio's holding period. That yield is
determined by current short-term rates and may be more or less than the interest
rate on the underlying security. The value of the underlying securities is
marked to market daily. If the value of the underlying securities declined, the
seller would be required to provide the Portfolio with additional securities so
that the aggregate value of the underlying securities was at least equal to the
repurchase price.
The Portfolios may also enter into a special type of repurchase agreement
known as an "open repurchase agreement." An open repurchase agreement varies
from the typical repurchase agreement in the following respects: (1) the
agreement has no set maturity, but instead matures upon 24 hours' notice to the
seller; and (2) the repurchase price is not determined at the time the agreement
is entered into, but instead is based on a variable interest rate and duration
of the agreement.
The Portfolios may enter into repurchase agreements only with banks or
securities dealers, and the underlying securities will consist of securities
issued or guaranteed by the U.S. Government or its agencies or
instrumentalities. If a seller of a repurchase agreement were to default, the
Portfolio might experience losses, including delays and expenses in enforcing
its rights. To minimize this risk, the investment adviser (under the review of
the Board of Directors) will review the creditworthiness of the seller, and must
find such creditworthiness satisfactory before a Portfolio may enter into the
repurchase agreement.
A Portfolio may invest no more than 10% of its net assets in repurchase
agreements maturing in more than seven days, and no more than 25% of its net
assets in repurchase agreements in which the underlying securities have
maturities in excess of one year, although there is no limit on the percentage
of each Portfolio's assets that may be invested in repurchase agreements that
mature in less than seven days and have underlying securities with maturities of
less than one year. Net assets are taken at market value at the time of each
purchase for purposes of the foregoing limitations. Open repurchase agreements
are considered to mature in one day.
21
<PAGE>
- --------------------------------------------------------------------------------
HOW TO
BUY
SHARES
- ---------
Shares of the Fund's various Portfolios are sold on a continuing basis at
their net asset value next determined after a purchase order and payment are
received in proper form as described below. The Fund is open for business on
each day the New York Stock Exchange is open for trading (except the Tuesday
after Christmas and the day after Thanksgiving). The Fund reserves the right to
reject any purchase order and to change the minimum purchase requirements at any
time. Share certificates are issued only on request.
INITIAL PURCHASE
The minimum initial purchase is $250, except there is no minimum initial
investment for retirement accounts and accounts opened under bona fide payroll
deduction plans. There is no initial sales charge. An Application may be
obtained either from the Fund or from a registered representative of FBL
Marketing Services, Inc.
Complete the Application and mail it with your check payable to the
appropriate Portfolio of the Fund to: FBL Series Fund, Inc., 3820 109th Street,
Des Moines, Iowa 50391-7003.
SUBSEQUENT PURCHASES
Send the Fund a check (no minimum) payable to the appropriate Portfolio of
the Fund accompanied by a letter indicating the dollar value of the shares to be
purchased and identifying the Portfolio, the account number and registered
owner(s).
PURCHASES BY WIRE (MONEY MARKET PORTFOLIO ONLY)
Purchases may be made in the Money Market Portfolio by wire transfer. If
making an initial purchase, call the toll free number (800) 247-4170 (in Iowa,
call toll free (800) 422-3175 or in the Des Moines metropolitan area call
225-5586) to obtain a Money Market Portfolio Account Number and provide the Fund
with your name, address and social security or tax identification number. Then,
simply instruct your bank to "wire transfer" funds to: BANKERS TRUST COMPANY,
ABA #021001033, DDA ACCOUNT #00220695 MONEY MARKET PORTFOLIO OF FBL SERIES FUND,
INC., FOR FURTHER CREDIT TO YOUR ACCOUNT REGISTRATION AND ACCOUNT NUMBER.
Finally, if making an initial purchase, complete an Application and mail it to
the Fund at the address listed under "Initial Purchase" above.
- --------------------------------------------------------------------------------
HOW TO
REDEEM
SHARES
- ---------
Upon receipt of an executed redemption request in proper form, as described
below, the Fund will redeem shares of a Portfolio at the next determined net
asset value. Proceeds payable upon redemption will be reduced by the amount of
any applicable contingent deferred sales charge. The Fund intends to pay
redemption proceeds within one business day after receipt of an executed
redemption request in proper form. If shares to be redeemed were purchased by
check, the Fund may delay transmittal of redemption proceeds until such time,
normally not more than 15 calendar days after the redemption request, that it
has assured itself that good payment has been collected for the purchase of such
shares.
22
<PAGE>
The Adviser employs procedures designed to confirm that instructions
communicated by telephone are genuine, including requiring certain identifying
information prior to acting upon instructions, recording all telephone
instructions and sending written confirmations of instructions. To the extent
such procedures are reasonably designed to prevent unauthorized or fraudulent
instructions neither the Adviser nor the Fund would be liable for any losses
from unauthorized or fraudulent instructions.
Redemptions can be requested by writing to the Fund, 3820 109th Street, Des
Moines, Iowa 50391-7003 and requesting redemption of either the number or dollar
value of shares of a specified Portfolio. Any certificates for shares to be
redeemed must be included, duly endorsed. The letter (and certificates, if any)
must be signed exactly as the account is registered. On a jointly owned account,
all owners must sign. SIGNATURES OF ACCOUNT OWNERS MUST BE GUARANTEED BY A
COMMERCIAL BANK, TRUST COMPANY, MEMBER OF A STOCK EXCHANGE, SAVINGS AND LOAN
ASSOCIATION OR SAVINGS BANK, OTHER ELIGIBLE FINANCIAL INSTITUTION, OR A
REGISTERED REPRESENTATIVE OF FBL MARKETING SERVICES, INC. OR FBL INVESTMENT
ADVISORY SERVICES, INC., and shall include such other documentation of authority
as the Fund deems necessary in the case of estates, trusts, guardianships,
corporations, unincorporated associations and pension and profit sharing plans.
THE FUND CANNOT ACCEPT GUARANTEES FROM NOTARIES PUBLIC.
EXPEDITED REDEMPTION PROCEDURES (MONEY MARKET PORTFOLIO ONLY). Shareholders
may redeem shares of the Money Market Portfolio by telephone. The proceeds of
shares so redeemed (less any contingent deferred sales charge) will be sent by
Federal wire transfer to a single designated account maintained by the
shareholder at a domestic commercial bank that is a member of the Federal
Reserve System. To effect a redemption, a shareholder should call the Fund at
the appropriate number shown on the cover of the Prospectus between the hours of
8:00 a.m. and 4:30 p.m. (Central Time) on any day when the Fund is open for
business. Requests received by the Fund prior to the earlier of the close of the
New York Stock Exchange or 3:00 p.m. (Central Time) will result in shares being
redeemed that day at the next determined net asset value, and the proceeds will
normally be sent to the designated bank account the following business day. The
minimum amount that may be wired is $10,000. The Fund reserves the right to
change this minimum or to terminate the wire redemption privilege. All
applications for telephone redemption service must have signatures guaranteed by
a commercial bank, trust company, member of a stock exchange, savings and loan
association or savings bank, other eligible financial institution, a registered
representative of FBL Marketing Services, Inc. or FBL Investment Advisory
Services, Inc. and shall include such other documentation of authority as the
Fund deems necessary in the case of estates, trusts, guardianships,
corporations, unincorporated associations and pension and profit sharing plans.
A shareholder wishing to use this method of redemption must complete the
appropriate portions of the Application and it must be on file with the Fund.
Once the form is on file, the Fund will honor redemption requests by any person
by telephone (using the toll free numbers listed on the cover page), telegraph
or other method without a signature guarantee from the shareholder or any other
person. The Fund is not responsible for the efficiency of the federal wire
system or the shareholder's bank. To change the name of the single designated
bank account to receive wire redemption proceeds, it is necessary to send a
written request with signatures guaranteed to the Fund. The Fund does not
currently charge for wiring funds, although the shareholder will be responsible
for any wire fees charged by the receiving bank. This procedure is not available
for Retirement Accounts or shares for which certificates have been issued.
Shareholders may not use expedited redemption procedures until the shares
being redeemed have been on the Fund's books for at least four days. There is no
such delay in redeeming shares that were purchased by wiring Federal Funds.
23
<PAGE>
CONTINGENT DEFERRED SALES CHARGE. A contingent deferred sales charge is
imposed on that amount by which a redemption causes the current value of a
Portfolio account to fall below the total dollar amount of purchases of that
Portfolio's shares made during the preceding six years (reinvested dividends are
not considered purchases for this purpose). The charge is imposed upon
redemptions of shares in accordance with the following schedule:
<TABLE>
<CAPTION>
YEAR OF CONTINGENT
REDEMPTION DEFERRED SALES
AFTER PURCHASE CHARGE
- --------------------------------------------------- -------------------
<S> <C>
First.......................................... 5%
Second......................................... 4%
Third.......................................... 4%
Fourth......................................... 3%
Fifth.......................................... 2%
Sixth.......................................... 1%
Seventh and following.......................... 0%
</TABLE>
The following example will illustrate the operation of the contingent
deferred sales charge. Assume that an investor purchases $10,000 of a
Portfolio's shares and that 30 months later the value of the account has grown
through investment performance and reinvestment of dividends to $14,000. The
investor then may redeem up to $4,000 ($14,000 minus $10,000) without incurring
a contingent deferred sales charge. If the investor should redeem $5,000, a
contingent deferred sales charge would be imposed on $1,000 of the redemption.
The charge would be imposed at the rate of 4% ($40) because the redemption
occurred in the third year after the purchase. In determining whether a
contingent deferred sales charge is payable, it is assumed that the redemption
is made from the earliest purchase of shares.
The contingent deferred sales charge will be waived in the event of the
death of the shareholder (including a registered joint owner), with respect to
redemptions in connection with distributions from a 401(m), 401(k) or 457(k)
plan, or with respect to withdrawals under the Fund's periodic withdrawal plan.
FBL Investment Advisory Services, Inc., the Fund's Distributor, receives any
contingent deferred sales charge directly.
INVOLUNTARY REDEMPTIONS. Due to the high cost of maintaining small
accounts, the Fund reserves the right to redeem a Portfolio account that falls
below $250 as a result of redemptions. Prior to effecting such an involuntary
redemption, shareholders will be notified in writing and will be allowed 60 days
to make additional purchases to bring the account up to the Portfolio's $250
minimum investment requirement. Any such involuntary redemption will not be
subject to a contingent deferred sales charge.
REDEMPTIONS IN-KIND. If the Board of Directors determines that it would be
detrimental to the best interests of the remaining shareholders of a Portfolio
to make payment wholly or partly in cash, the Fund may pay the redemption price
in whole or in part by the distribution in-kind of securities held by the
applicable Portfolio in lieu of cash in conformity with applicable rules of the
Securities and Exchange Commission. Investors may incur brokerage charges on the
sale of securities so received in payment of redemption. A redemption paid
in-kind is treated as a sale for federal income tax purposes even though the
shareholder may have received no cash. The Fund has elected to be governed by
Rule 18f-1 under the Investment Company Act pursuant to which the Fund is
obligated to redeem shares solely in cash up to the lesser of $250,000 or 1
percent of the net asset value of a Portfolio during any 90-day period for any
one shareholder of record.
24
<PAGE>
- --------------------------------------------------------------------------------
OTHER
SHAREHOLDER
SERVICES
----------------
The Fund offers a number of shareholder services designed to facilitate
investment in shares of its Portfolios. Full details as to each of such services
and copies of the various plans described below can be obtained from the Fund.
PERIODIC WITHDRAWAL PLAN
A shareholder who owns in a single account $5,000 or more of a Portfolio's
shares may establish a Periodic Withdrawal Plan to provide for regular monthly,
quarterly or annual payments of a fixed dollar amount or fixed percent of the
account balance (with a minimum $100 annual payment and a maximum withdrawable
amount of 10% annually of the shareholder's initial account balance under the
plan) to be sent to the shareholder or a designated payee. Shares of a Portfolio
held in the shareholder's account having a net asset value of the amount of the
requested payment will be redeemed on or around the fifth business day before
the end of the applicable month and a check will be mailed to the shareholder
within seven days thereafter. Depending upon the size of the payments requested
and fluctuations in the net asset value of the shares redeemed, redemptions for
the purpose of making such payments may reduce or even exhaust the account. FBL
will waive the contingent deferred sales charge on redemptions made pursuant to
a periodic withdrawal program. The right is reserved to amend the periodic
withdrawal program on thirty days' notice. The program may be terminated at any
time by the shareholder or the Fund.
AUTOMATIC INVESTMENT PLAN:
A shareholder may elect to participate in the Fund's automatic investment
plan. This plan enables a shareholder to automatically purchase shares of the
Fund on a monthly basis. A minimum initial investment of $50 is required to
establish an automatic investment plan. Minimum monthly investments of $25 are
necessary to maintain the plan. The Fund will debit the shareholder's financial
institution account and subsequently purchase shares of the Fund having a net
asset value of the amount of the requested deposit on or around the 16th day of
the month. Shareholders interested in this plan must complete an automatic
investment form available from the Fund.
EXCHANGE PRIVILEGE
A shareholder may exchange all or some shares of a Portfolio for shares of
any other Portfolio in the Fund, if that Portfolio's shares are registered for
sale in the shareholder's state of residence, on the basis of each Portfolio's
relative net asset value per share next determined following receipt of an
exchange request in proper form. There is no minimum amount required to exercise
the exchange privilege between Portfolios, except that shareholders wishing to
open an account in a new Portfolio must meet the minimum purchase requirements
described under "How to Buy Shares." If the exchange involves the establishment
of a new account, an application for that account must be completed and mailed
to the Fund. Shares may be exchanged without any contingent deferred sales
charge but will be subject to a $5.00 exchange fee. Amounts exchanged retain
their original cost and purchase date for purposes of the contingent deferred
sales charge. If shares of the Portfolio being exchanged were acquired at
different times, the shares of the Portfolio acquired in the exchange will be
deemed to possess the same holding period (or exempt status) for contingent
deferred sales charge purposes as the shares being exchanged. Exercise of the
exchange privilege is treated as a sale for federal income tax purposes and,
depending on the circumstances, a capital gain or loss may be realized by the
shareholder. Shareholders are automatically provided the exchange privilege upon
establishment of an account with the Fund.
25
<PAGE>
Shareholders not interested in the exchange privilege must check the appropriate
box on the Application. The exchange privilege may be provided after an account
has been established by completing an exchange form (obtainable from the Fund).
Once the privilege has been afforded a shareholder, exchanges may be authorized
by telephone (by calling one of the numbers shown on the front cover, from 8:00
a.m. to 4:30 p.m. (Central Time) on any day that the Fund is open for business)
or by letter (by writing the Fund at 3820 109th Street, Des Moines, Iowa
50391-7003). Telephone exchange requests received prior to the close of the New
York Stock Exchange (usually 3:00 p.m., Central Time) will be effected at that
day's relative net asset values.
Shares of FBL Money Market Fund, Inc. may be exchanged for shares of any
Portfolio of the Fund without imposition of an exchange fee. The exchange
privilege may be modified or terminated by the Fund at any time. An exchange
application must be on file with FBL Money Market Fund, Inc.
RETIREMENT PLANS
Eligible shareholders of the Fund may participate in a variety of qualified
retirement plans which are available from the Distributor. Some of the plans
currently offered are: Self-Employed Individual Retirement Plans (Keogh Plans),
Individual Retirement Accounts (IRAs), Simplified Employee Pension Plans (SEPs),
Tax-Sheltered 403(b) Plans, Corporate Pension and Profit Sharing Plans and
Public Employer Deferred Compensation Plans. The initial investment to establish
any such plan, and subsequent investments, may be in any amount (subject to plan
limitations). Investors Fiduciary Trust Company ("IFTC") of Kansas City,
Missouri serves as custodian and provides the required services for Keogh Plans,
IRAs, SEPs and Corporate Pension and Profit Sharing plans. A custodial fee,
currently $10.00, will be collected annually by liquidating shares, or fractions
thereof, from each participant's account(s). FBL Investment Advisory Services,
Inc. performs plan services for IFTC for a portion of the fee. Information with
respect to these plans is available upon request from the Fund.
Trustees of qualified retirement plans and 403(b)(7) custodial accounts are
required by law to withhold 20% of the taxable portion of any distribution that
is eligible to be "rolled over." The 20% withholding requirement does not apply
to distributions from IRAs or any part of a distribution which is transferred
directly to another qualified retirement plan, 403(b)(7) account or IRA.
Shareholders should consult their tax advisers regarding this 20% withholding
requirement.
- --------------------------------------------------------------------------------
NET ASSET
VALUE
INFORMATION
- ---------------
The net asset value per share of each Portfolio is determined as of the
earlier of 3:00 P.M. (Central Time) or the close of the New York Stock Exchange
on each day that the Exchange is open (except the Tuesday after Christmas and
the day after Thanksgiving), and on each other day on which there is sufficient
trading in the Portfolio's investments that it might affect the net asset value,
except that the net asset value of a given Portfolio will not be computed on a
day when no orders for purchase or redemption of shares of the Portfolio are
received. If the Fund offices should be closed because of a weather-related or
comparable type of emergency, and the Fund is unable to segregate orders and
redemption requests received on the emergency closed day, then the Fund will
price those orders and redemptions at the net asset value next determined. The
net asset value per share of each Portfolio is
26
<PAGE>
computed by dividing the total value of the Portfolio's securities and other
assets, less liabilities, by the total number of outstanding shares of such
Portfolio. The Fund reserves the right to calculate or estimate the net asset
value of one or more Portfolios more frequently than once daily if deemed
desirable.
MONEY MARKET PORTFOLIO. The net asset value per share of the Money Market
Portfolio is ordinarily $1.00. The Money Market Portfolio's securities are
valued using the amortized cost method of valuation. This involves valuing a
security at cost on the date of acquisition and thereafter assuming a constant
accretion of a discount or amortization of a premium to maturity. For a further
discussion of the manner in which such values are determined, see the Statement
of Additional Information under the heading "Net Asset Value."
OTHER PORTFOLIOS. For all Portfolios other than the Money Market Portfolio,
Portfolio securities that are traded on a national exchange are valued at the
last sale price as of the close of business on the day the securities are being
valued, or, lacking any sales, at the mean between the closing bid and asked
prices. Securities other than money market instruments traded in the
over-the-counter market are valued at the mean between the bid and asked prices
or at the yield equivalent as obtained from one or more dealers that make
markets in the securities. Portfolio securities that are traded both in the
over-the-counter market and on a national exchange are valued according to the
broadest and most representative market; and it is expected that, for debt
securities, this ordinarily will be the over-the-counter market. Values of
securities and assets for which market quotations are not readily available are
determined in good faith by or under the direction of the Board of Directors.
Money market instruments are valued at market value, except that debt
instruments maturing in 60 days or less are valued using the amortized cost
method of valuation described above with respect to the Money Market Portfolio.
- --------------------------------------------------------------------------------
PERFORMANCE
INFORMATION
-----------------
From time to time, the Fund may advertise several types of performance
information for a Portfolio. All Portfolios, except the Money Market Portfolio,
may advertise "average annual total return" and "total return." The High Grade
Bond and High Yield Bond Portfolios may also advertise "yield." The Money Market
Portfolio may advertise "yield" and "effective yield." Each of these figures is
based upon historical results and is not necessarily representative of the
future performance of a Portfolio.
Average annual total return and total return figures measure both the net
income generated by, and the effect of any realized and unrealized appreciation
or depreciation of, the underlying investments in the Portfolio for the
designated period, assuming the reinvestment of all dividends and distributions
during the period. Thus, these figures reflect the change in value of an
investment in the Portfolio during a specified period. Average annual total
return will be quoted for at least one-, five- and ten-year periods (or, if such
periods have not yet elapsed, at the end of a shorter period corresponding to
the life of the Portfolio). Average annual total return figures represent the
average annual percentage change in the value of a specific dollar amount
invested in the Portfolio's shares for the designated period. Total return
figures are not annualized and represent the aggregate percentage or dollar
value change over the period.
Yield is a measure of the net investment income per share earned over a
specific one-month or 30-day period (seven-day period for the Money Market
Portfolio) expressed as a percentage of the Portfolio's net asset value per
share at the end of the period (except for the Money Market Portfolio where the
net asset value per share at the beginning of the period is used). Yield is an
annualized figure which
27
<PAGE>
means that it is assumed that the Portfolio generates the same level of
investment income over a one-year period. The effective yield for the Money
Market Portfolio is calculated similarly, but the net investment income earned
is assumed to be compounded when annualized. The Money Market Portfolio's
effective yield will be slightly higher than its yield due to this compounding.
Semi-annual compounding is assumed for Portfolios other than the Money Market
Portfolio.
From time to time, the Fund may include in its sales literature and
shareholder reports for the High Grade Bond and High Yield Bond Portfolios a
quotation of the current "distribution rate" for the Portfolios. The
distribution rate is simply a measure of the level of income and short-term
capital gain dividends distributed for a specified period. It differs from
yield, which is a measure of the income actually earned by the Portfolio's
investments and from total return, which is a measure of the income actually
earned by, plus the effect of any realized or unrealized appreciation or
depreciation of, such investments during the period. Distribution rate,
therefore, is not intended to be a complete measure of performance. Distribution
rate may sometimes be greater than yield since, for instance, it may include
short-term gains (which may be non-recurring) and may not reflect the
amortization of bond premiums.
Additionally, from time to time, in advertisements or reports to
shareholders, a Portfolio may compare its performance to that of the Consumer
Price Index or various unmanaged indexes such as the Dow Jones Industrial
Average, the Standard & Poor's 500, the Shearson/Lehman Government and Corporate
Bond Index and the Salomon Brothers High Grade Bond Index. A Portfolio may also
use mutual fund quotation services such as Lipper Analytical Services, Inc., an
independent mutual fund reporting service, or similar industry services, for
purposes of comparing a Portfolio's rank or performance with that of other
mutual funds having similar investment objectives. Performance comparisons
should not be considered representative of the future performance of any
Portfolio.
The Portfolio's shares are sold at net asset value, and return and net asset
value will fluctuate, except that the Money Market Portfolio seeks to maintain a
$1.00 net asset value per share. Shares of the Portfolio are redeemable by an
investor at the then current net asset value, which may be more or less than
original cost. Yield and effective yield figures do not include the effect of
any contingent deferred sales charge. The standardized average annual total
return figures, calculated in accordance with a formula prescribed by the
Securities and Exchange Commission, include the effect of the contingent
deferred sales charge that may be imposed at the end of the period indicated. In
addition, average annual total return figures, which do not include the effect
of any contingent deferred sales charge, may also be used. Total return figures
may or may not include the effect of the contingent deferred sales charge that
may be imposed at the end of the period in question. Performance figures not
including the effect of the applicable contingent deferred sales charge would be
reduced if it were included. More information about performance figures is
included in the Statement of Additional information.
- --------------------------------------------------------------------------------
MANAGEMENT
OF THE FUND
- ---------------
BOARD OF DIRECTORS
The Board of Directors has nine members, five of whom are not "interested
persons" of the Fund as defined in the Investment Company Act. The Board of
Directors is responsible for the overall supervision of the operations of the
Fund and performs the various duties imposed on the directors of investment
companies by the Investment Company Act. The Board of Directors elects officers
of the Fund annually.
28
<PAGE>
INVESTMENT ADVISER
FBL Investment Advisory Services, Inc., 5400 University Avenue, West Des
Moines, Iowa 50266, serves as the Fund's investment adviser pursuant to an
Investment Advisory and Management Services Agreement. The Adviser is an
indirect subsidiary of Farm Bureau Multi-State Services, Inc., an Iowa
corporation. The following individuals are officers and/or directors of both the
Adviser and the Fund: Stephen M. Morain, Thomas R. Gibson, Timothy J. Hoffman,
Dennis M. Marker, William J. Oddy, Richard D. Warming, Sue A. Cornick, Kristi
Rojohn and Elaine A. Followwill. FBL has served as the Fund's investment adviser
since the Fund commenced operations in 1971. The Adviser also acts as an
investment adviser to individuals, institutions and two other investment
companies: FBL Money Market Fund, Inc. and FBL Variable Insurance Series Fund.
Personnel of the Adviser also manage investments for the portfolios of insurance
companies.
The Adviser handles the investment and reinvestment of the Fund's assets,
and is responsible for the overall management of the Fund's business affairs,
subject to the review of the Board of Directors. Roger F. Grefe and Robert J.
Rummelhart serve as managers for various portfolios of the Fund. Mr. Grefe
joined FBL in 1986 and assumed responsibility for the management of Farm Bureau
Growth Fund, Inc., currently known as the Growth Common Stock Portfolio.
Additionally, he assumed management of the Managed Portfolio at its inception in
1987. Mr. Grefe is a graduate of Coe College in Cedar Rapids, Iowa and is a
Chartered Financial Analyst and NASD Registered Principal.
Mr. Rummelhart has managed both the High Grade Bond and High Yield Bond
Portfolios since their inception in 1987. He received his BA and MBA degrees
from the University of Iowa and is a Chartered Financial Analyst and NASD
Registered Representative.
The Adviser provides investment supervision to the Blue Chip Portfolio
through the use of a team approach. As cash accumulates for investment, trading
personnel are notified to execute the necessary transactions in order to
maintain the relative weights of the equity securities in this Portfolio.
As compensation for the advisory and management services provided by the
Adviser, the Fund has agreed to pay the Adviser an annual management fee,
accrued daily and payable monthly, based on an annual percentage of the average
daily net assets of each Portfolio, as follows:
<TABLE>
<CAPTION>
AVERAGE DAILY NET ASSETS
-------------------------------------
FIRST SECOND OVER
$200 $200 $400
PORTFOLIO MILLION MILLION MILLION
- ----------------------------------------------------------------- ----------- ----------- -----------
<S> <C> <C> <C>
Growth Common Stock.............................................. 0.50% 0.45% 0.40%
High Grade Bond.................................................. 0.40% 0.35% 0.30%
High Yield Bond.................................................. 0.55% 0.50% 0.45%
Managed.......................................................... 0.60% 0.55% 0.50%
Money Market..................................................... 0.40% 0.35% 0.30%
Blue Chip........................................................ 0.25% 0.25% 0.25%
</TABLE>
The Adviser, at its expense, furnishes the Fund with office space and
facilities, certain business equipment, advisory, research and statistical
facilities, and clerical services and personnel to administer the business
affairs of the Fund. The Fund pays its other expenses which include, but are not
limited to, the following: the cost of net asset value calculations; portfolio
transaction costs; interest on Fund obligations; stock certificates;
miscellaneous reports; membership dues; reports and notices to shareholders; all
expenses of registration of its shares under federal and state securities laws;
investor services (including allocable telephone and personnel expenses); all
taxes and fees payable to federal, state or other governmental authorities; and
the fees and expenses of independent auditors, legal
29
<PAGE>
counsel, custodian, shareholder service, transfer and dividend disbursing agent.
For its services as investment adviser and manager and for facilities furnished
to the Fund during the fiscal year ending July 31, 1995 the Adviser received
management fees of .50% of the average daily net assets of the Growth Common
Stock Portfolio, .40% of the average daily net assets of the High Grade Bond
Portfolio, .55% of the average daily net assets of the High Yield Bond
Portfolio, .60% of the average daily net assets of the Managed Portfolio, .40%
of the average daily net assets of the Money Market Portfolio and .25% of the
average daily net assets of the Blue Chip Portfolio.
The Adviser has agreed to reimburse any Portfolio to the extent that the
annual operating expenses (including the investment advisory fee but excluding
brokerage, interest, taxes, the distribution fee and extraordinary expenses) of
such Portfolio exceed 1 1/2% of average daily net assets. The amount reimbursed,
however, shall not exceed the amount of the advisory fee paid by the Portfolio
for such period.
- --------------------------------------------------------------------------------
PORTFOLIO
TRANSACTIONS
- -----------------
With respect to transactions in portfolio securities, whether through a
broker as agent or with a dealer as principal, the Adviser endeavors to obtain
for the Fund the most favorable prices and efficient execution of orders.
Subject to this primary consideration, the Adviser places substantially all the
Fund's portfolio transactions with brokerage firms that furnish research and
other services to the Fund. These services include, but are not limited to,
advice as to the advisability of purchasing or selling specific securities,
furnishing of analyses and reports on particular securities or industries,
providing information on economic factors and trends, providing computer
software used in security analyses and providing technical market analyses.
Certain affiliates and other clients of the Adviser also place portfolio
transactions with these brokerage firms, and such affiliates and clients share
the benefits of the research and other services obtained from these brokers. The
Adviser regards information that is customarily available only in return for
brokerage as among the many elements to be considered in arriving at investment
decisions. No specific value can be determined for most such information and
services and they are deemed supplemental to the Adviser's own efforts in the
performance of its duties under the Investment Advisory Agreement. Any research
benefits derived are available for all clients.
The investment decisions for the Fund are reached independently from those
for the other funds and accounts managed by the Adviser. At certain times, one
or more Portfolios of the Fund may purchase identical securities at the same
time as the other funds and accounts managed by the Adviser. When multiple
accounts and/or funds have assets available for investment in the same
securities, available investments are allocated as to amount in a manner
considered equitable to each. In some cases, this procedure may affect the size
or price of the position obtainable for the Fund. It is the opinion of the Board
of Directors that the benefits to the Fund arising out of simultaneous
transactions outweigh any disadvantages.
- --------------------------------------------------------------------------------
DIVIDENDS
AND TAXES
- ------------
DIVIDENDS
GROWTH COMMON STOCK AND BLUE CHIP PORTFOLIO DIVIDENDS. The Fund normally
follows the practice of distributing substantially all the net investment income
and any net short-term and long-term capital gains of these Portfolios after the
close of the Fund's fiscal year.
30
<PAGE>
HIGH GRADE BOND AND HIGH YIELD BOND PORTFOLIO DIVIDENDS. The Fund normally
follows the practice of distributing substantially all the net investment income
and net short-term capital gains of these Portfolios monthly and distributing
any net long-term capital gains after the close of the Fund's fiscal year.
MANAGED PORTFOLIO DIVIDENDS. The Fund normally follows the practice of
distributing substantially all the net investment income of this Portfolio
quarterly and distributing any net short-term and long-term capital gains after
the close of the Fund's fiscal year.
MONEY MARKET PORTFOLIO DIVIDENDS. On each day that the net asset value per
share of the Money Market Portfolio is determined, the Money Market Portfolio's
net investment income will be declared, as of the earlier of 3:00 p.m. (Central
Time) or the close of the New York Stock Exchange, as a dividend to shareholders
of record prior to the declaration. Dividends will be reinvested or paid in cash
monthly. If a shareholder withdraws his or her entire account, all dividends
accrued to the time of withdrawal will be paid at that time.
GENERAL. Among other factors, the requirements of the Internal Revenue Code
may make it necessary or desirable to vary from the dividend practices as set
forth above. Dividends with respect to any Portfolio will be reinvested in
shares of that same Portfolio unless a shareholder indicates in writing a desire
to receive them in cash.
TAXES
It is the policy of each Portfolio to distribute annually substantially all
its net investment income and any net realized capital gains from the preceding
fiscal year. By doing so, each Portfolio intends to continue to qualify each
year as a regulated investment company under the Internal Revenue Code. By so
qualifying, a Portfolio will not be subject to federal income taxes to the
extent that its net investment income and net realized capital gains are
distributed.
Dividends will not be taxable to tax-exempt entities such as qualified
retirement plans (e.g., IRAs or qualified pension or profit sharing plans).
Dividends (whether paid in cash or in additional shares) derived from net
investment income or net short-term capital gains will be taxable to other
shareholders as ordinary income while net long-term capital gain dividends to
such shareholders will be treated as long-term capital gains regardless of the
length of time the shareholder held the Portfolio shares. For corporate
taxpayers, long-term capital gains are taxed at the same rates as ordinary
income, but for individual taxpayers, the maximum federal income tax rate on
long-term capital gains is 28%. The Fund will inform shareholders of the amount
and nature of such dividends as well as the amount of dividends eligible for the
"dividends received deduction" available to corporate shareholders. For
shareholders other than tax-exempt entities, an exchange of shares of one
Portfolio for shares of another Portfolio is ordinarily a taxable transaction.
Each Portfolio's dividends are paid on a per-share basis. At the time of
such payment, therefore, the value of each share will be reduced by the amount
of the payment. If a shareholder purchases shares shortly before the payment of
a dividend or distribution, that shareholder pays the full price for the shares
but receives some portion of the price back as a taxable dividend or
distribution. Shareholders will receive information annually as to the tax
status of distributions made by the Fund in each calendar year.
Dividends which a Portfolio declares in October, November or December to
shareholders of record as of a specified date in one of those months will be
treated for federal income tax purposes as received by such shareholders on
December 31 of the year declared, if paid during January of the following
calendar year.
31
<PAGE>
The Fund is required by law to withhold 31% of taxable distributions to
shareholders who do not furnish their correct social security or taxpayer
identification number and in certain other circumstances.
- --------------------------------------------------------------------------------
ORGANIZATION
OF THE FUND
- ----------------
The Fund is an open-end, diversified series management investment company
registered under the Investment Company Act. The Fund was organized as a
corporation under the laws of Maryland on August 14, 1970 and has authorized
capital of 5,000,000,000 shares of common stock, $.001 par value.
The Fund was initially known as Farm Bureau Growth Fund, Inc. prior to the
effectiveness of Articles of Amendment to its charter on November 30, 1987
changing its name to FBL Series Fund, Inc. and, among other things, establishing
multiple Portfolios of the Fund and designating the then current assets,
liabilities and shareholders of Farm Bureau Growth Fund, Inc. as the assets,
liabilities and shareholders of the Growth Common Stock Portfolio of FBL Series
Fund, Inc. The meaning of the term "Growth Common Stock Portfolio" as used in
the prospectus includes, where appropriate, Farm Bureau Growth Fund, Inc. prior
to December 1, 1987. The expenses incurred by the Fund in connection with the
establishment of the Portfolios were paid by the Adviser.
The shares of each Portfolio have equal rights and privileges with all other
shares of that Portfolio and each share of a Portfolio represents an equal
proportionate interest in that Portfolio with each other share. Upon liquidation
of the Fund or any Portfolio, shareholders of a Portfolio are entitled to share
pro-rata in the net assets of that Portfolio available for distribution. Shares
have no preemptive or conversion rights and are fully paid and nonassessable by
the Fund. The Board of Directors may establish additional Portfolios at any
time. The assets received by the Fund on the sale of shares of each Portfolio
and all income, earnings, profits and proceeds thereof, subject only to the
rights of creditors, are allocated to each Portfolio, and constitute the assets
of such Portfolio. The assets of each Portfolio are required to be segregated on
the Fund's books of account.
As of October 31, 1995, Farm Bureau Life Insurance Company, which provided
the initial capital for the Portfolios, owned more than 25% of the Money Market
Portfolio. Such shares have been acquired for investment and can only be
disposed of by redemption or transfer to an affiliate.
- --------------------------------------------------------------------------------
GENERAL
INFORMATION
- ---------------
REPORTS TO SHAREHOLDERS
Shareholders will receive unaudited semi-annual financial statements and
fiscal year-end financial statements audited by the Fund's independent auditors.
SHAREHOLDER INQUIRIES
Shareholders may make inquiries either by contacting their registered
representative or by writing or calling the Fund at the address or telephone
numbers as shown on the front cover.
SHAREHOLDER VOTING RIGHTS
Under the Fund's corporate charter, the Fund is not required to hold, and
does not expect to hold, annual shareholders' meetings. However, it will hold
special meetings of shareholders as required or
32
<PAGE>
deemed desirable for such purposes as electing Directors, changing fundamental
policies or approving an investment management agreement. Shareholders will vote
by Portfolio and not in the aggregate, except when voting in the aggregate is
permitted under the laws of the State of Maryland and the Investment Company
Act, such as for the election of Directors.
Each member of the Board of Directors serves for a term of unlimited
duration, subject to the right of the Board of Directors or the shareholders to
remove such Director. The Board of Directors has the power to alter the number
of Directors and to appoint successor Directors provided that, immediately after
the appointment of any successor Director, at least two-thirds of the Directors
have been elected by the shareholders of the Fund. However, if at any time less
than a majority of the Directors holding office has been elected by the
shareholders, the Directors are required to call a special meeting of
shareholders for the purpose of electing Directors to fill any existing
vacancies in the Board.
As used in this Prospectus and in the Statement of Additional Information,
the phrase "majority vote" of a Portfolio (or of the Fund, as appropriate) means
the vote of the lesser of (i) 67% of the shares of the Portfolio (Fund) present
at a meeting if the holders of more than 50% of the outstanding shares are
present in person or by proxy, or (ii) more than 50% of the outstanding shares
of the Portfolio (Fund).
SHAREHOLDER SERVICE, DIVIDEND DISBURSING AND TRANSFER AGENT
FBL serves as the Fund's Shareholder Service, Dividend Disbursing and
Transfer Agent for a separate fee. FBL in turn has contracted with DST Systems,
Inc., an unrelated party, to perform certain services incidental to the
maintenance of shareholder accounts for a portion of the fee.
ACCOUNTING SERVICES
The Fund has entered into an accounting services agreement with FBL pursuant
to which FBL performs accounting services for the Fund. In addition, the
agreement provides that FBL shall calculate the Fund's net asset value in
accordance with the Fund's prospectus and prepare for Fund approval and use
various tax returns and other reports. For such services, each Portfolio pays
FBL an annual fee, payable monthly, of .05% of the Portfolio's average daily net
assets, with the annual fee payable by a Portfolio not to exceed $30,000.
DISTRIBUTOR
FBL Investment Advisory Services, Inc. (the "Distributor") also serves as
distributor and principal underwriter for the Fund pursuant to a distribution
agreement dated December 1, 1987, as amended November 25, 1991. Since the
distribution agreement provides for payment by the Fund of fees that are used by
the Distributor to pay for distribution services, the agreement, along with the
related dealer agreements (collectively, the "Plan"), is approved and reviewed
in accordance with Rule 12b-1 under the Investment Company Act, which regulates
the manner in which an investment company may, directly or indirectly, bear the
expenses of distributing its shares. Since the Plan applies to all Portfolios,
the fees paid by one portfolio may be used to finance distribution of the shares
of another portfolio and the distribution fee payable to the Distributor is
allocated among the Portfolios based on relative net asset size. The Distributor
bears all its expenses of providing services pursuant to the distribution
agreement, including the payment of any commissions and the preparation and
distribution of advertising or sales literature and bears the cost of printing
and mailing prospectuses to persons other than shareholders. For its services
under the distribution agreement, the Fund pays the Distributor a fee, payable
monthly, at the annual rate of .50% of average daily net assets of the Fund.
This fee is accrued daily as an expense of the Fund. The Distributor compensates
firms for sales of Portfolio shares at a commission rate of up to 4%. The
Distributor may from time to time pay additional commissions, service fees or
promotional incentives to firms that sell shares of the Fund. In some instances,
such additional commissions, fees or other incentives may be offered only to
certain firms who sell or are expected to
33
<PAGE>
sell during specified time periods certain minimum amounts of shares of the
Fund, or of other funds underwritten by the Distributor. The Distributor
receives any contingent deferred sales charges. See "How to Redeem Shares."
Firms to which service fees and commissions may be paid include affiliated
broker-dealers.
As a result of the commissions and other payments made by the Distributor,
the expenses incurred by the Distributor during the early years of the Plan,
which may include interest and overhead expenses, will exceed the fees received
by the Distributor under the Plan; however, it is possible that, during the
later years of the Plan, the fees paid by the Fund to the Distributor under the
Plan may exceed the Distributor's expenses. If the Plan is terminated in
accordance with its terms, the obligation of the Fund to make payments to the
Distributor pursuant to the Plan will cease and the Fund will not be required to
make any payments past the termination date. Thus, there is no legal obligation
for the Fund to pay any expenses incurred by the Distributor in excess of its
fees under the Plan, if for any reason the Plan is terminated in accordance with
its terms. Future fees under the Plan may or may not be sufficient to reimburse
the Distributor for its expenses incurred.
During the fiscal year ended July 31, 1995, a total of $553,282 was paid
pursuant to the Plan. Of this amount, $165,967 was paid to FBL Marketing
Services, Inc., the principal dealer for Fund shares, $24 was paid to other
dealers and the balance was retained by the Distributor. FBL Marketing Services,
Inc. is an affiliate of the Distributor.
The Distributor provides information and administrative services for Fund
shareholders pursuant to an administrative services agreement ("Administrative
Agreement"). For such services, the Fund pays the Distributor a fee, payable
monthly, at an annual rate of .25% of average daily net assets of the Fund. The
Distributor may enter into related agreements with various financial services
firms, such as broker-dealer firms or banks ("firms"), to provide services and
facilities for their customers or clients who are shareholders of the Fund. The
services and assistance that may be provided by the Distributor or such firms
may include, but are not limited to, assisting in the establishment and
maintenance of shareholder accounts and records, furnishing information as to
the status of shareholder accounts, processing shareholder service requests,
forwarding purchase and redemption requests, responding to telephone inquiries,
assisting shareholders with tax information and such other services as may be
agreed upon from time to time and as may be permitted by applicable statute,
rule or regulation. The Distributor pays each firm a service fee, payable
monthly, at the annual rate of .15 of 1% on assets attributable to the firm that
have been maintained and serviced in Fund accounts.
34
<PAGE>
- --------------------------------------------------------------------------------
APPENDIX A
-------------
MONEY MARKET INSTRUMENTS
The Money Market Portfolio invests in money market instruments maturing in
thirteen months or less from the time of investment, including the instruments
described below. In addition, the other Portfolios, subject to their respective
investment objectives, may invest in certain money market instruments.
U.S. GOVERNMENT SECURITIES: Bills, notes, bonds and other debt securities
issued by the U.S. Treasury. These are direct obligations of the U.S. Government
and differ mainly in the length of their maturities.
U.S. GOVERNMENT AGENCY OR INSTRUMENTALITY SECURITIES: Debt securities
issued or guaranteed by agencies or instrumentalities of the U.S. Government.
Although these securities are not direct obligations of the U.S. Government,
some are supported by the full faith and credit of the U.S. Treasury; others are
supported only by the limited right of the issuer to borrow from the U.S.
Treasury; and others depend solely upon the credit of the agency or
instrumentality and not the U.S. Treasury.
OBLIGATIONS OF BANKS OR SAVINGS INSTITUTIONS: Certificates of deposit,
bankers' acceptances and other short-term debt obligations of commercial banks
or savings and loan associations. None of the Portfolios will invest in any
instruments issued by a commercial bank unless it has total assets of at least
$100 million and has its deposits insured by the Federal Deposit Insurance
Corporation ("FDIC"). Similarly, the Portfolios will not invest in any
instrument issued by a savings and loan association unless it has total assets
of at least $100 million, has been issued a charter by the Office of Thrift
Supervision ("OTS") or was formerly a member of the Federal Home Loan Bank
System and is now subject to regulation by the OTS, and is insured by the FDIC.
However, the Portfolios may invest in an obligation of a bank or savings and
loan association with assets of less than $100 million if the principal amount
of such obligation is fully covered by FDIC insurance. The limit of such
coverage is currently $100,000.
COMMERCIAL PAPER: Short-term unsecured promissory notes issued by
corporations, primarily to finance short-term credit needs. The Portfolio will
only invest in U.S. dollar-denominated instruments which the Board of Directors
determines present minimal credit risks and which, at the time of acquisition,
generally are either:
1. rated in one of the two highest rating categories by at least two
nationally recognized statistical rating organizations ("NRSRO"); or
2. rated in one of the two highest rating categories by only one NRSRO if
that NRSRO is the only NRSRO that has rated the instrument or issuer; or
3. in the case of an unrated instrument, determined by the Board of
Directors to be of comparable quality to either of the above; or
4. issued by an issuer that has received a rating of the type described in
1 or 2 above on other securities that are comparable in priority and
security to the instrument.
In addition, the Fund will invest in commercial paper issued by major
corporations in reliance on the so-called "private placement" exemption from
registration by Section 4(2) of the Securities Act of 1933 ("Section 4(2)
paper") subject to the above noted requirements with respect to ratings. Section
4(2)
A-1
<PAGE>
paper is restricted as to disposition under the federal securities laws, and
generally is sold to institutional investors such as the Fund, who agree that it
is purchasing the paper for investment and not with a view to public
distribution. Any resale by the purchaser must be in an exempt transaction.
Section 4(2) paper normally is resold to other institutional investors through
or with the assistance of the issuer or investment dealers who make a market in
the Section 4(2) paper, thus providing liquidity. The Fund's investment adviser
considers the legally restricted but readily saleable Section 4(2) paper to be
liquid; however, the paper will be treated as illiquid unless, pursuant to
procedures approved by the Board of Directors, a particular investment in
Section 4(2) paper is determined to be liquid. The investment adviser monitors
the liquidity of the Fund's investments in Section 4(2) paper on a continuing
basis.
OTHER CORPORATE DEBT SECURITIES: Outstanding nonconvertible corporate debt
securities (e.g., bonds and debentures) which were not issued as short-term
obligations but which have thirteen months or less remaining until maturity. The
Portfolio will only invest in such obligations if the Board of Directors
determines that they present minimal credit risk and are, at the time of
acquisition, rated AA/Aa or better by Standard & Poor's or Moody's and:
1. determined by the Board of Directors to be of comparable quality to
either 1 or 2 above; or
2. issued by an issuer that has received a rating of the type described in
1 or 2 above on other short-term securities that are comparable in
priority and security to the obligation.
REPURCHASE AGREEMENTS: See "Description of Certain Investment
Techniques--Repurchase Agreements."
FLOATING AND VARIABLE RATE SECURITIES: The Portfolio may invest in
instruments having rates of interest that are adjusted periodically or that
float continuously or periodically according to formulas intended to minimize
fluctuation in the value of the instruments ("Variable Rate Securities"). The
interest rate on a Variable Rate Security is ordinarily determined by reference
to, or is a percentage of, a specified market rate such as a bank's prime rate,
the 90-day U.S. Treasury Bill rate, or the rate of return on commercial paper or
bank certificates of deposit. Generally, the changes in the interest rate on
Variable Rate Securities reduce the fluctuation in the market value of such
securities. Accordingly, as interest rates decrease or increase, the potential
for capital appreciation or depreciation is less than for fixed rate
obligations. Some Variable Rate Securities have a demand feature ("Variable Rate
Demand Securities") entitling the purchaser to resell the securities at an
amount approximately equal to the principal amount thereof plus accrued
interest. As in the case for other Variable Rate Securities, the interest rate
on Variable Rate Demand Securities varies according to some specified market
rate intended to minimize fluctuation in the value of the instruments. Some of
these Variable Rate Demand Securities are unrated, their transfer is restricted
by the issuer and there is little if any secondary market for the securities.
Thus, any inability of the issuers of such securities to pay on demand could
adversely affect the liquidity of these securities. The Portfolio determines the
maturity of Variable Rate Securities in accordance with Securities and Exchange
Commission rules which allow the Portfolio to consider certain of such
instruments as having maturities shorter than the maturity date on the face of
the instrument.
A-2
<PAGE>
- --------------------------------------------------------------------------------
APPENDIX B
-------------
PORTFOLIO COMPOSITION FOR HIGH YIELD BONDS
The tables below reflect the average composition by quality rating of the
investment securities of the High Yield Bond Portfolio and the High Grade Bond
Portfolio for the fiscal year ended July 31, 1995. Percentages are weighted
averages based upon the portfolio composition at the end of each month during
the year. The percentage of total assets represented by bonds rated by Moody's
and Standard & Poor's ("S&P") is shown. The percentage of total assets
represented by unrated bonds is also shown. Although not specifically rated by
Moody's or Standard & Poor's, U.S. Government securities are reflected as Aaa
and AAA (highest quality) for purposes of these tables. The category noted as
"Cash and Other Assets" includes all assets other than the rated and unrated
bonds reflected in the table including, without limitation, equity securities,
preferred stocks, money market instruments, repurchase agreements and cash.
The allocations reflected in the tables do not necessarily reflect the view
of the investment adviser as to the quality of the bonds in the Portfolio on the
date shown; and they are not necessarily representative of the composition of
the Portfolio at other times. The composition of the Portfolio will change over
time.
HIGH YIELD BOND PORTFOLIO
COMPOSITION OF PORTFOLIO BY QUALITY
<TABLE>
<CAPTION>
PERCENTAGE OF PERCENTAGE OF
MOODY'S RATING PORTFOLIO BY PORTFOLIO BY GENERAL DEFINITION OF
CATEGORY MOODY'S RATINGS S&P RATING CATEGORY S&P RATINGS BOND
- ------------------- ----------------- ------------------- -------------- -------------------------
<S> <C> <C> <C> <C>
Aaa................ 4.61% AAA................ 4.61 % Highest quality
A.................. 2.34 A.................. 2.34 Upper medium grade
Baa................ 3.35 BBB................ 7.43 Medium grade
Ba................. 36.16 BB................. 25.75 Lower medium grade
B.................. 47.26 B.................. 52.38 Speculative
Caa................ .31 CCC................ More speculative
Ca................. .27 D.................. .27 Highly speculative
Not rated.......... 2.78 Not rated.......... 4.30 Not rated by Moody's or
S&P
Cash and Other Cash and Other
Assets............ 2.92 Assets............. 2.92
------- -------
100.00% 100.00 %
</TABLE>
B-1
<PAGE>
HIGH GRADE BOND PORTFOLIO
COMPOSITION OF PORTFOLIO BY QUALITY
<TABLE>
<CAPTION>
PERCENTAGE OF PERCENTAGE OF
MOODY'S RATING PORTFOLIO BY PORTFOLIO BY GENERAL DEFINITION OF
CATEGORY MOODY'S RATINGS S&P RATING CATEGORY S&P RATINGS BOND
- ------------------- ----------------- ------------------- -------------- -------------------------
<S> <C> <C> <C> <C>
Aaa................ 17.49% AAA................ 13.13 % Highest quality
Aa................. 13.16 AA................. 20.48 High quality
A.................. 41.42 A.................. 32.33 Upper medium grade
Baa................ 13.78 BBB................ 19.71 Medium grade
Ba................. 5.24 BB................. Lower medium grade
Not rated.......... 2.08 Not rated.......... 7.52 Not rated by Moody's or
S&P
Cash and Other Cash and Other
Assets............ 6.83 Assets............. 6.83
------- -------
100.00% 100.00 %
</TABLE>
The description of each bond quality category set forth in the tables above
is intended to be a general guide and not a definitive statement as to how
Moody's and Standard & Poor's define such rating category. A more complete
description of the rating categories is set forth under "Appendix C--
Description of Corporate Bond Ratings." The ratings of Moody's and Standard &
Poor's represent their opinions as to the capacity to pay interest and principal
of the securities that they undertake to rate. It should be emphasized, however,
that ratings are relative and subjective and do not evaluate market value risk.
After purchase by a Portfolio, an obligation may cease to be rated or its rating
may be reduced. Neither event would require a Portfolio to eliminate the
obligation from its portfolio. An issue may be unrated simply because the issuer
chose not to have it rated, and not necessarily because it is of lower quality.
Unrated issues may be less marketable.
B-2
<PAGE>
- --------------------------------------------------------------------------------
APPENDIX C
-------------
DESCRIPTION OF CORPORATE BOND RATINGS
MOODY'S INVESTORS SERVICE, INC.
AAA:
Bonds that 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
anticipated are most unlikely to impair the fundamentally strong position
of such issues.
AA:
Bonds that are rated Aa are judged to be of 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 with Aaa securities.
A:
Bonds that are rated A possess many favorable investment attributes and
may be considered as upper medium-grade obligations. This rating indicates
an extremely strong capacity to pay principal and interest which is
considered adequate but elements may be present which suggest a
susceptibility to impairment sometime in the future.
BAA:
Bonds rated Baa are considered medium-grade obligations, i.e., they are
neither highly protected nor poorly secured. Interest payments and
principal security appear adequate for the present but certain protective
elements may be lacking or may be characteristically unreliable over any
great length of time. Such bonds lack outstanding investment
characteristics and in fact have speculative characteristics as well.
BA:
Bonds rated Ba are judged to have speculative elements; their future
cannot be considered as well-assured. Often the protection of interest and
principal payments may be very moderate and thereby not well-safeguarded
during both good and bad times over the future. Uncertainty of position
characterizes bonds in this class.
B:
Bonds rated B generally lack characteristics of a desirable investment.
Assurance of interest and principal payments or of maintenance of other
terms of the contract over any long period of time may be small.
CAA:
Bonds rated Caa are of poor standing. Such issues may be in default or
there may be present elements of danger with respect to principal or
interest.
CA:
Bonds rated Ca represent obligations which are speculative in a high
degree. Such issues are often in default or have other market
shortcomings.
STANDARD & POOR'S CORPORATION
AAA:
Bonds rated AAA are highest grade debt obligations. This rating indicates
an extremely strong capacity to pay principal and interest.
AA:
Bonds rated AA also qualify as high-quality obligations. Capacity to pay
principal and interest is very strong, and in the majority of instances
they differ from AAA issues only in a small degree.
C-1
<PAGE>
A:
Bonds rated A have a strong capacity to pay principal and interest,
although they are more susceptible to the adverse effects of changes in
circumstances and economic conditions.
BBB:
Bonds rated BBB are regarded as having an adequate capacity to pay
principal and interest. Whereas they normally exhibit protection
parameters, adverse economic conditions or changing circumstances are more
likely to lead to a weakened capacity to pay principal and interest for
bonds in this category, than for bonds in the A category.
BB-B-CCC-CC:Bonds rated BB, B, CCC and CC are regarded, on balance, as
predominantly speculative with respect to the issuer's capacity to pay
interest and repay principal in accordance with the terms of the
obligations. BB indicates the lowest degree of speculation and CC the
highest degree of speculation. While such bonds will likely have some
quality and protective characteristics, these are outweighed by large
uncertainties or major risk exposures to adverse conditions.
D:
Bonds rated D are in default, and payment of interest and/or repayment of
principal is in arrears.
Plus (+) or Minus (-): The ratings from "AA" to "BB" may be modified by
the addition of a plus or minus sign to show relative standing within the
major rating categories.
NR:
Not rated by the indicated rating agency.
DESCRIPTION OF COMMERCIAL PAPER RATINGS
MOODY'S INVESTORS SERVICE, INC.
P-1:
The rating P-1 is the highest commercial paper rating assigned by Moody's
and indicates that, in Moody's opinion, the issuer or supporting
institution has a superior ability for repayment of senior short-term debt
obligations. P-1 repayment ability will often be evidenced by many of the
following characteristics: (1) leading market positions in
well-established industries, (2) high rates of return on funds employed,
(3) conservative capitalization structures with moderate reliance on debt
and ample asset protection, (4) broad margins in earnings coverage of
fixed financial charges and high internal cash generation and (5)
well-established access to a range of financial markets and assured
sources of alternate liquidity.
P-2:
The rating P-2 indicates that, in Moody's opinion, the issuer or
supporting institution has a strong ability for repayment of senior
short-term debt obligations. Strong ability for repayment will normally be
evidenced by many of the characteristics listed under the description of
"P-1." Earnings trends and coverage ratios, while sound, may be more
subject to variation. Capitalization characteristics, while still
appropriate, may be more affected by external conditions. Ample alternate
liquidity is maintained.
STANDARD & POOR'S CORPORATION
A-1:
This designation indicates that the degree of safety regarding timely
payment of debt having an original maturity of no more than 365 days is
either overwhelming or very strong.
A-2:
This designation indicates that capacity for timely payment of debt having
an original maturity of no more than 365 days is strong; however, the
relative degree of safety is not as high as for issues designated "A-1."
C-2
<PAGE>
Distributed by FBL Investment Advisory Services, Inc.
CONFIDENTIAL CUSTOMER RECORD
___________________________________ __________________________________
Name of
Customer Date
These questions are for the purpose of determining the suitability of a Fund
investment for you and are asked pursuant to rules established by the Securites
and Exchange Commission. Furnishing the answers is voluntary on your part;
however, the information will be treated confidentially and is intended to
assist in determining an appropriate recommendation.
/ / I elect not to provide the information below.
1. SEX: / / MALE / / FEMALE
2. DATE OF BIRTH: _________________________________________________
3. DEPENDENT CHILDREN: Number _______ Age of youngest _______ Age of oldest
_______
4. PRINCIPAL OCCUPATION: ______________________________________________________
5. NAME AND ADDRESS OF EMPLOYER: ______________________________________________
______________________________________________
6. INSURANCE ON LIFE OF CUSTOMER: / / Less than $25,000 / / $25,000 to $50,000
/ / $50,000 to $100,000 / / $100,000 or over
7. INVESTMENT OBJECTIVE: / / Growth of Investment
/ / Other (Specify) __________________________________
8. NET WORTH: / / Less than $25,000 / / $25,000 to $50,000 / / $50,000 to
$100,000 / / $100,000 or over
9. SAVINGS: / / Less than $5,000 / / $5,000 to $10,000 / / $10,000 to $25,000
/ / $25,000 or over
10. OTHER ASSETS:
Amount / / Less than $10,000 / / $10,000 to $50,000 / / $50,000 to $100,000
/ / $100,000 or over
Description ________________________________________________________________
__
__
11. ANNUAL INCOME: / / Less than $10,000 / / $10,000 to $25,000
/ / $25,000 to $50,000 / / $50,000 to $100,000 / / $100,000 or
over
12. OTHER INFORMATION CONSIDERED IN MAKING AN INVESTMENT RECOMMENDATION:
____________________________________________________________________________
__
__
___________________________________ ___________________________________
Signature of Customer Signature of Representative
<PAGE>
<TABLE>
<S> <C>
INVESTMENT ADVISER, DISTRIBUTOR, CUSTODIAN
SHAREHOLDER SERVICE, DIVIDEND Bankers Trust Company
DISBURSING AND TRANSFER AGENT Global Assets -- Insurance Group
FBL Investment Advisory Services, Inc. 16 Wall Street
5400 University Avenue New York, New York 10005
West Des Moines, Iowa 50266
LEGAL COUNSEL INDEPENDENT AUDITORS
Vedder, Price, Kaufman & Kammholz Ernst & Young LLP
Suite 2600 Suite 3400
222 North LaSalle Street 801 Grand Avenue
Chicago, Illinois 60601 Des Moines, Iowa 50309
</TABLE>
<PAGE>
------------------------------------------------------------------------
Farm Bureau Mutual Funds
FBL Series Fund, Inc.
R
PROSPECTUS
DECEMBER 1, 1995
INVESTMENT MANAGER AND
PRINCIPAL UNDERWRITER
FBL INVESTMENT ADVISORY
SERVICES, INC.
5400 UNIVERSITY AVENUE
WEST DES MOINES, IA 50266
1-800-247-4170 (OUTSIDE IOWA)
1-800-422-3175 (IN IOWA)
225-5586 (DES MOINES)
FARM BUREAU MUTUAL FUNDS
[LOGO]
5400 UNIVERSITY AVENUE
WEST DES MOINES, IOWA 50266
737-018(12/95)
<PAGE>
PART B
FARM BUREAU MUTUAL FUNDS
FBL SERIES FUND, INC.
5400 University Avenue
West Des Moines, Iowa 50266
(515) 225-5586
STATEMENT OF ADDITIONAL INFORMATION
December 1, 1995
FBL Series Fund, Inc. (the "Fund") is an open-end, diversified management
investment company that consists of six Portfolios: the Growth Common Stock
Portfolio, High Grade Bond Portfolio, High Yield Bond Portfolio, Managed
Portfolio, Money Market Portfolio and Blue Chip Portfolio. Each Portfolio has
distinct investment objectives and policies and each is in effect a separate
fund issuing its own shares.
This Statement of Additional Information is not a prospectus and should be
read in conjunction with the Prospectus of the Fund dated December 1, 1995. A
copy of the Prospectus may be obtained without charge by writing or calling the
Fund at the address and telephone number shown above.
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
INVESTMENT OBJECTIVES, POLICIES AND TECHNIQUES . . . . . . . . . . . . B-1
Loans of Portfolio Securities. . . . . . . . . . . . . . . . . . . . B-1
Covered Call Options . . . . . . . . . . . . . . . . . . . . . . . . B-2
Ginnie Mae Certificates. . . . . . . . . . . . . . . . . . . . . . . B-2
INVESTMENT RESTRICTIONS. . . . . . . . . . . . . . . . . . . . . . . . B-4
Fundamental Policies . . . . . . . . . . . . . . . . . . . . . . . . B-4
Non-Fundamental (Operating) Policies . . . . . . . . . . . . . . . . B-6
OFFICERS AND DIRECTORS . . . . . . . . . . . . . . . . . . . . . . . . B-7
INVESTMENT ADVISER . . . . . . . . . . . . . . . . . . . . . . . . . . B-12
PORTFOLIO TRANSACTIONS AND BROKERAGE COMMISSIONS . . . . . . . . . . . B-15
UNDERWRITING AND DISTRIBUTION EXPENSES . . . . . . . . . . . . . . . . B-16
PURCHASES AND REDEMPTIONS. . . . . . . . . . . . . . . . . . . . . . . B-17
NET ASSET VALUE. . . . . . . . . . . . . . . . . . . . . . . . . . . . B-18
Money Market Portfolio . . . . . . . . . . . . . . . . . . . . . . . B-18
Other Portfolios . . . . . . . . . . . . . . . . . . . . . . . . . . B-19
TAXES. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . B-20
DIVIDENDS AND DISTRIBUTIONS. . . . . . . . . . . . . . . . . . . . . . B-21
Money Market Portfolio . . . . . . . . . . . . . . . . . . . . . . . B-21
PERFORMANCE INFORMATION. . . . . . . . . . . . . . . . . . . . . . . . B-21
SHAREHOLDER VOTING RIGHTS. . . . . . . . . . . . . . . . . . . . . . . B-27
RETIREMENT PLANS . . . . . . . . . . . . . . . . . . . . . . . . . . . B-27
Self-Employed Individual Retirement Plans. . . . . . . . . . . . . . B-27
Individual Retirement Accounts . . . . . . . . . . . . . . . . . . . B-28
Tax-Sheltered 403(b) Plans . . . . . . . . . . . . . . . . . . . . . B-28
Corporate Pension and Profit Sharing Plans . . . . . . . . . . . . . B-28
Public Employer Deferred Compensation Plans. . . . . . . . . . . . . B-29
General. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . B-29
</TABLE>
<PAGE>
<TABLE>
<S> <C>
OTHER INFORMATION. . . . . . . . . . . . . . . . . . . . . . . . . . . B-29
Custodian. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . B-29
Independent Auditors . . . . . . . . . . . . . . . . . . . . . . . . B-30
Accounting Services. . . . . . . . . . . . . . . . . . . . . . . . . B-30
Shareholder Service, Dividend Disbursing and Transfer Agent. . . . . B-30
Legal Matters. . . . . . . . . . . . . . . . . . . . . . . . . . . . B-30
FINANCIAL STATEMENTS . . . . . . . . . . . . . . . . . . . . . . . . . B-30
</TABLE>
<PAGE>
INVESTMENT OBJECTIVES, POLICIES AND TECHNIQUES
The investment objectives and policies of each of the Fund's six
Portfolios are set forth in the Prospectus under the heading "Investment
Objectives and Policies of the Portfolios." A description of certain
investment strategies and techniques applicable to some or all of the
Portfolios is set forth in the Prospectus under the heading "Description of
Certain Investment Techniques." A description of the money market instruments
in which the Money Market Portfolio may invest is contained in Appendix A to
the Prospectus. A description of the corporate bond and commercial paper
ratings of Moody's Investors Services, Inc. ("Moody's") and Standard & Poor's
Corporation ("Standard & Poor's") is contained in the Prospectus.
The following is intended to augment the explanation in the Prospectus of
certain investment strategies and techniques applicable to one or more of the
Portfolios.
LOANS OF PORTFOLIO SECURITIES
Each Portfolio may from time to time lend securities (but not in excess of
20% of its assets) from its portfolio to brokers, dealers and financial
institutions, provided that: (i) the loan is secured continuously by
collateral consisting of U.S. Government securities, government agency
securities, or cash or cash equivalents adjusted daily to have a market value
at least equal to the current market value of the securities loaned plus
accrued interest; (ii) the Portfolio may at any time call the loan and regain
the securities loaned; and (iii) the Adviser (under the review of the Board of
Directors) has reviewed the creditworthiness of the borrower and found such
creditworthiness satisfactory. The collateral will be invested in short-term
securities, the income from which will increase the return to the Portfolio.
The Portfolio will retain all rights of beneficial ownership in the loaned
securities, including voting rights and rights to interest or other
distributions, and will have the right to regain record ownership of loaned
securities to exercise such beneficial rights. The Portfolio may pay
reasonable administrative, custodial and finders' fees to persons unaffiliated
with the Fund in connection with the arranging of such loans. Unless certain
requirements contained in the Internal Revenue Code are satisfied, the
dividends, interest and other distributions received by the Portfolio on loaned
securities may not be treated for tax purposes as qualified income for the
purposes of the 90% test discussed under "Taxes." Each Portfolio intends to
loan portfolio securities only to the extent that such activity does not
jeopardize the Portfolio's qualification as a regulated investment company
under Subchapter M of the Internal Revenue Code.
B-1
<PAGE>
COVERED CALL OPTIONS
Each Portfolio (other than the Money Market Portfolio) may write (sell)
covered call options on its portfolio securities in seeking to enhance
investment performance. A call option is a short-term contract, ordinarily
having a duration of nine months or less, which gives the purchaser of the
option, in return for a premium paid, the right to buy, and the writer of the
option the obligation to sell, the underlying security at the exercise price at
any time prior to the expiration of the option period. An option is "covered"
if the writer owns the optioned security.
A Portfolio will write covered call options both to reduce the risks
associated with certain of its investments and to increase total investment
return. In return for the premium income, the Portfolio will forego the
opportunity to profit from an increase in the market price of the underlying
security above the exercise price so long as its obligations under the contract
continue, except insofar as the premium represents a profit. Moreover, in
writing the option, the Portfolio will retain the risk of loss if the price of
the security declines, and the premium is intended to offset any such loss in
whole or in part. A Portfolio, in writing call options, must assume that the
call may be exercised at any time prior to the expiration of its obligations as
a writer and that in such circumstances, the net proceeds realized from the
sale of the underlying securities pursuant to the call may be substantially
below the prevailing market price.
A Portfolio may write covered call options on debt securities that are
traded over-the-counter. When a Portfolio writes an over-the-counter option,
there is no assurance that the Portfolio will be able to enter into a closing
purchase transaction. It may not always be possible for the Portfolio to
negotiate a closing purchase transaction with the same dealer for the same
exercise price and expiration date as the option which the Portfolio previously
had written. Although the Portfolio may choose to purchase an option from a
different dealer, the Portfolio would then be subject to the additional credit
risk of such dealer. If the Portfolio is unable to effect a closing purchase
transaction, it will not be able to sell the underlying security until the
option expires or until it delivers the underlying security upon exercise.
GINNIE MAE CERTIFICATES
The High Grade Bond Portfolio, High Yield Bond Portfolio and Managed
Portfolio may each invest in Ginnie Mae certificates ("Ginnie Maes"). Ginnie
Maes are debt securities issued by a mortgage banker or other mortgagee and
represent an interest in pools of mortgage loans insured by the Federal Housing
Administration or the Farmers Home Administration, or guaranteed by the
Veterans Administration. Scheduled payments of principal and interest are made
to the registered holders of the Ginnie Maes. The Government National Mortgage
Association ("GNMA") guarantees the timely payment of monthly installments of
principal and interest on Ginnie Maes at the time such payments are due,
whether or not such amounts are collected on the underlying mortgages by the
B-2
<PAGE>
issuer of the Ginnie Maes. The National Housing Act provides that the full
faith and credit of the United States is pledged to the timely payment of
principal and interest by GNMA of amounts due on these Ginnie Maes, and an
assistant attorney general of the United States has rendered an opinion that
this guarantee by GNMA is a general obligation of the United States backed by
its full faith and credit.
The Ginnie Maes in which these Portfolios may invest are of the "modified
pass-through" type, which means that GNMA guarantees the timely payment of
principal and interest installments (whether or not the amounts are collected
by the issuer of the Ginnie Maes). Under the other general type of Ginnie
Maes, referred to as "straight pass-through" Ginnie Maes, the payment of
principal and interest on a timely basis is not guaranteed.
The average life of Ginnie Maes varies with the maturities of the
underlying mortgage instruments with maximum maturities of 30 years. The
average life is likely to be substantially less than the original maturity of
the mortgage pools underlying the securities as the result of prepayments or
refinancing of such mortgages or foreclosure. Such prepayments are passed
through to the registered holder with the regular monthly payments of principal
and interest, and have the effect of reducing future payments. Due to the
guarantee of Ginnie Maes by GNMA, foreclosures impose no risk to the principal
invested.
The average life of pass-through pools varies with the maturities of the
underlying mortgage instruments. In addition, a pool's term may be shortened
by unscheduled or early payments of principal and interest on the underlying
mortgages. The occurrence of mortgage prepayments is affected by factors
including the level of interest rates, general economic conditions, the
location and age of the mortgage and other social and demographic conditions.
As prepayment rates vary widely, it is not possible to accurately predict the
average life of a particular pool. However, statistics indicate that the
average life of the type of mortgages backing the majority of Ginnie Maes is
approximately 12 years. For this reason, it is standard practice to treat
Ginnie Maes as 30-year mortgage-backed securities that prepay fully in the
twelfth year. Pools of mortgages with other maturities or different
characteristics will have varying assumptions for average life. The assumed
average life of pools of mortgages having terms of less than 30 years is less
than 12 years, but typically not less than 5 years.
The coupon rate of interest on Ginnie Maes is lower than the interest rate
paid on the VA-guaranteed or FHA-insured mortgages underlying the certificates,
but only by the amount of the fees paid to GNMA and the issuer. Such fees in
the aggregate usually amount to approximately 1/2 of 1%.
Yields on pass-through securities are typically quoted by investment
dealers and vendors based on the maturity of the underlying instruments and the
associated average-life assumption. In periods of falling interest rates, the
rate of prepayment tends to increase, thereby shortening the actual average
life of a pool of mortgage-related securities. Conversely, in periods of rising
rates, the rate of prepayment tends to decrease, thereby
B-3
<PAGE>
lengthening the actual average life of the pool. Prepayments generally occur
when interest rates have fallen. Reinvestments of prepayments at such times
will be at lower rates, which would lower the return of the Portfolios. The
actual yield of each Ginnie Mae is influenced by the prepayment experience of
the mortgage pool underlying the certificates and may differ from the yield
based on the assumed average life. Interest on Ginnie Maes is paid monthly
rather than semi-annually as for traditional bonds.
INVESTMENT RESTRICTIONS
FUNDAMENTAL POLICIES
In seeking to achieve its investment objective(s), each Portfolio has
adopted the following investment restrictions. These are fundamental policies
and may not be changed without a majority vote of the outstanding shares of
each Portfolio affected. As used in this Statement of Additional Information
and in the Prospectus, the phrase "majority vote" of a Portfolio (or the Fund)
means the vote of the lesser of (i) 67% of the shares of the Portfolio (Fund)
present at a meeting if the holders of more than 50% of the outstanding shares
are present in person or by proxy, or (ii) more than 50% of the outstanding
shares of the Portfolio (Fund). A change in policy by only one Portfolio may
be effected by a majority vote of the outstanding shares of that Portfolio.
Except as noted below, each Portfolio may not:
1. Purchase securities of any issuer (other than U.S. Government
securities or government agency securities) if, as a result, more than 5% of
the value of the Portfolio's assets (taken at value) would be invested in
securities of that issuer.
2. Purchase more than 10% of the voting securities or more than 10% of
any class of securities of any issuer. (For this purpose all outstanding debt
securities of an issuer are considered as one class and all preferred stocks of
an issuer are considered as one class.)
3. Concentrate its investments in any one industry; however, it may
invest up to 25% of the value of its assets in any one industry. This
restriction does not apply to U.S. Government securities or government agency
securities (or, with respect to the Money Market Portfolio, obligations of
banks or savings institutions), or to instruments, such as repurchase
agreements, secured by these instruments.
4. Purchase securities of other investment companies except by purchase
in the open market involving only customary brokers' commissions (and in no
event to the extent of more than 5% of the value of the Portfolio's total
assets), or as part of a merger, consolidation or acquisition of assets.
B-4
<PAGE>
5. Purchase or sell (although it may purchase securities of issuers
which invest or deal in) interests in oil, gas or other mineral exploration or
development programs, real estate, commodities or commodity contracts.
6. Purchase any securities on margin (except that the Portfolio may
obtain such short-term credit as may be necessary for the clearance of
purchases and sales of portfolio securities) or make short sales unless, by
virtue of its ownership of other securities, it has the right to obtain
securities equivalent in kind and amount to the securities sold and, if the
right is conditional, the sale is made upon the same condition.
7. Purchase or retain the securities of any issuer if any of the
officers or directors of the Fund or of its investment adviser own individually
more than one-half of 1% of the securities of such issuer and together own more
than 5% of the securities of such issuer.
8. Issue senior securities, except as appropriate to evidence
indebtedness which a Portfolio is permitted to incur pursuant to (9) below.
9. Borrow money, except from banks for temporary or emergency purposes,
and in no event in excess of 5% of its total net assets, or pledge or mortgage
more than 15% of its gross assets.
10. Underwrite securities issued by others, except that it may be deemed
to be a statutory underwriter in the sale of any so-called restricted
securities which require registration under the Securities Act of 1933. In
this connection, a Portfolio will not invest more than 10% of the value of its
total assets in securities which are subject to legal or contractual
restrictions on resale, or are not readily marketable. No Portfolio has made,
or has a present intention of making, any such investments.
11. Participate on a joint (or a joint and several) basis in any trading
account in securities (but this does not include the "bunching" of orders for
the sale or purchase of portfolio securities with the other Portfolios or with
other investment company and client accounts managed by the Fund's investment
adviser or its affiliates to reduce brokerage commissions or otherwise to
achieve best overall execution, or to obtain securities on more favorable
terms).
12. Alone, or together with any other Portfolios, make investments for
the purpose of exercising control over, or management of, any issuer.
13. Lend money or securities, except as provided in (14) below (the
making of demand deposits with banks, and the purchase of securities such as
bonds, debentures, commercial paper and short-term obligations in accordance
with the Portfolio's investment objectives and policies, shall not be
considered the making of a loan). In addition, each Portfolio may not invest
more than 10% of its total assets (taken at market value at the time of each
purchase) in repurchase agreements maturing in more than seven days.
B-5
<PAGE>
14. Lend its portfolio securities in excess of 20% of its net assets.
15. Invest in foreign securities except for foreign equity securities
traded on U.S. exchanges and payable in U.S. dollars (and in no event in excess
of 25% of the Portfolio's net assets).
16. Write, purchase or sell puts, calls or combinations thereof, other
than writing covered call options.
17. Invest more than 5% of the value of its total assets in securities of
companies which have a record of less than three years continuous operation,
including in such three years the operation of any predecessor company or
companies, partnership or individual proprietorship if the company whose
securities are to be purchased by the Fund has come into existence as a result
of a merger, consolidation or reorganization or the purchase of substantially
all of the assets of such predecessor.
The investment restrictions for the Blue Chip Portfolio are the same as
those for the other Portfolios except that investment restriction number 1
shall be applicable to only 75% of the value of the Blue Chip Portfolio's total
assets.
NON-FUNDAMENTAL (OPERATING) POLICIES
The following are non-fundamental (operating) policies approved by the
Board of Directors. Such policies may be changed by the Board of Directors
without approval of the Shareholders.
Each Portfolio shall not:
(a) invest more than 10% of its total net assets in illiquid securities,
which includes repurchase agreements maturing in more than 7 days, securities
used to cover covered calls options written by a Portfolio, and any security
which is subject to restriction upon disposition or otherwise considered to be
illiquid.
The Growth Common Stock Portfolio shall not:
(b) purchase warrants, valued at the lower of cost or market, in excess
of 5% of the value of the Portfolio's net assets. Included within that amount,
but not to exceed 2% of the value of the Portfolio's net assets, may be
warrants that are not listed on the New York or American Stock Exchange.
Warrants acquired by the Portfolio at any time in units or attached to
securities are not subject to this restriction; or
(c) purchase securities which are subject to legal or contractual
restrictions on resale in excess of 5% of the value of the Portfolio's net
assets.
B-6
<PAGE>
The term "government agency securities" for purposes of investment
restriction 3 has the same meaning as that set forth in Appendix A to the
Prospectus. The term "commodities or commodity contracts" as used in
investment restriction 5 includes futures contracts.
If a percentage increase is adhered to at the time of investment, a later
increase or decrease in percentage beyond the specified limit resulting from a
change in values or net assets will not be considered a violation.
OFFICERS AND DIRECTORS
The officers and directors of the Fund, their age and their principal
occupations for the past five years are set forth below, though corporate
positions may, in some instances, have changed during this period. The address
of the officers of the Fund is 5400 University Avenue, West Des Moines, Iowa
50266. The directors listed with an asterisk are "interested persons" of the
Fund as defined in the Investment Company Act of 1940.
MERLIN D. PLAGGE*, PRESIDENT AND DIRECTOR (65)
Farmer; President and Director, Iowa Farm Bureau Federation, Farm Bureau
Multi-State Services, Inc., Farm Bureau Life Insurance Company, Universal
Assurors Life Insurance Company, FBL Insurance Brokerage, Inc., Farm Bureau
Mutual Insurance Company, Utah Farm Bureau Insurance Company, FBL Financial
Services, Inc., BIC, Inc., and Farm Bureau Agricultural Business
Corporation; Director, Western Farm Bureau Management Corporation, Western
Farm Bureau Life Insurance Company, Western Agricultural Insurance Company
and American Agricultural Insurance Company.
EUGENE R. MAAHS*, SENIOR VICE PRESIDENT, SECRETARY-TREASURER AND DIRECTOR (64)
Senior Vice President and Secretary-Treasurer, Farm Bureau Multi-State
Services, Inc., Farm Bureau Life Insurance Company, Universal Assurors
Life Insurance Company, Farm Bureau Mutual Insurance Company, Utah Farm
Bureau Insurance Company, FBL Financial Services, Inc. and FBL Insurance
Brokerage, Inc.; Executive Director and Secretary-Treasurer, Iowa Farm
Bureau Federation; Senior Vice President and Assistant
Secretary-Treasurer, South Dakota Farm Bureau Mutual Insurance Company;
Vice President and Treasurer, Farm Bureau Management Corporation; Former
Administrative Director, Iowa Farm Bureau Federation; Former Executive
Vice President and Director, Communications Providers, Inc.; Co-Owner,
Country Gardens.
B-7
<PAGE>
STEPHEN M. MORAIN*, SENIOR VICE PRESIDENT, GENERAL COUNSEL, ASSISTANT SECRETARY
AND DIRECTOR (50)
General Counsel and Assistant Secretary, Iowa Farm Bureau Federation;
General Counsel, Secretary and Director, Farm Bureau Management
Corporation; Senior Vice President and General Counsel, Farm Bureau
Multi-State Services, Inc., Farm Bureau Life Insurance Company, Universal
Assurors Life Insurance Company, Farm Bureau Mutual Insurance Company,
Utah Farm Bureau Insurance Company, FBL Financial Services, Inc., FBL
Insurance Brokerage, Inc. and South Dakota Farm Bureau Mutual Insurance
Company; Senior Vice President, General Counsel and Director, FBL
Investment Advisory Services, Inc. and FBL Marketing Services, Inc.;
Director, Computer Aided Design Software, Inc. and Iowa Business
Development Finance Corporation; Chairman, Edge Technologies, Inc.
THOMAS R. GIBSON, EXECUTIVE VICE PRESIDENT AND GENERAL MANAGER (51)
Executive Vice President and General Manager, Farm Bureau Multi-State
Services, Inc., Farm Bureau Life Insurance Company, Universal Assurors
Life Insurance Company, Western Farm Bureau Life Insurance Company, Farm
Bureau Mutual Insurance Company, Utah Farm Bureau Insurance Company, FBL
Insurance Brokerage, Inc., FBL Financial Services, Inc., and South Dakota
Farm Bureau Mutual Insurance Company; Executive Vice President, General
Manager and Director, FBL Investment Advisory Services, Inc. and FBL
Marketing Services, Inc.
TIMOTHY J. HOFFMAN, VICE PRESIDENT, CHIEF MARKETING OFFICER (45)
Vice President, Chief Marketing Officer, Farm Bureau Multi-State Services,
Inc., Farm Bureau Life Insurance Company, Universal Assurors Life
Insurance Company, Western Farm Bureau Life Insurance Company, Farm Bureau
Mutual Insurance Company, Utah Farm Bureau Insurance Company, FBL
Financial Services, Inc., South Dakota Farm Bureau Mutual Insurance
Company and FBL Insurance Brokerage, Inc. President and Director, FBL
Marketing Services, Inc. and FBL Educational Services, Inc.; Vice
President, Chief Marketing Officer and Director, FBL Investment Advisory
Services, Inc.
WILLIAM J. ODDY, VICE PRESIDENT, CHIEF OPERATING OFFICER AND ASSISTANT GENERAL
MANAGER (51)
Vice President, Chief Operating Officer and Assistant General Manager,
Farm Bureau Multi-State Services, Inc., Farm Bureau Life Insurance
Company, Universal Assurors Life Insurance Company, Western
B-8
<PAGE>
Farm Bureau Life Insurance Company, FBL Insurance Brokerage, Inc., Utah
Farm Bureau Insurance Company, Farm Bureau Mutual Insurance Company, South
Dakota Farm Bureau Mutual Insurance Company and FBL Financial Services,
Inc.; President, Treasurer and Director, Communications Providers, Inc.;
Vice President, Chief Operating Officer, Assistant General Manager,
Treasurer and Director, FBL Investment Advisory Services, Inc. and FBL
Marketing Services, Inc.; President and Director, FBL Real Estate Ventures,
Ltd. and RIK, Inc.
RICHARD D. WARMING, VICE PRESIDENT, CHIEF INVESTMENT OFFICER (62)
Vice President, Chief Investment Officer and Assistant Treasurer, Farm
Bureau Multi-State Services, Inc., Farm Bureau Life Insurance Company,
Universal Assurors Life Insurance Company, Western Farm Bureau Life
Insurance Company, FBL Insurance Brokerage, Inc., Utah Farm Bureau
Insurance Company, FBL Financial Services, Inc., Farm Bureau Mutual
Insurance Company; Western Agricultural Insurance Company, Western Farm
Bureau Mutual Insurance Company and South Dakota Farm Bureau Mutual
Insurance Company; President and Director, FBL Leasing Services, Inc. and
FBL Investment Advisory Services, Inc.; Vice President, Chief Investment
Officer and Director, FBL Marketing Services, Inc.; Vice President,
Secretary and Director, RIK, Inc; Secretary and Director, FBL Real Estate
Ventures, Ltd.
DENNIS M. MARKER, INVESTMENT VICE PRESIDENT, ADMINISTRATION AND ASSISTANT
SECRETARY (44)
Investment Vice President, Administration, Farm Bureau Life Insurance
Company, Universal Assurors Life Insurance Company, Western Farm Bureau
Life Insurance Company, FBL Insurance Brokerage, Inc., Farm Bureau Mutual
Insurance Company, Utah Farm Bureau Insurance Company and South Dakota
Farm Bureau Mutual Insurance Company; Vice President and Director, FBL
Leasing Services, Inc.; Investment Vice President, Administration,
Secretary and Director, FBL Investment Advisory Services, Inc. and FBL
Marketing Services, Inc.
SUE A. CORNICK, MARKET CONDUCT AND MUTUAL FUNDS MANAGER AND ASSISTANT SECRETARY
(35)
Market Conduct and Mutual Funds Manager and Assistant Secretary, FBL
Investment Advisory Services, Inc. and FBL Marketing Services, Inc.
B-9
<PAGE>
KRISTI ROJOHN, ASSISTANT SECRETARY (32)
Senior Compliance Assistant and Assistant Secretary, FBL Investment
Advisory Services, Inc. and FBL Marketing Services, Inc.
ELAINE A. FOLLOWWILL, ASSISTANT SECRETARY (25)
Compliance Assistant and Assistant Secretary, FBL Investment Advisory
Services, Inc. and FBL Marketing Services, Inc.
DONALD G. BARTLING, DIRECTOR (68)
Box 104
Herman, Nebraska 68029
Farmer; Partner, Bartling Brothers Partnership (farming business) and BBK
(farming partnership); Director, Papio Missouri River Natural Resources
District.
JOHN R. GRAHAM, DIRECTOR (50)
1512 Country Club Place
Manhattan, Kansas 66502
Executive Vice President, Kansas Farm Bureau, Kansas Farm Bureau Services,
Kansas Agricultural Marketing Association, FB Services Insurance Agency,
Kansas Farm Bureau Life Insurance Company, The Farm Bureau Mutual
Insurance Company, Inc., Kansas Farm Bureau Reinsurance Company, Inc. and
KFB Insurance Company, Inc.; Chairman, Chief Executive Officer and
Director, FB Capital Management, Inc. of Kansas; Director, National
Association of Independent Insurers, Didde Corporation, Farm Bureau Mutual
Insurance Agency of Kansas and Kansas State Travel Agency, Inc.; Partner,
Arthur-Graham Rental Properties, CM Brass and G&H Real Estate Investments;
Trustee, Master Teacher Employee Benefit Pension Trust.
ERWIN H. JOHNSON, DIRECTOR (52)
1841 March Avenue
Charles City, Iowa 50616
Farmer; Owner and Manager, Center View Farms Co.; Director, First Security
Bank and Trust Co., Charles City, Iowa; Farm Associate, Iowa State
University Cooperative Extension Service; Voting Delegate, Former
President and Director, Floyd County Farm Bureau.
B-10
<PAGE>
ANN JORGENSEN, DIRECTOR (55)
R.R. 1, Box 43
Garrison, Iowa 52229
Private Investor; Farm and Business Management; Partner, Jorg-Anna Farms;
President and Founder, Farm Home Offices; Vice President, Timberlane Hogs
Limited; Director, Iowa Department of Economic Development; Chairperson,
Rural Development Council; Member, Iowa Agriculture Products Advisory
Council; Secretary, Iowa Public Television Foundation, Iowa Freedom
International Foundation; Friends of the U.I.H.C.; Former Director and
Chairperson, Iowa's Alcoholic Beverage Control Commission; Former Regent,
State of Iowa Board of Regents; Former Director, Iowa Public Television
and University of Iowa Hospitals and Clinics.
DALE W. NELSON, DIRECTOR (76)
4216 Patricia Drive
Des Moines, Iowa 50322
Retired; Former Executive Director and Secretary-Treasurer, Iowa Farm
Bureau Federation and affiliated companies; Former Senior Vice President,
Secretary-Treasurer and Director of the Fund and FBL Money Market Fund,
Inc..
CURTIS C. PIETZ, DIRECTOR (64)
R. R. 3, Box 79
Lakefield, Minnesota 65150
Farmer; Director and Part Owner, Storden Seed and Chemical Service, Inc.;
Director, Minnesota Rural Finance Authority; Former Program Evaluator,
Minnesota Department of Vocational Education; Former President, Jackson
County Farm Bureau; Former Chairman and Director, Southwest Farm
Management Association; Director, F.C.S.
The officers and directors of the Fund also serve in similar capacities as
officers and directors of FBL Money Market Fund, Inc., and as officers and
trustees of FBL Variable Insurance Series Fund. Several of the officers and
directors of the Fund are also officers and directors of the Adviser. The Fund
pays no direct remuneration to any officer of the Fund. Each of the directors
who is not affiliated with the Adviser receives a fee of $115 plus expenses for
each directors' meeting attended. For the fiscal year ended July 31, 1995,
directors fees paid by the Fund totalled $2,580.
The following table sets forth the compensation received by all Directors
of the Fund, for the fiscal year ended July 31, 1995. The information in the
last column of the table sets forth the total compensation received by all
Directors for
B-11
<PAGE>
calendar year 1994 for services as a Director of the Fund and other funds
in the FBL Family.
<TABLE>
<CAPTION>
Pension and
Aggregate Retirement Total Compensation
Compensation Benefits Accrued from all funds in the
Name of Director From the Fund as Part of Fund Expenses FBL Family
- ---------------- ------------- ------------------------ ---------------------
<S> <C> <C> <C>
Donald G. Bartling $ 430 0 $ 1,200
John R. Graham 430 0 1,200
Erwin H. Johnson 430 0 1,200
Ann Jorgensen 430 0 1,200
Eugene R. Maahs 0 0 0
Stephen M. Morain 0 0 0
Dale W. Nelson 430 0 1,200
Curtis C. Pietz 430 0 1,200
Merlin D. Plagge 0 0 0
</TABLE>
As of October 31, 1995, the officers and directors as a group owned less
than 1% of the then outstanding shares of the Fund.
INVESTMENT ADVISER
The following information supplements the information set forth in the
Prospectus under "Management of the Fund -- Investment Adviser." Pursuant to
an Investment Advisory and Management Services Agreement dated November 11,
1987 ("Agreement"), FBL Investment Advisory Services, Inc. ("FBL" or the
"Adviser") acts as the Fund's investment adviser and manager subject to the
review of the Fund's Board of Directors. The Adviser is a wholly-owned
subsidiary of FBL Financial Services, Inc., which is a wholly-owned subsidiary
of Farm Bureau Life Insurance Company, an Iowa insurance company, which is a
wholly-owned subsidiary of Farm Bureau Multi-State Services, Inc., an Iowa
corporation, 64% of whose outstanding voting shares are in turn owned by Iowa
Farm Bureau Federation an Iowa not-for-profit corporation. The Adviser also
acts as an investment adviser to individuals, institutions and two other mutual
funds: FBL Money Market Fund, Inc. and FBL Variable Insurance Series Fund.
Personnel of the Adviser also manage investments for the portfolios of
insurance companies.
The Adviser subscribes to leading bond information services and receives
published reports and statistical compilations from the issuers directly, as
well as analyses from brokers and dealers who may execute portfolio
transactions for the Fund or the Adviser's other clients. The Adviser regards
this information and material, however, as an adjunct to its own research
activities.
B-12
<PAGE>
Under the Agreement, the Adviser regularly provides the Fund with
investment research, advice and supervision, and furnishes an investment
program consistent with the investment objectives and policies of each
Portfolio, determining for each Portfolio, what securities shall be purchased
and sold and what portion of the Portfolio's assets shall be held uninvested,
subject always to: (i) the provisions of the articles of incorporation, the
Fund's by-laws, the Investment Company Act of 1940 and applicable requirements
of the Internal Revenue Code; (ii) the Portfolio's investment objectives,
policies and restrictions; and (iii) such policies and instructions as the
Board of Directors may from time to time establish. The Adviser also advises
and assists the officers of the Fund in taking such steps as are necessary or
appropriate to carry out the decisions of the Board of Directors (and any
committees thereof) regarding the conduct of the business of the Fund. The
Adviser has agreed to arrange for any of its officers or directors to serve
without salary as directors, officers or agents of the Fund if duly elected to
such positions.
The Adviser, at its expense, furnishes the Fund with office space and
facilities, simple business equipment, advisory, research and statistical
facilities, and clerical services and personnel to administer the business
affairs of the Fund. As compensation for the Adviser's investment advisory,
management and clerical services, as well as the facilities it provides and the
expenses it assumes, the Agreement provides for the payment of a monthly fee as
described in the Prospectus.
The Adviser is not required to pay expenses of the Fund other than those
set forth above. Each Portfolio will pay all other expenses incurred in its
operation, including a portion of the Fund's general administrative expenses,
allocated on the basis of the Portfolio's net asset value. Expenses that will
be borne directly by the Portfolios include, but are not limited to, the
following: net asset value calculations; portfolio transaction costs; interest
on Fund obligations; stock certificates; miscellaneous reports; membership
dues; all expenses of shareholders' and directors' meetings and of preparing,
printing and mailing proxy statements, reports and notices to shareholders; all
expenses of registering the Fund's shares under federal and state securities
laws; the typesetting costs of printing Fund prospectuses and supplements
thereto; investor services (including allocable telephone and personnel
expenses); all taxes and fees payable to federal, state or other governmental
authorities; the fees and expenses of independent public auditors, legal
counsel, custodian, dividend disbursing and transfer agent; fees of directors
who are not affiliated with the Adviser; insurance premiums for fidelity bond
and other coverage of the Fund's operations; and such non-recurring expenses as
may arise including actions, suits or proceedings affecting the Fund and the
legal obligation the Fund may have to indemnify its officers and directors with
respect thereto. See "Underwriting and Distribution Expenses" and "Other
Information -- Accounting Services" for a description of certain other Fund
expenses.
B-13
<PAGE>
The Agreement was approved on November 11, 1987 by a vote of the
shareholders of Farm Bureau Growth Fund, Inc.(1) and on December 1, 1987 by
Farm Bureau Life Insurance Company as the then sole shareholder of each of the
other seven Portfolios of the Fund, and was most recently approved for
continuance on August 17, 1995, by the Board of Directors, including a vote of
a majority of the Directors who are not "interested persons" of either party to
the Agreement. Unless earlier terminated as described below, the Agreement
will remain in effect until November 30, 1996. Thereafter, the Agreement will
continue in effect, with respect to a Portfolio, from year to year so long as
its continuation is approved at least annually by (a) the vote of a majority of
those Directors who are not parties to the Agreement or "interested persons" of
either party to the Agreement cast in person at a meeting called for the
purpose of voting on such approval, and (b) either (i) the vote of a majority
of the Directors or (ii) the vote of a majority of the outstanding shares of
such Portfolio.
The Agreement will be deemed to have been approved (or amended) by the
shareholders of any Portfolio if a majority of the outstanding shares of that
Portfolio vote for approval (or amendment) of the Agreement, notwithstanding
(a) that the Agreement has not been approved (or amended) by a majority of the
outstanding shares of any other Portfolio, and (b) that the Agreement has not
been approved (or amended) by a vote of a majority of the outstanding shares of
the Fund. The Agreement may be terminated without penalty at any time upon 60
days' notice by either party, and will terminate automatically upon assignment.
The Agreement provides that the Adviser shall not be liable for any error
of judgment or mistake of law or for any loss suffered by the Fund in
connection with matters to which the Agreement relates, except a loss resulting
from willful misfeasance, bad faith or gross negligence on the part of the
Adviser in the performance of its duties, or from reckless disregard by the
Adviser of its obligations and duties under the Agreement.
Officers and employees of the Adviser from time to time may have
transactions with various banks, including the Fund's custodian bank. It is
the Adviser's opinion that the terms and conditions of such transactions will
not be influenced by existing or potential custodial or other Fund
relationships.
- ------------------------
(1) The Fund, which was incorporated in Maryland on August 14, 1970, was
known as Farm Bureau Growth Fund, Inc. prior to the effectiveness of Articles
of Amendment to its charter on December 1, 1987 which, among other things,
changed its name to FBL Series Fund, Inc. and established eight Portfolios of
the Fund and designated the then current assets, liabilities and shareholders
of Farm Bureau Growth Fund, Inc. as the assets, liabilities and shareholders of
the Growth Common Stock Portfolio of FBL Series Fund, Inc. The meaning of the
term "Growth Common Stock Portfolio" as used herein includes, where
appropriate, Farm Bureau Growth Fund, Inc. prior to December 1,
1987.
B-14
<PAGE>
The investment advisory and management fee expense for the fiscal years
ended July 31, 1995, 1994 and 1993 was $331,615, $294,555 and $217,543,
respectively, for the Growth Common Stock Portfolio; $31,381, $30,712 and
$31,638, respectively, for the High Grade Bond Portfolio; $35,015, $33,735 and
$28,620, respectively, for the High Yield Bond Portfolio; $118,526, $85,361 and
$30,189, respectively, for the Managed Portfolio; $10,035, $10,596 and $10,643,
respectively, for the Money Market Portfolio; and $19,647, $14,982 and
$12,007, respectively, for the Blue Chip Portfolio.
PORTFOLIO TRANSACTIONS AND BROKERAGE COMMISSIONS
With respect to transactions in portfolio securities, whether through a
broker as agent or with a dealer as principal, the Adviser endeavors to obtain
for the Fund the most favorable prices and efficient execution of orders.
Subject to this primary consideration, the Adviser may place a Portfolio's
transactions with firms that furnish research, statistical and other services.
In particular, the Adviser may direct brokerage transactions to a specific
broker in return for certain data and research-oriented software. Certain
affiliates of the Adviser also place portfolio transactions with these
brokerage firms, and such affiliates share the benefits of the research and
other services obtained from these brokers.
Brokerage research services, as provided in Section 28(e) of the
Securities Exchange Act of 1934, include: advice as to the value of
securities, the advisability of investing in, purchasing or selling securities,
and the availability of securities or purchasers or sellers of securities;
furnishing analyses and reports concerning issues, industries, securities,
economic factors and trends; portfolio strategy and performance of accounts;
and the execution of securities transactions and performance of functions
incidental thereto (such as clearance and settlement).
The Fund paid brokerage commissions during the fiscal years ended July 31,
1995, 1994 and 1993 of $199,427, $156,305 and $95,696, respectively. The
Adviser regards information that is customarily available only in return for
brokerage as among the many elements to be considered in arriving at investment
decisions. No specific value can be determined for most such information and
services and they are deemed supplemental to the Adviser's own efforts in the
performance of its duties under the investment advisory agreement. Neither the
Adviser nor any of its affiliates will receive any brokerage business arising
out of the portfolio transactions of the Fund.
If, in the judgment of the Adviser, the Fund or any Portfolio will be
benefited by such supplemental research services, the Fund or such Portfolio is
authorized to pay greater
B-15
<PAGE>
spreads or commissions than another broker or dealer may charge for the same
transaction. Accordingly, while the Adviser generally seeks reasonably
competitive spreads or commissions, the Portfolios will not necessarily be
paying the lowest spread or commission available in every case. The expenses
of the Adviser will not necessarily be reduced as a result of the receipt of
such supplemental information.
The Portfolios may deal in some instances in securities that are not
listed on a national securities exchange but rather are traded in the
over-the-counter market. The Portfolios may also purchase listed securities
through the "third market." Where transactions are executed in the
over-the-counter market or third market, the Adviser will seek to deal with
primary market makers but, when necessary, will utilize the services of
brokers. In all such cases, the Adviser will attempt to negotiate the best
price and execution. Money market instruments are generally traded directly
with the issuer. On occasion, other securities may be purchased directly from
the issuer. The cost of a Portfolio's securities transactions will consist
primarily of brokerage commissions or dealer or underwriter spreads.
Certain investments may be appropriate for certain of the Portfolios and
for other clients advised by the Adviser. Investment decisions for the
Portfolios and such other clients are made with a view to achieving their
respective investment objectives and after consideration of factors such as
their current holdings, availability of cash for investment and the size of
their investments in general. Frequently, a particular security may be bought
or sold for only one client, or in different amounts and at different times for
more than one but less than all clients. Likewise, a particular security may
be bought for one or more clients when one or more other clients are selling
the security. In addition, purchases or sales of the same security may be made
for two or more Portfolios or other clients at the same time. In such event,
such transactions will be allocated among the Portfolios or other clients in a
manner believed by the Adviser to be equitable to each. In some cases, this
procedure could have an adverse effect on the price or amount of the securities
purchased or sold by a Portfolio. It is the opinion of the Board of Directors
that the benefits available because of the Adviser's organization outweigh any
disadvantages that may arise from exposure to simultaneous transactions.
Purchase and sale orders for a Portfolio may be combined with those of other
Portfolios or other clients of the Adviser in the interest of the most
favorable net results to the Portfolio.
UNDERWRITING AND DISTRIBUTION EXPENSES
FBL Investment Advisory Services, Inc. (the "Distributor") also serves as
principal underwriter for the Fund under an Underwriting Agreement dated
December 31, 1983, and as distributor of the Fund's shares under a Distribution
Plan and Agreement dated December 1, 1987, as amended November 25, 1991
("Distribution Agreement"). See "General Information--Distributor" in the
Prospectus. The Distributor bears all its expenses of providing services
pursuant to the Distribution Agreement, including the payment of any
commissions, the preparation and distribution of advertising or sales
literature, and bears
B-16
<PAGE>
the cost of printing and mailing prospectuses to persons other than
shareholders. The Fund bears the cost of qualifying and maintaining the
qualification of its shares for sale under the securities laws of the various
states and the expense of registering its shares with the Securities and
Exchange Commission.
The Distribution Agreement continues in effect from year to year so long
as such continuance is approved at least annually by a vote of the Board of
Directors of the Fund, including the Directors who are not "interested persons"
of the Fund and who have no direct or indirect financial interest in the
agreement. The Distribution Agreement automatically terminates in the event of
its assignment and may be terminated at any time without penalty by the Fund or
by the Distributor upon six months' notice. Termination by the Fund may be by
vote of a majority of the Board of Directors, or a majority of the Directors
who are not "interested persons" of the Fund and who have no direct or indirect
financial interest in the Distribution Agreement, or a "majority of the
outstanding voting securities" of the Fund as defined under the Investment
Company Act of 1940. The Distribution Agreement may not be amended to increase
the fee to be paid by the Fund without approval by a majority of the
outstanding voting securities of the Fund and all material amendments must in
any event be approved by the Board of Directors in the manner described above
with respect to the continuation of the Agreement. Shareholders vote in the
aggregate and not by Portfolio with respect to the Distribution Agreement.
Pursuant to an action by the Board of Directors on August 15, 1991, the
Board approved an amendment to the Distribution Agreement which provided for a
reduction in the distribution services fee and approved an Administrative
Services Agreement between the Fund and the Distributor which provides for an
administrative services fee to be paid to the Distributor. Effective November
25, 1991, the distribution services fee paid by the Fund to the Distributor was
lowered from .75% to .50% of average daily net assets of the Fund and an
administrative services fee of .25% of average daily net assets of the Fund
will be paid by the Fund to the Distributor.
The Fund paid annual distribution fees to the Distributor during the
fiscal years ended July 31, 1995, 1994 and 1993 of $553,282, $477,956 and
$345,586, respectively. During the fiscal year ended July 31, 1995, of the
aggregate amount of distribution fees paid to the Distributor, $165,967 was
paid to FBL Marketing Services, Inc., an affiliate of the Distributor, $24 was
paid to other dealers and the balance of $387,291 was retained by the
Distributor. During the fiscal year ended July 31, 1995, the Distributor
incurred expenses in the approximate amounts noted: $394,111 for commissions
paid to Dealers for Fund sales, $171,343 for management services, $20,513 for
rent, $17,424 for report costs, $9,839 for telephone, $5,763 for postage,
$3,014 for printing and office supplies, and $2,939 for furniture and equipment.
B-17
<PAGE>
During the fiscal years ended July 31, 1995, 1994 and 1993 the Distributor
received $135,141, $49,718 and $75,251, respectively, in contingent deferred
sales charges.
The Distributor also acts as principal underwriter and sole distributor of
the shares of FBL Money Market Fund, Inc. and FBL Variable Insurance Series
Fund.
PURCHASES AND REDEMPTIONS
The following supplements the discussion in the Prospectus under the
headings "How to Buy Shares" and "How to Redeem Shares."
Shares of each Portfolio are sold at their respective net asset value next
determined after an order for purchase and payment are received in proper form.
Shares of each Portfolio are redeemed at their respective net asset value
next determined after a request for redemption is received in proper form. The
Fund may suspend the right of redemption or postpone the date of payment, with
respect to the shares of a Portfolio, during any period when (a) trading on the
New York Stock Exchange is restricted as determined by the Securities and
Exchange Commission or such exchange is closed for trading (other than
customary weekend and holiday closing); (b) an emergency exists, as determined
by the Securities and Exchange Commission, as a result of which disposal of
such Portfolio's securities, or determination of the net asset value of such
Portfolio, is not reasonably practicable; or (c) the Securities and Exchange
Commission by order permits such suspension for the protection of Shareholders.
In such event, redemption will be effected at the net asset value next
determined after the suspension has been terminated unless the Shareholder has
withdrawn the redemption request in writing and the request has been received
by FBL Investment Advisory Services, Inc., 5400 University Avenue, West Des
Moines, Iowa 50266, prior to the day of such determination of net asset value.
NET ASSET VALUE
The following supplements the discussion in the Prospectus under the
heading "Net Asset Value Information."
MONEY MARKET PORTFOLIO
The net asset value per share of the Money Market Portfolio is computed by
dividing the total value of the Portfolio's securities and other assets, less
liabilities (including dividends payable), by the number of shares outstanding.
The assets are determined by valuing the portfolio securities at amortized
cost, pursuant to Rule 2a-7 under the Investment Company Act. The amortized
cost method of valuation involves valuing a security at cost at the time of
purchase and thereafter assuming a constant amortization to
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<PAGE>
maturity of any discount or premium, regardless of the impact of fluctuating
interest rates on the market value of the instrument.
The purpose of the amortized cost method of valuation is to attempt to
maintain a constant net asset value per share of $1.00. While this method
provides certainty in valuation, it may result in periods during which value,
as determined by amortized cost, is higher or lower than the price the
Portfolio would receive if it sold its portfolio securities. Under the
direction of the Board of Directors, certain procedures have been adopted to
monitor and stabilize the price per share. Calculations are made to compare
the value of the portfolio securities, valued at amortized cost, with market
values. Market valuations are obtained by using actual quotations provided by
market makers, estimates of market value, or values obtained from yield data
relating to classes of money market instruments published by reputable sources
at the mean between the bid and asked prices for those instruments. If a
deviation of 1/2 of 1% or more between the Portfolio's $1.00 per share net
asset value and the net asset value calculated by reference to market
valuations were to occur, or if there were any other deviations which the Board
of Directors believes would result in dilution or other unfair results material
to Shareholders, the Board of Directors would consider what action, if any,
should be initiated.
The market value of debt securities usually reflects yields generally
available on securities of similar quality. When yields decline, the market
value of a Portfolio holding higher yielding securities can be expected to
increase; when yields increase, the market value of a Portfolio invested at
lower yields can be expected to decline. In addition, if the Portfolio has net
redemptions at a time when interest rates have increased, the Portfolio may be
forced to sell portfolio securities prior to maturity at a price below the
Portfolio's carrying value. Also, because the Portfolio generally will be
valued at amortized cost rather than market value, any yield quoted may be
different from the yield that would result if the entire Portfolio were valued
at market value, since the amortized cost method does not take market
fluctuations into consideration.
OTHER PORTFOLIOS
The net asset value per share of each Portfolio other than the Money
Market Portfolio is computed by dividing the total value of the Portfolio's
securities and other assets, less liabilities, by the number of Portfolio
shares then outstanding. Securities traded on a national exchange are valued at
the last sale price as of the close of business on the day the securities are
being valued, or, lacking any sales, at the mean between closing bid and asked
prices. Securities, other than money market instruments, traded in the
over-the-counter market are valued at the mean between the bid and asked prices
or at yield equivalent as obtained from one or more dealers that make markets
in the securities. Securities traded both in the over-the-counter market and
on a national exchange are valued according to the broadest and most
representative market, and it is expected that for debt securities this
ordinarily will be the over-the-counter market. Securities and assets for
which market quotations are not readily available are valued at fair value as
determined in good
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<PAGE>
faith by or under the direction of the Board of Directors. Money market
instruments are valued at market value, except that instruments maturing in 60
days or less are valued using the amortized cost method of valuation.
The proceeds received by each Portfolio for each issue or sale of its
shares, and all income, earnings, profits and proceeds thereof, subject only to
the rights of creditors, are allocated specifically to such Portfolio, and
constitute the underlying assets of such Portfolio. The underlying assets of
each Portfolio are segregated on the Fund's books of account and are charged
with the liabilities of such Portfolio and with a share of the general
liabilities of the Fund. Expenses with respect to any two or more Portfolios
are allocated in proportion to the net asset values of the respective
Portfolios except where allocations of direct expenses can otherwise be fairly
made.
TAXES
For federal income tax purposes, each Portfolio is treated as a separate
entity. Each Portfolio intends to continue to qualify to be taxed as a
"regulated investment company" under Subchapter M of the Internal Revenue Code
of 1986, as amended ("Code"). If a Portfolio qualifies as a regulated
investment company and complies with the provisions of the Code, such Portfolio
will be relieved from federal income tax on the part of its net ordinary income
and net realized capital gain that it distributes to its shareholders. To
qualify for treatment as a "regulated investment company," a Portfolio must,
among other things, derive in each taxable year at least 90% of its gross
income from dividends, interest, payments with respect to securities loans, and
gains from the sale or other disposition of stock or securities or foreign
currencies (subject to the authority of the Secretary of the Treasury to
exclude foreign currency gains that are not ancillary to the Portfolio's
principal business of investing in stock or securities or options and futures
with respect to such stock or securities), or other income (including but not
limited to gains from options, futures, or forward contracts) derived with
respect to its business of investing in such stocks, securities, or currencies.
In addition, to qualify for treatment as a "regulated investment company," a
Portfolio must derive less than 30% of its gross income in each taxable year
from gains (without deduction for losses) from the sale or other disposition of
securities held for less than three months. This rule may limit a Portfolio's
ability to engage in futures and options transactions.
A 4% excise tax is imposed on the excess of the required distribution for
a calendar year over the distributed amount for such calendar year. The
required distribution is generally the sum of 98% of a Portfolio's net ordinary
income for the calendar year plus 98% of its capital gain net income for the
one year period ending October 31. The Fund intends to declare or distribute
dividends from each Portfolio during the calendar year of an amount sufficient
to prevent imposition of the 4% excise tax.
A portion of the ordinary income distributions from a Portfolio may be
eligible for the "dividends received deduction" available to corporate
shareholders. The aggregate
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<PAGE>
amount eligible for the "dividends received deduction" may not exceed the
aggregate qualifying dividends received by such Portfolio for the fiscal year.
The portion of the income dividends paid during the fiscal year ended July 31,
1995 that qualified for the "dividends received deduction" available to
corporate shareholders was as follows: 71% of the income dividend paid December
29, 1994 by the Growth Common Stock Portfolio; 61%, 65%, 64% and 61% of the
income dividends paid November 7, 1994, December 29, 1994, May 5, 1995, and
August 7, 1995, respectively, by the Managed Portfolio; and 87% of the income
dividend paid December 29, 1994 by the Blue Chip Portfolio.
If a shareholder exchanges shares of a Portfolio for shares of another
Portfolio of the Fund, the shareholder will recognize a gain or loss for
federal income tax purposes measured by the difference between the value of the
shares acquired and the basis of the shares exchanged. Such gain or loss will
generally be a capital gain or loss and will be a long-term gain or loss if the
shareholder has held his or her shares for more than one year. If a shareholder
realizes a loss on the redemption of shares of a Portfolio and invests in
shares of the same Portfolio within 30 days before or after the redemption, the
transactions may be subject to the wash sale rules resulting in a postponement
of the recognition of such loss for federal income tax purposes. Any loss
recognized on the disposition of shares of a Portfolio held six months or less
will be treated as long-term capital loss to the extent that the shareholder
has received any long-term capital gain dividends on such shares.
The discussion under "Dividends and Taxes" in the Prospectus, in
conjunction with the foregoing, is a general summary of applicable provisions
of the Code and Treasury Regulations now in effect as currently interpreted by
the courts and the Internal Revenue Service. The Code and these Regulations,
as well as the current interpretations thereof, may be changed at any time by
legislative, judicial or administrative action.
DIVIDENDS AND DISTRIBUTIONS
Reference is made to the discussion in the Prospectus under the heading
"Dividends and Taxes" for a more complete discussion of dividends and
distributions.
MONEY MARKET PORTFOLIO
The Portfolio declares dividends of all its daily net investment income on
each day the Portfolio's net asset value per share is determined. Dividends
are payable monthly and are automatically reinvested and distributed monthly on
the last business day of each month in full and fractional shares of the
Portfolio at the then-current net asset value unless a Shareholder requests
payment in cash. Each Shareholder will receive a monthly summary of the
Portfolio's activity, including information on dividends paid or reinvested.
Net investment income, for dividend purposes, consists of (1) accrued
interest income, plus or minus (2) amortized purchase discount or premium, plus
or minus (3) all
B-21
<PAGE>
short-term realized gains or losses and unrealized appreciation or depreciation
on portfolio assets, minus (4) all accrued expenses of the Portfolio. Expenses
of the Portfolio are accrued daily. So long as the portfolio securities are
valued at amortized cost, there will be no unrealized appreciation or
depreciation on such securities.
PERFORMANCE INFORMATION
As described in the Prospectus, a Portfolio's historical performance or
return may be shown in the form of "average annual total return" and "total
return" in the case of all Portfolios except the Money Market Portfolio;
"yield" in the case of the High Grade Bond and High Yield Bond Portfolios; and
"yield" and "effective yield" in the case of the Money Market Portfolio. These
various measures of performance are described below.
Average annual total return and total return measure both the net income
generated by, and the effect of any realized and unrealized appreciation or
depreciation of, the underlying investments of a Portfolio over the specified
period. Yield is a measure of the net investment income per share earned over
a specific one-month or 30-day period (seven-day period for the Money Market
Portfolio) expressed as a percentage of the net asset value.
A Portfolio's standardized average annual total return quotation is
computed in accordance with a method prescribed by rules of the Securities and
Exchange Commission. The standardized average annual total return for a
Portfolio for a specific period is determined by assuming a hypothetical $1,000
investment in the Fund's shares on the first day of the period at the then
effective net asset value per share ("initial investment"), and computing the
ending redeemable value ("redeemable value") of that investment at the end of
the period. The redeemable value includes the effect of the applicable
contingent deferred sales charge that may be imposed at the end of the period.
The redeemable value is then divided by the initial investment, and this
quotient is taken to the Nth root (N representing the number of years in the
period) and 1 is subtracted from the result, which is then expressed as a
percentage. The calculation assumes that all income and capital gains
dividends by the Portfolio have been reinvested at net asset value on the
reinvestment dates during the period. Standardized average annual total return
figures for various periods are set forth in the tables below. In addition,
included in the table below are figures for the average annual total return
without the deduction of the contingent deferred sales charge. Thus, the same
formula as set forth above is used except that the redeemable value has not
been reduced by the applicable sales charge for that period.
Calculation of a Portfolio's total return is not subject to a standardized
formula. Total return performance for a specific period is calculated by first
taking an investment (assumed to be $1,000) in the Fund's shares on the first
day of the period at the then effective net asset value per share ("initial
investment") and computing the ending value ("ending value") of that investment
at the end of the period. The ending value may or may not include the effect
of the applicable contingent deferred sales charge that may be
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<PAGE>
imposed at the end of the period. The total return percentage is then
determined by subtracting the initial investment from the value and dividing
the difference by the initial investment and expressing the result as a
percentage. This calculation assumes that all income and capital gains
dividends by the Portfolio have been reinvested at net asset value on the
reinvestment dates during the period. Total return may also be shown as the
increased dollar value of the hypothetical investment over the period. Total
return figures for various periods are set forth in the tables below.
The yield for a Portfolio, other than the Money Market Portfolio, is
computed in accordance with the formula set forth below, which is a
standardized method prescribed by rules of the Securities and Exchange
Commission. The High Grade Bond Portfolio's yield based upon the 30-day period
ended July 31, 1995 was 6.37% and the High Yield Bond Portfolio's was 8.12%. A
Portfolio's yield is computed by dividing the net investment income per share
earned during the specific one-month or 30-day period by the offering price per
share on the last day of the period, according to the following formula:
[(a-b +1)(6) -1]
Yield = 2 ---
cd
a = dividends and interest earned during the period.
b = expenses accrued for the period (net of reimbursements).
c = the average daily number of shares outstanding during the
period that were entitled to receive dividends.
d = the offering price per share on the last day of the period.
In computing yield, the Fund follows certain standardized accounting
practices specified by Securities and Exchange Commission rules. These
practices are not necessarily consistent with those that the Fund uses to
prepare its annual and interim financial statements in accordance with
generally accepted accounting principles.
The Money Market Portfolio's yield is computed in accordance with a
standard method prescribed by rules of the Securities and Exchange Commission.
Under that method, the yield quotation is based on a seven-day period and is
computed as follows. The net investment income per share (accrued interest on
portfolio securities, plus or minus amortized premium or discount, less accrued
expenses) is divided by the price per share (expected to remain constant at
$1.00) at the beginning of the period ("base period return") and the result is
divided by seven and multiplied by 365. The resulting yield figure is carried
to the nearest one hundredth of one percent. Realized capital gains or losses
and unrealized appreciation or depreciation of investments are not included in
the calculation. The Money Market Portfolio's yield for the seven day period
ended July 31, 1995 was 3.86%.
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<PAGE>
The Money Market Portfolio's effective yield is determined by taking the
base period return (computed as described above) and calculating the effect of
assumed compounding. The formula for the effective yield is
[(base period return +1) raised to the 365/7] -1. The Money Market Portfolio's
effective yield for the seven day period ended July 31, 1995 was 3.93%.
A Portfolio's performance quotations are based upon historical results and
are not necessarily representative of future performance. The Fund's shares
are sold at net asset value, and return and net asset value will fluctuate
except that the Money Market Portfolio seeks to maintain a $1.00 net asset
value per share. Factors affecting a Portfolio's performance include general
market conditions, operating expenses and investment management. Shares of a
Portfolio are redeemable at net asset value, which may be more or less than
original cost. Redemptions within the first six years after purchase may be
subject to a contingent deferred sales charge that ranges from 5% the first
year to 0% after six years. Yield and effective yield do not include the
effect of the contingent deferred sales charge. The standardized average
annual total return does include the effect of the contingent deferred sales
charge. Average annual total return does not, and total return may or may not
include the effect of the contingent deferred sales charge that may be imposed
at the end of the designated period. Performance figures not including the
effect of the contingent deferred sales charge would be reduced if the charge
were included. No adjustments are made for taxes payable on dividends.
The figures below show performance information for various periods ended
July 31, 1995. Because all of the Portfolios, with the exception of the Growth
Common Stock Portfolio, have been in operation only since December 1, 1987, the
performance information reflects only an ninety-two month period.
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<PAGE>
AVERAGE ANNUAL TOTAL RETURN TABLE
FOR PERIOD ENDED JULY 31, 1995
<TABLE>
<CAPTION>
STANDARDIZED AVERAGE ANNUAL
AVERAGE ANNUAL TOTAL RETURN
PORTFOLIO TOTAL RETURN (1) UNADJUSTED (2)
- --------- ---------------- --------------
<S> <C> <C>
Growth Common Stock
10 years 9.25% 9.25%
5 years 11.64% 11.90%
1 year 4.37% 9.36%
High Grade Bond
Life of Portfolio (3) 8.02% 8.02%
5 years 8.06% 8.35%
1 year 3.23% 8.23%
High Yield Bond
Life of Portfolio (3) 9.65% 9.65%
5 years 10.38% 10.65%
1 year 4.71% 9.71%
Managed
</TABLE>
B-25
<PAGE>
<TABLE>
<S> <C> <C>
Life of Portfolio (3) 8.99% 8.99%
5 years 10.18% 10.45%
1 year 4.40% 9.40%
Blue Chip
Life of Portfolio (3) 13.84% 13.84%
5 years 10.55% 10.81%
1 year 17.77% 33.77%
</TABLE>
(1) The adjusted value represents the percentage change in the ending
value after the deduction of the contingent deferred sales charge.
(2) The unadjusted value represents the percentage change in the ending value
without the deduction of the contingent deferred sales charge.
(3) The High Grade Bond, High Yield Bond, Managed and Blue Chip Portfolios
commenced operations on December 1, 1987.
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<PAGE>
TOTAL RETURN TABLE
FOR PERIOD ENDED JULY 31, 1995
<TABLE>
<CAPTION>
STANDARDIZED TOTAL RETURN
PORTFOLIO TOTAL RETURN (1) UNADJUSTED (2)
- --------- ---------------- --------------
<S> <C> <C>
Growth Common Stock
10 years 142.15% 142.15%
5 years 73.44% 75.44%
1 year 4.37% 9.36%
High Grade Bond
Life of Portfolio (3) 80.66% 80.66%
5 years 47.34% 49.34%
1 year 3.23% 8.23%
High Yield Bond
Life of Portfolio (3) 102.63% 102.63%
5 years 63.85% 65.85%
1 year 4.71% 9.71%
Managed
</TABLE>
B-27
<PAGE>
<TABLE>
<S> <C> <C>
Life of Portfolio (3) 93.52% 93.52%
5 years 62.37% 64.37%
1 year 4.40% 9.40%
Blue Chip
Life of Portfolio (3) 170.23% 170.23%
5 years 65.09% 67.09%
1 year 17.77% 22.77%
</TABLE>
(1) The adjusted value represents the percentage change in the ending value
after the deduction of the contingent deferred sales charge.
(2) The unadjusted value represents the percentage change in the ending value
without the deduction of the contingent deferred sales charge.
(3) The High Grade Bond, High Yield Bond, Managed and Blue Chip Portfolios
commenced operations on December 1, 1987.
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<PAGE>
SHAREHOLDER VOTING RIGHTS
All shares of the Fund have equal voting rights and may be voted in the
election of Directors and on other matters submitted to the vote of
shareholders. As permitted by Maryland law and the Fund's corporate charter,
there will normally be no meetings of shareholders for the purpose of electing
directors unless and until such time as fewer than a majority of the directors
holding office have been elected by shareholders. At that time, the directors
then in office will call a shareholders' meeting for the election of directors.
The directors shall normally continue to hold office and may appoint successor
directors, provided that immediately after the appointment of any successor
director, at least two-thirds of the directors have been elected by the
shareholders. The shares do not have cumulative voting rights, which means
that the holders of a majority of the shares voting for the election of
directors can elect all the directors. No amendment may be made to the Fund's
corporate charter without the affirmative vote of a majority of the outstanding
shares of the Fund.
In matters which only affect a particular Portfolio, the matter shall have
been effectively acted upon by a majority vote of that Portfolio even though:
(i) the matter has not been approved by a majority vote of any other Portfolio;
or (ii) the matter has not been approved by a majority vote of the Fund.
RETIREMENT PLANS
The Fund offers a variety of retirement investment programs whereby
contributions are invested in shares of the Fund, and any dividends (and
capital gain distributions, if any) are reinvested in additional full and
fractional shares of the Fund. The Fund has waived the minimum investment
requirement for an account opened under any of these programs and subsequent
investments can be in any amount (subject to plan limitations).
SELF-EMPLOYED INDIVIDUAL RETIREMENT PLANS
The Fund has available for self-employed individuals a form of Paired
Defined Contribution Plan, Trust Agreement and related Custodial Agreement
(Keogh Plan) under IRS approved prototypes. A self-employed individual has
complete discretion to make his or her own fee arrangements with the custodial
bank of his or her selection, instead of using the custodian named herein on
the terms described under "General" below. The maximum annual tax deductible
amount for contributions is generally the lesser of 25% of earned income or
$30,000. For further details, including the right of appointing a successor
custodian, reference is made to the Plan, Trust Agreement and Custodial
Agreement available from the Fund.
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<PAGE>
INDIVIDUAL RETIREMENT ACCOUNTS
The Fund has available Individual Retirement Accounts (IRAs) under IRS
approved prototypes. A full $2,000 deduction for IRA contributions is
available only to (1) taxpayers who are not active participants in an
employer-sponsored retirement plan and (2) taxpayers who are active
participants in an employer-sponsored plan but have adjusted gross income below
a specified level. For these purposes, a taxpayer generally will be deemed to
be an active participant in an employer-sponsored retirement plan if for any
part of the taxable year either the employee or his or her spouse is an active
participant under a qualified pension plan, a qualified profit sharing or money
purchase plan, a 403(b) annuity program, a Simplified Employee Pension plan, or
a government plan (other than a plan maintained for state and local employees
under section 457 of the Internal Revenue Code). Married taxpayers filing a
joint return who are active participants in an employer-sponsored plan may make
a tax deductible IRA contribution of up to $2,000 ($2,250 spousal) if their
adjusted gross income is $40,000 or less. Between $40,000 and $50,000 of
adjusted gross income, the IRA deduction is phased-out. For single taxpayers
who are active participants in an employer-sponsored plan, the $2,000
deductible IRA contribution is similarly phased-out between $25,000 and $35,000
of adjusted gross income. To the extent the IRA deduction is reduced or
eliminated by the phase-out rule, an individual may elect to make nondeductible
IRA contributions that, when combined with the deductible contributions, may
not exceed $2,000 ($2,250 for a spousal IRA). The income on the IRA
contribution will not be taxed until withdrawn.
For a period of seven days after establishment of an IRA Account and
receipt of a disclosure statement the investor may revoke his or her
application and the full payment made to the Account will be returned. Form
5305-A, available from the Distributor, FBL Investment Advisory Services, Inc.,
5400 University Avenue, West Des Moines, Iowa 50266, is to be used to establish
an Account. The form should be consulted for detailed information, including
circumstances under which redemption requests must be accompanied by a
declaration of intent as to the disposition of the amount distributed.
TAX-SHELTERED 403(B) PLANS
The Fund has available Tax-Deferred Plans under section 403(b) of the
Internal Revenue Code. Certain tax-exempt organizations and public schools may
establish such plans under which they will be able to make contributions which
are not currently taxable to their employees. For further details, contact the
Fund.
CORPORATE PENSION AND PROFIT SHARING PLANS
Accounts for corporate pension and profit sharing plans (IRS approved
prototypes as well as other plans) are available. For further details, contact
the Fund.
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<PAGE>
PUBLIC EMPLOYER DEFERRED COMPENSATION PLANS
Employees of state, county and municipal agencies may make investments
with pre-tax dollars through eligible deferred compensation plans authorized
under section 457 of the Internal Revenue Code. Contributions and earnings are
tax-sheltered until the funds are actually paid to the employee. Plans and
Administrative Services are available to states, counties and municipalities to
provide a tax-sheltered program for employees. For further details, contact the
Fund.
GENERAL
Investors Fiduciary Trust Company of Kansas City, Missouri, serves as
custodian and provides the services required for Keogh Plans, Individual
Retirement Plans, section 403(b) Plans and corporate pension and profit sharing
plans. An annual maintenance fee, currently $10, will be collected annually by
redemption of shares or fractions thereof from each participant's account. FBL
Investment Advisory Services, Inc. performs plan services for a portion of the
fee and during the fiscal year ended July 31, 1995 received $79,703 for its
services. Unusual administrative responsibilities will be subject to such
additional charges as will reasonably compensate the custodian for the service
involved.
Since a retirement investment program involves a commitment covering
future years, it is important that the investor consider his or her needs and
whether the investment objective of the Fund as described in the Prospectus is
likely to fulfill them. Premature termination or curtailment of the plan may
result in adverse tax consequences. Consultation with an attorney or other tax
adviser regarding these plans is recommended. For further information
regarding these plans, contact the Fund.
OTHER INFORMATION
PRINCIPAL HOLDERS OF SECURITIES
As of October 31, 1995, Farm Bureau Life Insurance Company (a wholly-owned
subsidiary of Farm Bureau Multi-State Services, Inc., an Iowa corporation),
owned more than 25% of the Money Market Portfolio. As of October 31, 1995,
Farm Bureau Life Insurance Company owned more than 5% of the outstanding voting
securities of the High Yield Bond Portfolio. Farm Bureau Life Insurance
Company indirectly owns FBL Investment Advisory Services, Inc., the Fund's
investment adviser, principal underwriter and distributor.
CUSTODIAN
Bankers Trust Company, 16 Wall Street, New York, New York 10005, currently
serves as custodian of all cash and securities owned by the Fund. The
custodian performs no managerial or policy-making functions for the Fund.
B-31
<PAGE>
INDEPENDENT AUDITORS
The Fund's independent auditors are Ernst & Young LLP, 801 Grand Avenue,
Suite 3400, Des Moines, Iowa 50309. The independent auditors audit and report
on the Fund's annual financial statements, review certain regulatory reports
and perform other professional accounting, auditing, tax and advisory services
when engaged to do so by the Fund.
ACCOUNTING SERVICES
The Fund has entered into an accounting services agreement with FBL
Investment Advisory Services, Inc. ("FBL") pursuant to which FBL performs
accounting services for the Fund. In addition, the agreement provides that FBL
shall calculate the Fund's net asset value in accordance with the Fund's
current Prospectus and to prepare, for Fund approval and use, various tax
returns and other reports. For such services, each Portfolio pays FBL an
annual fee, payable monthly, of .05% of the Portfolio's average daily net
assets, with the annual fee payable by a Portfolio not to exceed $30,000.
During the fiscal year ended July 31, 1995, the aggregate amount of such fees
paid to FBL was $52,166.
SHAREHOLDER SERVICE, DIVIDEND DISBURSING AND TRANSFER AGENT
FBL Investment Advisory Services, Inc. serves as the Fund's shareholder
service, transfer and dividend disbursing agent. FBL in turn has contracted
with DST Systems, Inc. ("DST"), an unrelated party, to perform certain services
incident to the maintenance of shareholder accounts. The Fund pays FBL an
annual fee of $7.00 to $9.00 per account and miscellaneous activity fees plus
out of pocket expenses, a portion of which is paid to DST. During the fiscal
year ended July 31, 1995, the aggregate amount of such fees paid to FBL was
$301,139, of which $183,637 was paid to DST.
LEGAL MATTERS
The firm of Vedder, Price, Kaufman & Kammholz, Chicago, Illinois, is
counsel for the Fund.
FINANCIAL STATEMENTS
The audited financial statements of the Fund, including the notes thereto,
contained in the Annual Report to Shareholders of FBL Series Fund, Inc. for the
fiscal year ended July 31, 1995, are incorporated herein by reference. A copy
of such Annual Report to Shareholders may be obtained without charge by
contacting the Fund.
B-32
<PAGE>
--------------------------
Farm Bureau Mutual Funds
<TABLE>
<S> <C>
FBL Series Fund, Inc.
[FBL LOGO]
ANNUAL REPORT
JULY 31, 1995
INVESTMENT MANAGER AND
PRINCIPAL UNDERWRITER
FBL INVESTMENT ADVISORY
SERVICES, INC.
5400 UNIVERSITY AVENUE
WEST DES MOINES, IA 50266
1-800-247-4170 (OUTSIDE IOWA)
1-800-422-3175 (IN IOWA)
225-5586 (DES MOINES)
</TABLE>
<TABLE>
<S> <C> <C>
FARM BUREAU MUTUAL FUNDS This report is not to be distributed
5400 UNIVERSITY AVENUE unless preceded or accompanied by
WEST DES MOINES, IOWA 50266 [FBL FINANCIAL SERVICES LOGO] a prospectus.
737-028(95)
</TABLE>
<PAGE>
PRESIDENT'S LETTER
Dear Shareholder,
Compared to a rather stressful 1994, stock and bond market participants have
had a much better time during 1995. Reversing the trends in place during the
latter half of 1994, this year has witnessed a marked slowdown in economic
activity, leading the Federal Reserve to cut interest rates by one-quarter
point. This rate decrease has fueled a major rally in the bond market, and to no
less extent the stock market. The latter believes that the lower level of
economic growth will allow profits to continue rising with little or no
inflationary pressures. However, classical theory tells us that one of these
markets is not telling the truth: either recession is on the horizon (the bond
case) or economic growth will resume, smartly (the stock case).
That this has been a powerful bull market no one can deny. That all bull
markets come to an end is a concept that is difficult to focus on, particularly
in the midst of so much upward momentum. This strong and relatively
uninterrupted rally has been a catalyst to growing mutual fund sales. According
to NED DAVIS RESEARCH, seventy-eight percent of all money deposited into
domestic equity mutual funds has been during the past four years. This means
that a large portion of money invested has never experienced a significant
market correction. We do not know when this bull market will end, nor when it
does end, how these relatively inexperienced market participants will react.
Perhaps they will remain true to their "long-term investment objectives" and no
disruption will occur. We will remain watchful in this regard.
Our overall value-oriented theme remains in force, seeking to enhance our
RISK-ADJUSTED performance record and to create lasting value for our
shareholders. To accomplish these goals, we attempt to avoid participating fully
in severe market corrections. By focusing on downside risk as well as upside
potential, current conditions have forced us to become very selective,
particularly with respect to equity investments. (The Blue Chip Portfolio is not
managed according to a value-oriented strategy, but is substantially invested in
common stocks at all times, seeking to parallel the performance of the major
market indices such as the S&P 500 and the DJIA.)
Below are activity and strategy summaries for the various portfolios of FBL
Series Fund, Inc.
GROWTH COMMON STOCK: In recent months, virtually all of the market averages
set new all-time highs. The DJIA and S&P 500 are now more than 15% above their
1994 peaks. However, the Merrill Lynch market analysis department ran a computer
tabulation which showed only 36% of the common stocks on the New York Stock
Exchange have exceeded their 1993-1994 price highs. The large capitalization
stocks which dominate the performance of the DJIA and S&P 500 went down less
than the wide array of stocks in the rotational corrective phase of 1994 and,
therefore, it has been easier for those major averages to reach new highs. For
the six-month period ending June 30, 1995, the Dow Jones Industrial Average and
the S&P 500 total return were 20.42% and 20.09%, respectively. Expectations that
the DJIA will continue its steep climb abound everywhere. However, we remain
skeptical of naive extrapolation of market returns.
The Growth Common Stock Portfolio will continue its search for undervalued
stocks that have served it well in the past, looking for equities that have no
inflated expectations built into their prices. At any market level, there are
stocks that are out of favor with investors. The problems that cause low
valuations are often temporary, and the patient, disciplined investor can
capitalize on such opportunities.
2
<PAGE>
We believe that such undervalued situations exist in the following industries:
insurance, oil and gas exploration and production, oil and gas drilling,
banking, specialty chemicals, telecommunications, utilities and real estate.
In addition, the Portfolio maintains a moderate investment in cash and
cash-equivalent securities. Currently, cash is a very unpopular asset class and
is viewed as a passive investment (fiduciaries don't believe you can add value
to a portfolio by holding cash). Of course, we think that is inaccurate. Between
1965 and 1976, cash (as approximated by U.S. Treasury Bills) had a higher return
than large stocks, small stocks, corporate bonds, government bonds and even
intermediate bonds, so there are times when cash is better than anything. The
amount of cash held in the Portfolio will largely depend on the availability of
attractive undervalued securities. As our investments approach full value, sale
proceeds will be invested in cash and cash-equivalents until investment
opportunities present themselves.
HIGH GRADE BOND: U.S. Treasury yields decreased dramatically during the
first six months of 1995. For example, the 2-year, 10-year and 30-year Treasury
issues yielded 7.69%, 7.83% and 7.88%, respectively, at December 31, 1994, but
at June 30, 1995, were 5.79%, 6.20% and 6.62%. Similarly, corporate spreads
remain near historically low levels, suggesting that investors are not being
well compensated for taking on both credit and market risk inherent in corporate
bonds.
This Portfolio continues to hold a significant portion of its assets in high
coupon, callable bonds that offer attractive incremental yields relative to
similar non-callable issues. Due to their call features, these types of
corporate issues tend to go up in price less than non-callable issues when
interest rates drop; and conversely, due to their incremental yield, tend to go
down less than non-callable issues when interest rates rise. Because of this,
Portfolio returns will tend to lag other, more aggressive funds in both up and
down markets. Future cash flows may be directed toward Treasury securities in
the seven-to-twelve year maturity range.
HIGH YIELD BOND: During the first six months of 1995, the high yield bond
market slightly underperformed the high grade corporate market. The reasons for
this underperformance were the naturally shorter duration of high yield bonds
and a general increase in their yield spreads as investors became more concerned
about a rise in actual default rates and the potential for an economic slowdown.
During this period, the yield and spread on the DLJ 100 Active High Yield
Issues Index declined from a 12.22% yield and 442 basis-point spread with the
comparable Treasury issue, to a 10.96% yield and a spread of 488 basis-points.
In general, we view these spread levels as reasonable, and therefore, no major
changes in the Portfolio are contemplated at this time.
MANAGED: The Managed Portfolio has benefited from the recent drop in
interest rates and continues to focus on income from stocks and bonds. Our
objective is to provide an income stream competitive with various savings
vehicles, while at the same time providing growth potential. Many of our
holdings remain deeply undervalued and are beginning to attract the attention of
investors. The Managed Portfolio will continue to seek out high income
securities from both the stock and bond markets, focusing primarily on
convertible issues with yields of 5%-9%.
MONEY MARKET: The moves by the Federal Reserve Board indicate their strong
resolve toward fighting inflation and intention to maintain a restrictive
monetary policy. In response, the Money Market Portfolio, in the first quarter,
extended its maturities to lock-in yields before the decline in the fed funds
rate. As there has not been a significant change in spreads, we continue to
utilize government agency securities and commercial paper for their relative
value.
3
<PAGE>
BLUE CHIP: True to its passive strategy, the performance of the Blue Chip
Portfolio over the past year has reflected that of the large capitalization
market sector which it represents. The Blue Chip Portfolio will, at all times,
remain substantially invested in common stocks of large companies. This
Portfolio is designed for those investors who prefer substantial exposure to
common stocks at all times or who wish to make their own market value judgments.
INSERT SPECIMEN SIGNATURE
MERLIN D. PLAGGE
PRESIDENT
September 11, 1995
4
<PAGE>
MANAGEMENT'S DISCUSSION OF FUND PERFORMANCE
GROWTH COMMON STOCK PORTFOLIO
COMPARISON OF CHANGE IN VALUE OF $10,000 INVESTMENT IN
THE GROWTH COMMON STOCK PORTFOLIO AND S&P 500
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
GROWTH COMMON STOCK PORTFOLIO S&P 500 STOCK COMPOSITE INDEX
<S> <C> <C>
1985 10000 10000
1986 11257 12841
1987 13246 17886
1988 11696 15790
1989 13039 20832
1990 13809 22186
1991 15420 25017
1992 17350 28216
1993 22077 30679
1994 22153 32263
1995 24226 40686
</TABLE>
For the twelve-month period ended July 31, 1995, the total return for the
Growth Common Stock Portfolio was 9.36% compared to the 26.06% total return
produced by the S&P 500 Stock Composite Index. The Portfolio has concentrated
much of its investments in high-income common stocks and convertible securities.
These securities pay a higher degree of income than the market as a whole and
are generally not as volatile as the overall market. Historically, when the
stock market really takes off, we do well, but may lag the averages because our
highly focused style does not include certain industry groups which may be
enjoying a moment of particular popularity. We accept this trade-off as our
total return investments (price appreciation and income) offer a consistent cash
flow to the Portfolio, and ultimately to its shareholders. We are beginning to
see a pay-off in the form of additional price appreciation from the Portfolio's
current exposure to undervalued convertible securities, many of which are found
in the energy sector. We remain committed to the energy sector on a long-term
basis.
5
<PAGE>
HIGH GRADE BOND PORTFOLIO
COMPARISON OF CHANGE IN VALUE OF $10,000 INVESTMENT IN
THE HIGH GRADE BOND PORTFOLIO AND LEHMAN BROTHERS AGGREGATE INDEX
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
HIGH GRADE BOND PORTFOLIO LEHMAN BROTHERS MUTUAL FUND AGGREGATE INDEX
<S> <C> <C>
1987 10000 10000
1988 10297 10585
1989 11396 12194
1990 12097 13054
1991 13342 14451
1992 15171 16589
1993 16401 18278
1994 16692 18292
1995 18066 20141
</TABLE>
For the twelve-month period ended July 31, 1995, the 8.23% total return
produced by the High Grade Bond Portfolio was less than the 10.11% return
produced by the Lehman Brothers Mutual Fund Aggregate Index. The Portfolio
continues to pursue an investment strategy of holding a large position in
high-coupon callable bonds. These bonds offer additional yield for taking on
call risk and allow for a more stable return to the Portfolio. Because these
securities have a call feature, they tend to underperform similar non-callable
issues when interest rates go down, and conversely, outperform similar
non-callable issues when interest rates rise.
6
<PAGE>
HIGH YIELD BOND PORTFOLIO
COMPARISON OF CHANGE IN VALUE OF $10,000 INVESTMENT IN
THE HIGH YIELD BOND PORTFOLIO AND LEHMAN BROTHERS CORPORATE/HIGH YIELD INDEX
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
HIGH YIELD BOND PORTFOLIO LEHMAN BROTHERS MUTUAL FUND CORPROATE/HIGH YIELD INDEX
<S> <C> <C>
1987 10000 10000
1988 10312 10776
1989 11427 12344
1990 12218 13103
1991 13786 14564
1992 16051 17092
1993 18129 19175
1994 18470 19251
1995 20263 21605
</TABLE>
The High Yield Bond Portfolio underperformed the Lehman Brothers Mutual Fund
Corporate/High Yield Index for the twelve-month period ended July 31, 1995
(9.71% total return for the Portfolio versus 12.23% for the Index). This slight
underperformance can largely be attributed to the Portfolio's large position in
high-coupon callable bonds. The Portfolio will continue to maintain its position
of such bonds until current market conditions warrant otherwise.
7
<PAGE>
MANAGED PORTFOLIO
COMPARISON OF CHANGE IN VALUE OF $10,000 INVESTMENT IN
THE MANAGED PORTFOLIO AND S&P 500
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
MANAGED PORTFOLIO S&P 500 STOCK COMPOSITE INDEX
<S> <C> <C>
1987 10000 10000
1988 10318 12070
1989 11007 15917
1990 11773 16946
1991 12603 19111
1992 14467 21550
1993 17798 23466
1994 17689 24672
1995 19352 31101
</TABLE>
The Managed Portfolio is an asset allocation portfolio and will not likely
mirror any particular index (equity or fixed-income) over time. During the
twelve-month period ended July 31, 1995, the Portfolio produced a total return
of 9.40% compared to the 26.06% total return produced by the S&P 500 Stock
Composite Index. The Managed Portfolio emphasizes stocks and bonds producing
current income with the opportunity for modest growth and during the year
maintained the majority of its assets in convertible bonds and convertible
preferred stocks. Our companies in the Portfolio are performing well
operationally and many of the stocks are beginning to be more widely followed by
investors. This should help the Portfolio's return in the long-run. The Managed
Portfolio will always maintain a focus on income-producing securities as part of
its long-term strategy.
8
<PAGE>
BLUE CHIP PORTFOLIO
COMPARISON OF CHANGE IN VALUE OF $10,000 INVESTMENT IN
THE BLUE CHIP PORTFOLIO AND S&P 500
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
BLUE CHIP PORTFOLIO S&P 500 STOCK COMPOSITE INDEX
<S> <C> <C>
1987 10000 10000
1988 11570 12070
1989 14802 15917
1990 16173 16946
1991 17525 19111
1992 19412 21550
1993 20618 23466
1994 22011 24672
1995 27023 31101
</TABLE>
The Blue Chip Portfolio is designed to represent the large capitalization
sector of the domestic equity market and remains substantially invested in
approximately 40 such common stock issues at all times. Accordingly, the
performance of this Portfolio will roughly parallel that of the Dow Jones
Industrial Average and the S&P 500 Stock Composite Index. As is apparent from
the line graph, the performance of the Blue Chip Portfolio, adjusted for
expenses, was similar to that of the S&P 500 Stock Composite Index for the
twelve-month period ended July 31, 1995.
9
<PAGE>
FBL SERIES FUND, INC.
STATEMENTS OF ASSETS AND LIABILITIES
JULY 31, 1995
<TABLE>
<CAPTION>
GROWTH HIGH
COMMON STOCK GRADE BOND
PORTFOLIO PORTFOLIO
--------------- -------------
<S> <C> <C>
ASSETS
Investments in securities, at value (cost -- $68,687,815; $7,872,647;
$6,457,065; $20,487,970; $2,440,038; and $6,202,994, respectively) (NOTE
5)....................................................................... $ 70,997,899 $ 8,091,828
Cash....................................................................... 26,742 98,811
Receivables:
Accrued dividends and interest........................................... 268,737 169,544
Investment securities sold............................................... 1,057
Prepaid expense and other assets........................................... 2,499 237
--------------- -------------
Total Assets............................................................... $ 71,295,877 $ 8,361,477
--------------- -------------
--------------- -------------
LIABILITIES AND NET ASSETS
Liabilities
Accounts payable:
FBL Investment Advisory Services, Inc. (NOTE 3)........................ $ 9,869 $ 3,281
Investment securities purchased........................................ 312,050
Dividends payable......................................................
Accrued expenses......................................................... 27,455 13,167
--------------- -------------
Total Liabilities.......................................................... 349,374 16,448
Net assets applicable to outstanding capital stock (NOTE 4)................ 70,946,503 8,345,029
--------------- -------------
Total Liabilities and Net Assets........................................... $ 71,295,877 $ 8,361,477
--------------- -------------
--------------- -------------
NET ASSET VALUE PER SHARE.................................................. $ 13.04 $ 10.26
--------------- -------------
--------------- -------------
</TABLE>
SEE ACCOMPANYING NOTES.
10
<PAGE>
<TABLE>
<CAPTION>
HIGH
YIELD BOND MANAGED MONEY MARKET BLUE CHIP
PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO
------------- -------------- -------------- -------------
<C> <C> <C> <C>
ASSETS
Investments in securities, at value (cost -- $68,687,815; $7,872,647;
$6,457,065; $20,487,970; $2,440,038; and $6,202,994, respectively)
(NOTE 5)............................................................ $ 6,453,172 $ 20,961,847 $ 2,440,038 $ 9,570,468
Cash.................................................................. 75,367 63,039 6,356 87,907
Receivables:
Accrued dividends and interest...................................... 177,038 131,492 3,579 15,265
Investment securities sold..........................................
Prepaid expense and other assets...................................... 190 592 68 284
------------- -------------- -------------- -------------
Total Assets.......................................................... $ 6,705,767 $ 21,156,970 $ 2,450,041 $ 9,673,924
------------- -------------- -------------- -------------
------------- -------------- -------------- -------------
LIABILITIES AND NET ASSETS
Liabilities
Accounts payable:
FBL Investment Advisory Services, Inc. (NOTE 3).................. $ 3,442 $ 9,207 $ 770 $ 3,074
Investment securities purchased..................................
Dividends payable................................................ 26,339
Accrued expenses................................................... 11,818 16,598 10,421 13,579
------------- -------------- -------------- -------------
Total Liabilities.................................................... 15,260 52,144 11,191 16,653
Net assets applicable to outstanding capital stock (NOTE 4).......... 6,690,507 21,104,826 2,438,850 9,657,271
------------- -------------- -------------- -------------
Total Liabilities and Net Assets..................................... $ 6,705,767 $ 21,156,970 $ 2,450,041 $ 9,673,924
------------- -------------- -------------- -------------
------------- -------------- -------------- -------------
NET ASSET VALUE PER SHARE............................................ $ 10.03 $ 11.85 $ 1.00 $ 22.85
------------- -------------- -------------- -------------
------------- -------------- -------------- -------------
</TABLE>
11
<PAGE>
FBL SERIES FUND, INC.
STATEMENTS OF OPERATIONS
YEAR ENDED JULY 31, 1995
<TABLE>
<CAPTION>
HIGH
GROWTH COMMON GRADE BOND
STOCK PORTFOLIO PORTFOLIO
--------------- ------------
<S> <C> <C>
INVESTMENT INCOME
Dividends................................................................... $ 2,473,760
Interest.................................................................... 888,498 $ 652,064
--------------- ------------
Total Investment Income..................................................... 3,362,258 652,064
EXPENSES
Paid to FBL Investment Advisory Services, Inc. (NOTE 3):
Investment advisory and management fees................................... 331,615 31,381
Transfer and dividend disbursing agent fees............................... 114,756 37,079
Distribution fees......................................................... 331,615 39,226
Administrative service fees............................................... 165,807 19,613
Accounting fees........................................................... 30,000 3,922
Custodian fees.............................................................. 12,702 7,627
Legal fees.................................................................. 12,421 1,446
Audit fees.................................................................. 11,000 6,100
Directors' fees and expenses................................................ 3,902 464
Reports to shareholders..................................................... 34,090 4,016
Registration fees........................................................... 19,971 4,728
Miscellaneous............................................................... 9,236 795
--------------- ------------
Total Expenses.............................................................. 1,077,115 156,397
Expense Reimbursement (NOTE 3)..............................................
--------------- ------------
Net Expenses................................................................ 1,077,115 156,397
--------------- ------------
Net Investment Income....................................................... 2,285,143 495,667
NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS
Net realized gain (loss) from investment transactions....................... 2,239,764 (33,881)
Change in unrealized appreciation of investments............................ 1,538,922 170,813
--------------- ------------
Net Gain on Investments..................................................... 3,778,686 136,932
--------------- ------------
Net Increase in Net Assets Resulting from Operations........................ $ 6,063,829 $ 632,599
--------------- ------------
--------------- ------------
</TABLE>
SEE ACCOMPANYING NOTES.
12
<PAGE>
<TABLE>
<CAPTION>
HIGH
YIELD BOND MANAGED MONEY MARKET BLUE CHIP
PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO
----------- ------------- -------------- -------------
<S> <C> <C> <C> <C>
INVESTMENT INCOME
Dividends............................................................. $ 846,078 $ 179,229
Interest.............................................................. $ 626,932 499,625 $ 138,122 33,968
----------- ------------- -------------- -------------
Total Investment Income............................................... 626,932 1,345,703 138,122 213,197
EXPENSES
Paid to FBL Investment Advisory Services, Inc. (NOTE 3):
Investment advisory and management fees............................. 35,015 118,526 10,035 19,647
Transfer and dividend disbursing agent fees......................... 38,496 68,228 8,361 34,219
Distribution fees................................................... 31,832 98,771 12,544 39,294
Administrative service fees......................................... 15,916 49,386 6,272 19,647
Accounting fees..................................................... 3,183 9,877 1,254 3,930
Custodian fees........................................................ 6,830 8,939 5,404 7,508
Legal fees............................................................ 1,154 4,166 441 1,548
Audit fees............................................................ 5,100 5,300 6,600 5,100
Directors' fees and expenses.......................................... 377 1,158 151 449
Reports to shareholders............................................... 3,275 10,180 1,311 3,970
Registration fees..................................................... 4,313 7,650 2,458 4,392
Miscellaneous......................................................... 648 1,908 291 726
----------- ------------- -------------- -------------
Total Expenses........................................................ 146,139 384,089 55,122 140,430
Expense Reimbursement (NOTE 3)........................................ (18,810) (4,948)
----------- ------------- -------------- -------------
Net Expenses.......................................................... 127,329 384,089 50,174 140,430
----------- ------------- -------------- -------------
Net Investment Income................................................. 499,603 961,614 87,948 72,767
NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS
Net realized gain (loss) from investment transactions................. 10,149 176,989 80
Change in unrealized appreciation of investments...................... 87,294 671,828 1,636,574
----------- ------------- -------------- -------------
Net Gain on Investments............................................... 97,443 848,817 1,636,654
----------- ------------- -------------- -------------
Net Increase in Net Assets Resulting from Operations.................. $ 597,046 $ 1,810,431 $ 87,948 $ 1,709,421
----------- ------------- -------------- -------------
----------- ------------- -------------- -------------
</TABLE>
13
<PAGE>
FBL SERIES FUND, INC.
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
GROWTH
COMMON STOCK
PORTFOLIO
------------------------------
YEAR ENDED JULY 31,
1995 1994
-------------- --------------
<S> <C> <C>
OPERATIONS
Net investment income...................................................... $ 2,285,143 $ 2,391,865
Net realized gain (loss) from investment transactions...................... 2,239,764 2,990,410
Change in unrealized appreciation/depreciation of investments.............. 1,538,922 (5,444,330)
-------------- --------------
Net Increase (Decrease) in Net Assets Resulting from Operations............ 6,063,829 (62,055)
DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS FROM (NOTE 6)
Net investment income...................................................... (1,942,351) (2,240,070)
Net realized gain from investment transactions............................. (3,592,463) (5,827,898)
Distributions in excess of net realized gain from investment
transactions.............................................................
-------------- --------------
(5,534,814) (8,067,968)
CAPITAL SHARE TRANSACTIONS (NOTE 4)........................................ 6,102,860 20,713,013
-------------- --------------
Total Increase (Decrease) in Net Assets.................................... 6,631,875 12,582,990
NET ASSETS
Beginning of year.......................................................... 64,314,628 51,731,638
-------------- --------------
End of year (including undistributed net investment income as set forth
below)................................................................... $ 70,946,503 $ 64,314,628
-------------- --------------
-------------- --------------
Undistributed Net Investment Income........................................ $ 1,457,162 $ 1,114,370
-------------- --------------
-------------- --------------
</TABLE>
SEE ACCOMPANYING NOTES.
14
<PAGE>
<TABLE>
<CAPTION>
HIGH HIGH
GRADE BOND YIELD BOND
PORTFOLIO PORTFOLIO
---------------------------- ----------------------------
YEAR ENDED JULY 31, YEAR ENDED JULY 31,
1995 1994 1995 1994
------------- ------------- ------------- -------------
<C> <C> <C> <C>
OPERATIONS
Net investment income.............................................. $ 495,667 $ 471,816 $ 499,603 $ 471,824
Net realized gain (loss) from investment transactions.............. (33,881) 80,649 10,149 60,461
Change in unrealized appreciation/depreciation of investments...... 170,813 (370,308) 87,294 (419,934)
------------- ------------- ------------- -------------
Net Increase (Decrease) in Net Assets Resulting from Operations.... 632,599 182,157 597,046 112,351
DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS FROM (NOTE 6)
Net investment income.............................................. (495,667) (471,816) (499,603) (471,824)
Net realized gain from investment transactions..................... (107,277) (59,344) (93,574)
Distributions in excess of net realized gain from investment
transactions..................................................... (24,669) (7,192)
------------- ------------- ------------- -------------
(520,336) (579,093) (566,139) (565,398)
CAPITAL SHARE TRANSACTIONS (NOTE 4)................................ 636,952 (54,060) 234,188 1,120,677
------------- ------------- ------------- -------------
Total Increase (Decrease) in Net Assets............................ 749,215 (450,996) 265,095 667,630
NET ASSETS
Beginning of year.................................................. 7,595,814 8,046,810 6,425,412 5,757,782
------------- ------------- ------------- -------------
End of year (including undistributed net investment income as set
forth below).................................................... $ 8,345,029 $ 7,595,814 $ 6,690,507 $ 6,425,412
------------- ------------- ------------- -------------
------------- ------------- ------------- -------------
Undistributed Net Investment Income............................... $ 0 $ 0 $ 0 $ 0
------------- ------------- ------------- -------------
------------- ------------- ------------- -------------
</TABLE>
15
<PAGE>
FBL SERIES FUND, INC.
STATEMENTS OF CHANGES IN NET ASSETS (CONTINUED)
<TABLE>
<CAPTION>
MANAGED
PORTFOLIO
------------------------------
YEAR ENDED JULY 31,
1995 1994
-------------- --------------
<S> <C> <C>
OPERATIONS
Net investment income...................................................... $ 961,614 $ 631,359
Net realized gain from investment transactions............................. 176,989 122,890
Change in unrealized appreciation/depreciation of investments.............. 671,828 (977,638)
-------------- --------------
Net Increase (Decrease) in Net Assets Resulting from Operations............ 1,810,431 (223,389)
DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS FROM (NOTE 6)
Net investment income...................................................... (963,801) (629,162)
Net realized gain from investment transactions............................. (239,223) (352,968)
Distributions in excess of net realized gain from investment
transactions............................................................. (161,255)
-------------- --------------
(1,364,279) (982,130)
CAPITAL SHARE TRANSACTIONS (NOTE 4)........................................ 1,558,373 12,048,899
-------------- --------------
Total Increase (Decrease) in Net Assets.................................... 2,004,525 10,843,380
NET ASSETS
Beginning of year.......................................................... 19,100,301 8,256,921
-------------- --------------
End of year (including undistributed net investment income as $ 19,100,301
set forth below)......................................................... $ 21,104,826
-------------- --------------
-------------- --------------
Undistributed Net Investment Income........................................ $ 1,272 $ 3,459
-------------- --------------
-------------- --------------
</TABLE>
SEE ACCOMPANYING NOTES.
16
<PAGE>
<TABLE>
<CAPTION>
MONEY MARKET BLUE CHIP
PORTFOLIO PORTFOLIO
---------------------------- ----------------------------
YEAR ENDED JULY 31, YEAR ENDED JULY 31,
1995 1994 1995 1994
------------- ------------- ------------- -------------
<C> <C> <C> <C>
OPERATIONS
Net investment income............................................. $ 87,948 $ 38,845 $ 72,767 $ 45,282
Net realized gain from investment transactions.................... 80 85
Change in unrealized appreciation/depreciation of investments..... 1,636,574 335,561
------------- ------------- ------------- -------------
Net Increase (Decrease) in Net Assets Resulting from Operations... 87,948 38,845 1,709,421 380,928
DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS FROM (NOTE 6)
Net investment income............................................. (87,948) (38,845) (53,615) (42,519)
Net realized gain from investment transactions....................
Distributions in excess of net realized gain from investment
transactions....................................................
------------- ------------- ------------- -------------
(87,948) (38,845) (53,615) (42,519)
CAPITAL SHARE TRANSACTIONS (NOTE 4)............................... (187,752) 72,048 1,256,850 991,238
------------- ------------- ------------- -------------
Total Increase (Decrease) in Net Assets........................... (187,752) 72,048 2,912,656 1,329,647
NET ASSETS
Beginning of year................................................. 2,626,602 2,554,554 6,744,615 5,414,968
------------- ------------- ------------- -------------
End of year (including undistributed net investment income as
set forth below)................................................ $ 2,438,850 $ 2,626,602 $ 9,657,271 $ 6,744,615
------------- ------------- ------------- -------------
------------- ------------- ------------- -------------
Undistributed Net Investment Income............................... $ 0 $ 0 $ 41,475 $ 22,323
------------- ------------- ------------- -------------
------------- ------------- ------------- -------------
</TABLE>
17
<PAGE>
FBL SERIES FUND, INC.
SCHEDULE OF INVESTMENTS
GROWTH COMMON STOCK PORTFOLIO
JULY 31, 1995
<TABLE>
<CAPTION>
SHARES
HELD VALUE
------------- -----------
<S> <C> <C>
COMMON STOCKS (44.20%)
- ----------------------
CHEMICALS AND ALLIED PRODUCTS (4.26%)
Crompton & Knowles Corp..................................... 200,000 $ 3,025,000
COMMUNICATIONS/TELECOMMUNICATIONS (7.34%)
American Telephone & Telegraph Corp......................... 68,100 3,592,275
Lincoln Telecommunications Co............................... 100,000 1,612,500
-----------
5,204,775
DEPOSITORY INSTITUTIONS (3.39%)
CU Bancorp.................................................. 296,000 2,405,000
ELECTRIC, GAS AND SANITARY SERVICES (4.24%)
Montana Power Co............................................ 140,000 3,010,000
FURNITURE AND FIXTURES (3.00%)
Ladd Furniture.............................................. 157,550 2,126,925
HOLDING AND OTHER INVESTMENT OFFICES (4.67%)
General Growth Properties, Inc.............................. 170,000 3,315,000
INSURANCE CARRIERS (8.06%)
EMC Insurance Group, Inc.................................... 353,100 4,325,475
Progressive Corp............................................ 36,000 1,390,500
-----------
5,715,975
MISCELLANEOUS RETAIL (4.32%)
Ferrellgas Partners, L.P.................................... 140,000 3,062,500
NONDEPOSITORY INSTITUTIONS (0.35%)
Berkshire Hathaway, Inc..................................... 10(1) 247,500
TRANSPORTATION -- BY AIR (1.68%)
Petroleum Helicopters, Inc. (Non-Voting).................... 108,000 1,066,500
Petroleum Helicopters, Inc. (Voting)........................ 12,350 128,131
-----------
1,194,631
WHOLESALE TRADE -- DURABLE GOODS (1.37%)
TBC Corporation............................................. 100,000(1) 975,000
WHOLESALE TRADE -- NONDURABLE GOODS (1.52%)
Super Valu Stores, Inc...................................... 35,000 1,076,250
-----------
Total Common Stocks........................................... 31,358,556
</TABLE>
18
<PAGE>
FBL SERIES FUND, INC.
SCHEDULE OF INVESTMENTS (CONTINUED)
GROWTH COMMON STOCK PORTFOLIO
<TABLE>
<CAPTION>
SHARES
HELD VALUE
------------- -----------
PREFERRED STOCKS (32.22%)
- -------------------------
<S> <C> <C>
DEPOSITORY INSTITUTIONS (5.45%)
Conservative Savings Corp., Convertible..................... 101,139 $ 2,680,183
Sterling Financial Corp..................................... 45,300 1,189,125
-----------
3,869,308
GAS PRODUCTION AND DISTRIBUTION (1.48%)
Western Gas Resources, Inc., Convertible.................... 30,000 1,053,750
HOLDING AND OTHER INVESTMENT OFFICES (4.45%)
Echo Bay Finance Corp., Convertible......................... 110,200 3,154,475
OIL AND GAS EXTRACTION (10.72%)
Chieftain International, Inc., Convertible.................. 75,200 1,776,600
Noble Drilling Corp., Convertible........................... 143,500 3,372,250
Reading & Bates Corp., Convertible.......................... 79,530 2,455,489
-----------
7,604,339
WATER TRANSPORTATION (5.04%)
Sea Containers, Ltd., Convertible........................... 78,750 3,573,281
WHOLESALE TRADE -- NONDURABLE GOODS (5.08%)
Howell Corp................................................. 69,600 3,601,800
-----------
Total Preferred Stocks........................................ 22,856,953
<CAPTION>
PRINCIPAL
AMOUNT
-------------
<S> <C> <C>
CORPORATE BONDS (12.29%)
- ------------------------
HOLDING AND OTHER INVESTMENT OFFICES (2.89%)
Centennial Bancorp, Convertible Sub. Deb., 7.00%, due
5/01/04................................................... $ 2,073,000 2,047,336
METAL MINING (3.36%)
Agnico Eagle Mines, Convertible Sub. Deb., 3.50%, due
1/27/04................................................... 2,840,000 2,385,600
PRINTING AND PUBLISHING (6.04%)
American City Business Journals, Inc., Convertible Sub.
Deb., 6.00%, due 12/31/11................................. 3,121,000 4,285,820
-----------
Total Corporate Bonds......................................... 8,718,756
</TABLE>
19
<PAGE>
FBL SERIES FUND, INC.
SCHEDULE OF INVESTMENTS (CONTINUED)
GROWTH COMMON STOCK PORTFOLIO
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
------------- -----------
<S> <C> <C>
SHORT-TERM INVESTMENTS (11.36%)
- -------------------------------
UNITED STATES GOVERNMENT AGENCIES (3.51%)
Federal National Mortgage Assoc., 5.75%, due 8/01/95........ $ 500,000 $ 500,000
Federal National Mortgage Assoc., 5.74%, due 8/22/95........ 1,000,000 996,709
Federal National Mortgage Assoc., 5.72%, due 9/22/95........ 1,000,000 991,925
-----------
2,488,634
COMMERCIAL PAPER (7.85%)
Deere (John) Capital Corp., 5.74%, due 8/23/95.............. 675,000 675,000
Ford Motor Credit Corp., 5.97%, due 8/01/95................. 500,000 500,000
Ford Motor Credit Corp., 5.99%, due 8/10/95................. 1,000,000 1,000,000
General Electric Capital Corp., 5.98%, due 8/03/95.......... 3,000,000 3,000,000
IBM Credit Corp., 5.77%, due 8/24/95........................ 400,000 400,000
-----------
5,575,000
-----------
Total Short-Term Investments.................................. 8,063,634
-----------
Total Investments (100.07%)................................... 70,997,899
OTHER ASSETS LESS LIABILITIES (-0.07%)
- --------------------------------------
Cash, receivables and prepaid expense, less accounts payable
and accrued expenses...................................... (51,396)
-----------
Total Net Assets (100.00%).................................... $70,946,503
-----------
-----------
</TABLE>
(1) Non-income producing security.
SEE ACCOMPANYING NOTES.
20
<PAGE>
FBL SERIES FUND, INC.
SCHEDULE OF INVESTMENTS
HIGH GRADE BOND PORTFOLIO
JULY 31, 1995
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
----------- ----------
<S> <C> <C>
CORPORATE BONDS (85.06%)
- ------------------------
APPAREL AND ACCESSORY STORES (4.43%)
TJX Companies, Inc., 9.50%, due 5/01/16.......................... $ 350,000 $ 370,020
COMMUNICATIONS (7.15%)
Hawaiian Telephone Co., 8.00%, due 9/01/01....................... 250,000 254,803
Pacific Telephone & Telegraph Co., 7.25%, due 2/01/08............ 350,000 341,582
----------
596,385
DEPOSITORY INSTITUTIONS (11.56%)
Midland America Capital Corp., 12.75%, due 11/15/03.............. 175,000 206,130
National Westminster Bancorp, Inc., 9.45%, due 5/01/01........... 125,000 140,833
Norwest Corp., 9.25%, due 5/01/97................................ 100,000 105,077
Third National Bank, 7.50%, due 11/15/02......................... 158,000 159,861
UnionBancorp, Inc. (Defeased), 8.50%, due 4/01/96................ 350,000 352,398
----------
964,299
ELECTRIC, GAS AND SANITARY SERVICES (9.86%)
Atlantic City Electric Co., 9.25%, due 10/01/19.................. 145,000 153,496
Commonwealth Edison Co., 9.125%, due 1/15/14..................... 280,000 294,907
MDU Resources Group, Inc., 9.125%, due 10/01/16.................. 200,000 214,746
Texas Eastern Transmission Corp., 10.00%, due 9/01/11............ 150,000 159,555
----------
822,704
ELECTRONIC & OTHER ELECTRIC EQUIPMENT (3.03%)
Harris Corp., 7.75%, due 12/15/01................................ 250,000 252,623
FABRICATED METAL PRODUCTS (5.07%)
Emhart Corp., 9.25%, due 8/15/16................................. 404,000 423,368
FOOD AND KINDRED PRODUCTS (8.81%)
Anheuser-Busch Companies, Inc., 8.50%, due 3/01/17............... 350,000 366,958
Sara Lee Corp., 8.75%, due 5/15/16............................... 350,000 368,116
----------
735,074
GENERAL MERCHANDISE STORES (3.80%)
Dayton-Hudson Corp., 9.25%, due 11/15/16......................... 300,000 317,073
HOLDING AND OTHER INVESTMENT OFFICES (4.46%)
Federal Realty Investment Trust, 8.875%, due 1/15/00............. 350,000 371,987
</TABLE>
21
<PAGE>
FBL SERIES FUND, INC.
SCHEDULE OF INVESTMENTS (CONTINUED)
HIGH GRADE BOND PORTFOLIO
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
----------- ----------
<S> <C> <C>
INSURANCE CARRIERS (5.75%)
Old Republic Int'l. Corp., 11.50%, due 6/01/15................... $ 150,000 $ 159,090
Old Republic Int'l. Corp., 10.00%, due 2/01/18................... 200,000 213,208
Torchmark Corp., 9.625%, due 5/01/98............................. 100,000 107,284
----------
479,582
NONDEPOSITORY INSTITUTIONS (3.76%)
National Rural Utilities Cooperative Finance Corp., 9.00%, due
3/15/16........................................................ 305,000 313,787
OIL AND GAS EXTRACTION (2.79%)
Burlington Resources, Inc., 9.125%, due 10/01/21................. 200,000 232,876
PETROLEUM AND COAL PRODUCTS (0.97%)
Pennzoil Co., 9.00%, due 4/01/17................................. 77,000 81,188
PRINTING AND PUBLISHING (3.95%)
Valassis Communications, Inc., 9.55%, due 12/01/03............... 300,000 329,676
RAILROAD TRANSPORTATION (4.30%)
Union Pacific Corp., 8.50%, due 1/15/17.......................... 350,000 359,226
SECURITY AND COMMODITY BROKERS (2.52%)
Lehman Brothers Holdings, Inc., 8.875%, due 11/01/98............. 200,000 210,278
TRANSPORTATION EQUIPMENT (2.85%)
Ford Motor Credit Co., 9.50%, due 9/15/11........................ 200,000 237,962
----------
Total Corporate Bonds.............................................. 7,098,108
MORTGAGE-BACKED SECURITIES (10.72%)
- -----------------------------------
FEDERAL HOME LOAN MORTGAGE CORPORATION (FHLMC) (1.04%)
Pool # 503442, 9.50%, due 7/01/05................................ 83,065 86,776
GOVERNMENT NATIONAL MORTGAGE ASSOCIATION (GNMA) (9.68%)
Pool # 144332, 9.00%, due 7/15/16................................ 49,247 52,140
Pool # 236070, 10.00%, due 10/15/12.............................. 628,649 669,109
Pool # 307097, 9.00%, due 7/15/21................................ 81,771 86,165
----------
807,414
----------
Total Mortgage-Backed Securities................................... 894,190
SHORT-TERM INVESTMENTS (1.19%)
- ------------------------------
UNITED STATES GOVERNMENT AGENCY
Federal National Mortgage Assoc., due 8/30/95.................... 100,000 99,530
----------
Total Investments (96.97%)......................................... 8,091,828
</TABLE>
22
<PAGE>
FBL SERIES FUND, INC.
SCHEDULE OF INVESTMENTS (CONTINUED)
HIGH GRADE BOND PORTFOLIO
<TABLE>
<CAPTION>
VALUE
----------
<S> <C> <C>
OTHER ASSETS LESS LIABILITIES (3.03%)
- -------------------------------------
Cash, receivables and prepaid expense, less accounts payable and
accrued expenses............................................... $ 253,201
----------
Total Net Assets (100.00%)......................................... $8,345,029
----------
----------
</TABLE>
SEE ACCOMPANYING NOTES.
23
<PAGE>
FBL SERIES FUND, INC.
SCHEDULE OF INVESTMENTS
HIGH YIELD BOND PORTFOLIO
JULY 31, 1995
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
----------- ----------
<S> <C> <C>
CORPORATE BONDS (91.97%)
- ------------------------
AGRICULTURAL PRODUCTION -- CROPS (2.34%)
Chiquita Brands International, Inc., 11.50%, due 6/01/01........... $ 150,000 $ 156,563
APPAREL AND ACCESSORY STORES (5.23%)
Genesco, Inc., 10.375%, due 2/01/03................................ 150,000 138,750
TJX Companies, Inc., 9.50%, due 5/01/16............................ 200,000 211,440
----------
350,190
APPAREL AND OTHER TEXTILE PRODUCTS (7.32%)
Dan River, Inc., 10.125%, due 12/15/03............................. 280,000 280,000
Fieldcrest Cannon, Inc., 11.25%, due 6/15/04....................... 200,000 209,500
----------
489,500
AUTO REPAIR, SERVICES AND PARKING (1.70%)
Envirotest Systems Corp., 9.625%, due 4/01/03...................... 150,000 114,000
BUSINESS SERVICES (3.31%)
Borg-Warner Corp., 9.125%, due 5/01/03............................. 250,000 221,250
COMMUNICATIONS (3.87%)
Panamsat, L.P., 9.75%, due 8/01/00................................. 250,000 258,750
ELECTRIC, GAS AND SANITARY SERVICES (7.94%)
Commonwealth Edison Co., 9.125%, due 1/15/14....................... 265,000 279,109
Public Service Company of New Mexico, 5.875%, due 5/01/97.......... 150,000 145,695
Texas Eastern Transmission Corp., 10.00%, due 10/01/11............. 100,000 106,370
----------
531,174
ELECTRONIC AND OTHER ELECTRIC EQUIPMENT (3.38%)
Amphenol Corp., 12.75%, due 12/15/02............................... 200,000 226,000
FABRICATED METAL PRODUCTS (6.84%)
Emhart Corp., 9.25%, due 8/15/16................................... 250,000 261,985
Jorgensen (Earle M.) Co., 10.75%, due 3/01/00...................... 200,000 196,000
----------
457,985
FOOD STORES (5.37%)
P&C Food Markets, Inc., 11.50%, due 10/15/01....................... 150,000 157,500
Penn Traffic Co., 10.25%, due 2/15/02.............................. 200,000 201,750
----------
359,250
GENERAL MERCHANDISE STORES (4.86%)
Federated Department Stores, Inc., 10.00%, due 2/15/01............. 300,000 325,125
</TABLE>
24
<PAGE>
FBL SERIES FUND, INC.
SCHEDULE OF INVESTMENTS (CONTINUED)
HIGH YIELD BOND PORTFOLIO
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
----------- ----------
<S> <C> <C>
INDUSTRIAL MACHINERY AND EQUIPMENT (0.83%)
Hyster-Yale Materials Handling, Inc., 12.375%, due 8/01/99......... $ 54,000 $ 55,620
LUMBER AND WOOD PRODUCTS (5.86%)
Georgia-Pacific Corp., 9.25%, due 3/15/16.......................... 150,000 158,410
Pacific Lumber Co., 10.50%, due 3/01/03............................ 250,000 233,750
----------
392,160
MISCELLANEOUS RETAIL (4.61%)
Eckerd Corp., 9.25%, due 2/15/04................................... 295,000 308,275
PAPER AND ALLIED PRODUCTS (3.82%)
Container Corp. of America, 9.75%, due 4/01/03..................... 250,000 255,625
PETROLEUM AND COAL PRODUCTS (5.22%)
Clark Oil & Refining Corp., 10.50%, due 12/01/01................... 175,000 183,750
Huntsman Corp., 11.00%, due 4/15/04................................ 150,000 165,375
----------
349,125
RUBBER AND MISCELLANEOUS PLASTICS PRODUCTS (4.10%)
Foamex, L.P., 9.50%, due 6/01/00................................... 182,000 182,910
Plastic Specialties & Technologies, Inc., 11.25%, due 12/01/03..... 100,000 91,500
----------
274,410
STONE, CLAY AND GLASS PRODUCTS (7.17%)
Owens-Illinois, Inc., 11.00%, due 12/01/03......................... 200,000 221,000
USG Corp., 9.25%, due 9/15/01...................................... 250,000 258,750
----------
479,750
TEXTILE MILL PRODUCTS (0.78%)
Bibb Co. (The), 14.00%, due 10/01/99............................... 125,000(1) 52,500
TRANSPORTATION EQUIPMENT (3.32%)
Preston Corp., 7.00%, due 5/01/11.................................. 306,000 221,850
WATER TRANSPORTATION (4.10%)
Moran Transport Co., 11.75%, due 7/15/94........................... 300,000 274,500
----------
Total Corporate Bonds................................................ 6,153,602
SHORT-TERM INVESTMENT (4.48%)
- -----------------------------
UNITED STATES GOVERNMENT AGENCY
Federal National Mortgage Assoc., due 8/10/95...................... 300,000 299,570
----------
Total Investments (96.45%)........................................... 6,453,172
</TABLE>
25
<PAGE>
FBL SERIES FUND, INC.
SCHEDULE OF INVESTMENTS (CONTINUED)
HIGH YIELD BOND PORTFOLIO
<TABLE>
<CAPTION>
VALUE
----------
<S> <C> <C>
OTHER ASSETS LESS LIABILITIES (3.55%)
- -------------------------------------
Cash, receivables and prepaid expense, less accounts payable and
accrued expenses............................................... $ 237,335
----------
Total Net Assets (100.00%)......................................... $6,690,507
----------
----------
</TABLE>
(1)_Company has defaulted on the April 1, 1995 interest payment.
SEE ACCOMPANYING NOTES.
26
<PAGE>
FBL SERIES FUND, INC.
SCHEDULE OF INVESTMENTS
MANAGED PORTFOLIO
JULY 31, 1995
<TABLE>
<CAPTION>
SHARES
HELD VALUE
---------- -----------
<S> <C> <C>
COMMON STOCKS (27.28%)
- ----------------------
COMMUNICATIONS (4.75%)
American Telephone & Telegraph Corp........................... 19,000 $ 1,002,250
ELECTRIC, GAS AND SANITARY SERVICES (7.76%)
Montana Power Co.............................................. 39,600 851,400
Peoples Energy Corp........................................... 30,000 787,500
-----------
1,638,900
HOLDING AND OTHER INVESTMENT OFFICES (4.53%)
General Growth Properties, Inc................................ 49,000 955,500
INSURANCE CARRIERS (6.09%)
EMC Insurance Group, Inc...................................... 105,000 1,286,250
MISCELLANEOUS RETAIL (4.15%)
Ferrellgas Partners, L.P...................................... 40,000 875,000
-----------
Total Common Stocks............................................. 5,757,900
PREFERRED STOCKS (33.53%)
- -------------------------
DEPOSITORY INSTITUTIONS (7.45%)
Community First Bankshares, Inc............................... 17,000 497,250
Conservative Savings Corp., Convertible....................... 34,170 905,505
Sterling Financial Corp....................................... 6,450 169,313
-----------
1,572,068
GAS PRODUCTION AND DISTRIBUTION (1.06%)
MCN Michigan, L.P............................................. 7,500 199,687
Western Gas Resources, Inc.................................... 1,000 24,875
-----------
224,562
HOLDING AND OTHER INVESTMENT OFFICES (3.93%)
Echo Bay Finance Corp., Convertible........................... 29,000 830,125
OIL AND GAS EXTRACTION (9.20%)
ICO, Inc., Convertible........................................ 10,000 203,750
Noble Drilling Corp., Convertible............................. 36,000 846,000
Reading & Bates Corp., Convertible............................ 28,900 892,288
-----------
1,942,038
PAPER AND ALLIED PRODUCTS (2.08%)
James River Corp. of Virginia, Convertible.................... 9,000 438,750
</TABLE>
27
<PAGE>
FBL SERIES FUND, INC.
SCHEDULE OF INVESTMENTS (CONTINUED)
MANAGED PORTFOLIO
<TABLE>
<CAPTION>
SHARES
HELD VALUE
---------- -----------
<S> <C> <C>
WATER TRANSPORTATION (4.95%)
Sea Containers, Ltd., Convertible............................. 23,000 $ 1,043,625
WHOLESALE TRADE -- NONDURABLE GOODS (4.86%)
Howell Corp................................................... 19,800 1,024,650
-----------
Total Preferred Stocks.......................................... 7,075,818
<CAPTION>
PRINCIPAL
AMOUNT
----------
<S> <C> <C>
CORPORATE BONDS (28.80%)
- ------------------------
COMMUNICATIONS (0.51%)
Hawaiian Telephone Co., 8.00%, due 9/01/01.................... $ 105,000 107,017
DEPOSITORY INSTITUTIONS (1.65%)
Columbia Banking System, Convertible Sub. Deb., 7.85%, due
6/30/02..................................................... 170,000 179,350
National Westminster Bancorp, Inc., 9.45%, due 5/01/01........ 150,000 169,000
-----------
348,350
ELECTRIC, GAS AND SANITARY SERVICES (0.73%)
National Co-op Services Corp. (Arkansas Electric), 9.48%, due
1/01/12..................................................... 142,000 153,131
FABRICATED METAL PRODUCTS (2.56%)
Emhart Corp., 9.25%, due 8/15/16.............................. 515,000 539,689
FOOD AND KINDRED PRODUCTS (1.99%)
Anheuser-Busch Companies, Inc., 8.50%, due 3/01/17............ 200,000 209,690
Sara Lee Corp., 8.75%, due 5/15/16............................ 200,000 210,352
-----------
420,042
GAS PRODUCTION AND DISTRIBUTION (4.40%)
Consolidated Natural Gas Co., Convertible Sub. Deb., 7.25%,
due 12/15/15................................................ 900,000 929,250
HOLDING AND OTHER INVESTMENT OFFICES (2.85%)
Centennial Bancorp, Convertible Sub. Deb., 7.00%, due
5/01/04..................................................... 608,000 600,473
INSURANCE CARRIERS (1.25%)
Torchmark Corp., 8.625%, due 3/01/17.......................... 250,000 263,383
METAL MINING (5.17%)
Agnico-Eagle Mines, Convertible Sub. Deb., 3.50%, due
1/27/04..................................................... 1,300,000 1,092,000
PETROLEUM AND COAL PRODUCTS (0.66%)
Pennzoil Co., 9.00%, due 4/01/17.............................. 133,000 140,234
</TABLE>
28
<PAGE>
FBL SERIES FUND, INC.
SCHEDULE OF INVESTMENTS (CONTINUED)
MANAGED PORTFOLIO
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
---------- -----------
<S> <C> <C>
PRINTING AND PUBLISHING (6.06%)
American City Business Journals, Inc., Convertible Sub. Deb.,
6.00%, due 12/31/11......................................... $ 932,000 $ 1,279,841
RAILROAD TRANSPORTATION (0.97%)
Union Pacific Corp., Sinking Fund Deb., 8.50%, due 1/15/17.... 200,000 205,272
-----------
Total Corporate Bonds........................................... 6,078,682
SHORT-TERM INVESTMENTS (4.97%)
- -----------------------------------
COMMERCIAL PAPER (2.60%)
NONDEPOSITORY INSTITUTIONS
Deere (John) Capital Corp., 5.74%, due 8/23/95.............. 100,000 100,000
General Electric Capital Corp., 5.37%, due 8/17/95.......... 450,000 450,000
-----------
550,000
UNITED STATES GOVERNMENT AGENCIES (2.37%)
Federal Home Loan Mortgage Corp., due 8/01/95............... 300,000 300,000
Federal Home Loan Mortgage Corp., due 8/18/95............... 200,000 199,447
-----------
499,447
-----------
Total Short-Term Investments.................................... 1,049,447
REPURCHASE AGREEMENT (4.74%)
- ----------------------------
Cantor Fitzgerald, dated 7/31/95, due 8/01/95 in the amount of
$1,000,785 (collateralized by Federal Home Loan Mortgage
Corp. Bond, 8.00%, fair value -- $999,117, due 7/01/24 and
Federal National Mortgage Assoc. CMO, 9.30%, fair value --
$27,258, due 2/25/20)....................................... 1,000,000 1,000,000
-----------
Total Investments (99.32%)...................................... 20,961,847
OTHER ASSETS LESS LIABILITIES (0.68%)
- -------------------------------------
Cash, receivables and prepaid expense, less accounts payable
and accrued expenses........................................ 142,979
-----------
Total Net Assets (100.00%)...................................... $21,104,826
-----------
-----------
</TABLE>
SEE ACCOMPANYING NOTES.
29
<PAGE>
FBL SERIES FUND, INC.
SCHEDULE OF INVESTMENTS
MONEY MARKET PORTFOLIO
JULY 31, 1995
<TABLE>
<CAPTION>
ANNUALIZED
YIELD ON PRINCIPAL
PURCHASE DATE AMOUNT VALUE
------------- ----------- ----------
<S> <C> <C> <C>
SHORT-TERM INVESTMENTS (100.05%)
- --------------------------------
COMMERCIAL PAPER (19.68%)
NONDEPOSITORY INSTITUTIONS
American General Finance Corp., due 10/11/95........ 5.759% $ 120,000 $ 120,000
Deere (John) Capital Corp., due 8/23/95............. 5.738 120,000 120,000
Ford Motor Credit Corp., due 8/01/95................ 5.972 120,000 120,000
General Electric Capital Corp., due 9/13/95......... 5.745 120,000 120,000
----------
Total Commercial Paper................................ 480,000
UNITED STATES GOVERNMENT AGENCIES (80.37%)
Federal Farm Credit Bank, due 9/08/95............... 5.749 225,000 223,661
Federal National Mortgage Assoc., due 8/15/95....... 5.710 775,000 773,306
Federal National Mortgage Assoc., due 8/22/95....... 5.982 400,000 398,628
Federal National Mortgage Assoc., due 8/30/95....... 5.911 70,000 69,673
Federal National Mortgage Assoc., due 9/22/95....... 5.715 250,000 247,981
Federal National Mortgage Assoc., due 10/23/95...... 5.722 250,000 246,789
----------
Total United States Government Agencies............... 1,960,038
----------
Total Investments (100.05%)............................. 2,440,038
OTHER ASSETS LESS LIABILITIES (-0.05%)
- --------------------------------------
Cash, receivables and prepaid expense, less accounts
payable and accrued expenses........................ (1,188)
----------
Total Net Assets (100.00%).............................. $2,438,850
----------
----------
</TABLE>
SEE ACCOMPANYING NOTES.
30
<PAGE>
FBL SERIES FUND, INC.
SCHEDULE OF INVESTMENTS
BLUE CHIP PORTFOLIO
JULY 31, 1995
<TABLE>
<CAPTION>
SHARES
HELD VALUE
----------- ----------
<S> <C> <C>
COMMON STOCKS (92.39%)
- ----------------------
CHEMICALS AND ALLIED PRODUCTS (16.70%)
Bristol-Myers Squibb Co.......................................... 2,315 $ 160,314
DuPont (EI) de Nemours & Co...................................... 3,185 213,395
Eastman Chemical Co.............................................. 1,567 100,288
Johnson & Johnson................................................ 3,617 259,520
Merck & Co., Inc................................................. 4,477 231,125
Praxair, Inc..................................................... 7,359 206,052
Procter & Gamble Co.............................................. 3,005 206,969
Union Carbide Corp............................................... 6,761 234,945
----------
1,612,608
COMMUNICATIONS (6.51%)
American Telephone & Telegraph Co................................ 3,464 182,726
Bell Atlantic Corp............................................... 2,992 171,292
Capital Cities/ABC, Inc.......................................... 2,353 274,713
----------
628,731
DEPOSITORY INSTITUTIONS (1.91%)
Morgan JP & Co., Inc............................................. 2,529 184,933
EATING AND DRINKING PLACES (2.74%)
McDonald's Corp.................................................. 6,847 264,465
ELECTRONIC AND OTHER ELECTRIC EQUIPMENT (2.17%)
General Electric Co.............................................. 3,550 209,450
FOOD AND KINDRED PRODUCTS (7.62%)
Coca-Cola Co. (The).............................................. 4,903 322,985
PepsiCo, Inc..................................................... 4,717 221,109
Philip Morris Companies, Inc..................................... 2,678 191,812
----------
735,906
GENERAL MERCHANDISE STORES (4.19%)
Sears, Roebuck & Co.............................................. 3,677 119,962
Wal-Mart Stores, Inc............................................. 7,407 197,211
Woolworth (F.W.) Co. Ltd......................................... 5,592 87,375
----------
404,548
</TABLE>
31
<PAGE>
FBL SERIES FUND, INC.
SCHEDULE OF INVESTMENTS (CONTINUED)
BLUE CHIP PORTFOLIO
<TABLE>
<CAPTION>
SHARES
HELD VALUE
----------- ----------
<S> <C> <C>
INDUSTRIAL MACHINERY AND EQUIPMENT (5.34%)
Caterpillar, Inc................................................. 4,785 $ 336,744
International Business Machines Corp............................. 1,648 179,426
----------
516,170
INSTRUMENTS AND RELATED PRODUCTS (1.98%)
Eastman Kodak Co................................................. 3,320 191,315
INSURANCE CARRIERS (3.85%)
Allstate Corp.................................................... 3,408 106,500
American International Group, Inc................................ 3,544 265,800
----------
372,300
MOTION PICTURES (2.54%)
Disney (Walt) Co................................................. 4,181 245,111
NONDEPOSITORY INSTITUTIONS (1.17%)
Dean Witter, Discover & Co....................................... 2,230 112,615
PAPER AND ALLIED PRODUCTS (3.88%)
International Paper Co........................................... 2,413 203,899
Minnesota Mining & Manufacturing Co.............................. 3,024 171,234
----------
375,133
PETROLEUM AND COAL PRODUCTS (10.58%)
Amoco Corp....................................................... 2,625 176,531
Chevron Corp..................................................... 3,636 179,528
Exxon Corp....................................................... 2,644 191,690
Mobil Corp....................................................... 2,063 201,658
Texaco, Inc...................................................... 2,335 155,278
USX Corp. -- Marathon Group...................................... 5,807 116,866
----------
1,021,551
PRIMARY METAL INDUSTRIES (3.80%)
Aluminum Company of America...................................... 4,090 232,619
Bethlehem Steel Corp............................................. 8,509 134,017
----------
366,636
RUBBER AND MISCELLANEOUS PLASTICS PRODUCTS (3.31%)
Goodyear Tire & Rubber Co........................................ 7,371 319,717
SECURITY AND COMMODITY BROKERS (2.45%)
American Express Co.............................................. 4,812 185,262
Lehman Brothers Holding, Inc..................................... 2,330 51,551
----------
236,813
</TABLE>
32
<PAGE>
FBL SERIES FUND, INC.
SCHEDULE OF INVESTMENTS (CONTINUED)
BLUE CHIP PORTFOLIO
<TABLE>
<CAPTION>
SHARES
HELD VALUE
----------- ----------
<S> <C> <C>
TRANSPORTATION EQUIPMENT (10.71%)
Allied-Signal, Inc............................................... 6,595 $ 308,316
Boeing Co. (The)................................................. 2,833 189,811
Ford Motor Co.................................................... 6,244 180,296
General Motors Corp.............................................. 3,051 148,736
United Technologies Corp......................................... 2,461 206,724
----------
1,033,883
WHOLESALE TRADE -- DURABLE GOODS (0.94%)
Westinghouse Electric Corp....................................... 6,638 90,443
----------
Total Common Stocks................................................ 8,922,328
<CAPTION>
PRINCIPAL
AMOUNT
-----------
<S> <C> <C>
SHORT-TERM INVESTMENTS (6.71%)
- ------------------------------
UNITED STATES GOVERNMENT AGENCIES
Federal National Mortgage Assoc., due 8/15/95.................... $ 450,000 449,016
Federal National Mortgage Assoc., due 8/28/95.................... 200,000 199,124
----------
Total Short-Term Investments....................................... 648,140
----------
Total Investments (99.10%)......................................... 9,570,468
OTHER ASSETS LESS LIABILITIES (0.90%)
- -------------------------------------
Cash, receivables and prepaid expense, less accounts payable and
accrued expenses............................................... 86,803
----------
Total Net Assets (100.00%)......................................... $9,657,271
----------
----------
</TABLE>
SEE ACCOMPANYING NOTES.
33
<PAGE>
FBL SERIES FUND, INC.
NOTES TO FINANCIAL STATEMENTS
JULY 31, 1995
1. SIGNIFICANT ACCOUNTING POLICIES
FBL Series Fund, Inc. (the "Fund") is registered under the Investment
Company Act of 1940, as amended, as an open-end, diversified management
investment company and operates in the mutual fund industry. The Fund consists
of six portfolios (known as the Growth Common Stock, High Grade Bond, High Yield
Bond, Managed, Money Market and Blue Chip Portfolios).
All portfolios, other than the Money Market Portfolio, value their common
stocks, corporate bonds, United States Treasury obligations and mortgage-backed
securities that are traded on any national exchange at the last sale price on
the day of valuation or, lacking any sales, at the mean between the closing bid
and asked prices. Investments traded in the over-the-counter market are valued
at the mean between the bid and asked prices or yield equivalent as obtained
from one or more dealers that make markets in the securities. Investments for
which market quotations are not readily available are valued at fair value as
determined in good faith by the Board of Directors. Short-term investments
(including repurchase agreements) are valued at market value, except that
obligations maturing in 60 days or less are valued using the amortized cost
method of valuation described below with respect to the Money Market Portfolio,
which approximates market.
The Money Market Portfolio values investments at amortized cost, which
approximates market. Under the amortized cost method, a security is valued at
its cost on the date of purchase and thereafter is adjusted to reflect a
constant amortization to maturity of the difference between the principal amount
due at maturity and the cost of the investment to the portfolio.
The value of the underlying securities serving to collateralize repurchase
agreements is marked to market daily. Should the value of the underlying
securities decline, the seller would be required to provide the applicable
portfolio with additional securities so that the aggregate value of the
underlying securities was at least equal to the repurchase price. If a seller of
a repurchase agreement were to default, the affected portfolio might experience
losses in enforcing its rights. To minimize this risk, the investment adviser
(under the supervision of the Board of Directors) will monitor the
creditworthiness of the seller of the repurchase agreement and must find such
creditworthiness satisfactory before a portfolio may enter into the repurchase
agreement.
The Fund records investment transactions generally one day after the trade
date. The identified cost basis has been used in determining the net realized
gain or loss from investment transactions and unrealized appreciation or
depreciation on investments. Dividends are taken into income on an accrual basis
as of the ex-dividend date and interest is recognized on an accrual basis.
Discounts and premiums on investments purchased are amortized over the life of
the respective investments.
Dividends and distributions to shareholders are recorded on the record date.
2. FEDERAL INCOME TAXES
No provision for federal income taxes is considered necessary because the
Fund is qualified as a "regulated investment company" under the Internal Revenue
Code and intends to distribute each year substantially all of its net investment
income and realized capital gains to shareholders. The cost of investments is
the same for both federal income tax and financial reporting purposes.
34
<PAGE>
FBL SERIES FUND, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
2. FEDERAL INCOME TAXES (CONTINUED)
At July 31, 1995, the High Grade Bond, High Yield Bond, Managed and Blue
Chip Portfolios had net capital loss carryforwards of approximately $39,000,
$7,000, $161,000 and $4,000, respectively, which will expire in 1999 and 2003.
3. MANAGEMENT CONTRACT AND TRANSACTIONS WITH AFFILIATES
The Fund has entered into agreements with FBL Investment Advisory Services,
Inc. ("FBL Investment") relating to the management of the portfolios and the
investment of their assets. Pursuant to these agreements, fees paid to FBL
Investment are as follows: (1) annual investment advisory and management fees,
which are based on each portfolio's daily net assets as follows: Growth Common
Stock Portfolio - 0.50%; High Grade Bond Portfolio - 0.40%; High Yield Bond
Portfolio - 0.55%; Managed Portfolio - 0.60%; Money Market Portfolio - 0.40% and
Blue Chip Portfolio - 0.25%; (2) distribution fees, which are computed at an
annual rate of 0.50% of each portfolio's average daily net asset value and, in
part, are subsequently remitted by FBL Investment to retail dealers including
FBL Marketing Services, Inc. ("FBL Marketing"), an affiliate who serves as
principal dealer; (3) administrative service fees, which are computed at an
annual rate of 0.25% of each portfolio's average daily net asset value; (4)
shareholder service, transfer and dividend disbursing agent fees, which are
based on direct services provided and expenses incurred by the investment
adviser, plus an annual per account charge ranging from $7.20 to $12.00; and (5)
accounting fees, which are based on each portfolio's daily net assets at an
annual rate of 0.05%, with a maximum per portfolio annual expense of $30,000.
FBL Investment has agreed to reimburse the portfolios annually for total
expenses (excluding brokerage, interest, taxes, the distribution fee and
extraordinary expenses) in excess of 1.50% of each portfolio's average daily net
assets. The amount reimbursed, however, shall not exceed the amount of the
investment advisory and management fees paid by the portfolio for such period.
Certain officers and directors of the Fund are also officers of Farm Bureau
Life Insurance Company, FBL Investment, FBL Marketing and other affiliated
entities. At July 31, 1995, Farm Bureau Life Insurance Company, the indirect
parent of FBL Investment and FBL Marketing, owned shares of the Fund's
portfolios as follows:
<TABLE>
<CAPTION>
PORTFOLIO SHARES
- --------------------------------------------------------------- ----------
<S> <C>
High Yield Bond................................................ 125,149
Money Market................................................... 1,910,602
</TABLE>
FBL Investment also owned shares of the Growth Common Stock Portfolio
aggregating 120,118 at July 31, 1995.
35
<PAGE>
FBL SERIES FUND, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
4. CAPITAL SHARE TRANSACTIONS
Net assets as of July 31, 1995 consisted of:
<TABLE>
<CAPTION>
PORTFOLIO
------------------------------------------------------------------------
GROWTH HIGH
COMMON HIGH GRADE YIELD MONEY BLUE
STOCK BOND BOND MANAGED MARKET CHIP
----------- ---------- ---------- ----------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
Capital Stock (5,000,000,000 shares of $.001
par value Capital Stock authorized).......... $ 5,441 $ 813 $ 667 $ 1,781 $ 2,439 $ 423
Additional paid-in capital..................... 66,985,376 8,163,783 6,700,925 20,789,151 2,436,411 6,252,283
Accumulated undistributed net investment
income....................................... 1,457,162 1,272 41,475
Accumulated undistributed net realized gain
(loss) from investment transactions.......... 188,440 (38,748) (7,192) (161,255) (4,384)
Net unrealized appreciation (depreciation) of
investments.................................. 2,310,084 219,181 (3,893) 473,877 3,367,474
----------- ---------- ---------- ----------- ---------- ----------
Net Assets..................................... $70,946,503 $8,345,029 $6,690,507 $21,104,826 $2,438,850 $9,657,271
----------- ---------- ---------- ----------- ---------- ----------
----------- ---------- ---------- ----------- ---------- ----------
Shares issued and outstanding as of July 31,
1995......................................... 5,441,946 813,312 666,735 1,780,492 2,438,850 422,597
----------- ---------- ---------- ----------- ---------- ----------
----------- ---------- ---------- ----------- ---------- ----------
</TABLE>
Transactions in Capital Stock for each portfolio were as follows:
<TABLE>
<CAPTION>
SHARES ISSUED IN
REINVESTMENT OF
DIVIDENDS AND NET INCREASE (DECREASE)
SHARES SOLD DISTRIBUTIONS SHARES REDEEMED
---------------------- --------------------- --------------------- -----------------------
PORTFOLIO SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT
- ---------------------------- --------- ----------- --------- ---------- --------- ---------- ---------- -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Year Ended July 31, 1995:
Growth Common Stock......... 456,086 $ 5,716,180 465,616 $5,401,147 399,968 $5,014,467 521,734 $ 6,102,860
High Grade Bond............. 97,267 947,943 37,987 400,616 71,483 711,607 63,771 636,952
High Yield Bond............. 85,943 872,956 35,880 351,724 97,585 990,492 24,238 234,188
Managed..................... 206,561 2,362,969 107,958 1,216,938 178,193 2,021,534 136,326 1,558,373
Money Market................ 194,697 194,697 19,711 19,711 402,160 402,160 (187,752) (187,752)
Blue Chip................... 91,343 1,825,635 2,799 52,645 31,209 621,430 62,933 1,256,850
Year Ended July 31, 1994:
Growth Common Stock......... 1,244,749 $17,459,895 586,203 $7,878,314 329,182 $4,625,196 1,501,770 $20,713,013
High Grade Bond............. 244,811 2,558,740 38,343 399,309 286,594 3,012,109 (3,440) (54,060)
High Yield Bond............. 220,909 2,366,382 28,346 291,725 142,044 1,537,430 107,211 1,120,677
Managed..................... 965,352 11,828,893 72,904 873,667 54,051 653,661 984,205 12,048,899
Money Market................ 963,596 963,596 10,609 10,609 902,157 902,157 72,048 72,048
Blue Chip................... 101,015 1,848,854 885 41,682 48,342 899,298 53,558 991,238
</TABLE>
36
<PAGE>
FBL SERIES FUND, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
5. INVESTMENT TRANSACTIONS
For the year ended July 31, 1995, the cost of investment securities
purchased and proceeds from investment securities sold (not including short-term
investments and U.S. Government securities) by portfolio, were as follows:
<TABLE>
<CAPTION>
PORTFOLIO PURCHASES SALES
- ----------------------------------------------- ----------- -----------
<S> <C> <C>
Growth Common Stock............................ $51,759,359 $55,260,641
High Grade Bond................................ 1,551,385 1,000,723
High Yield Bond................................ 1,397,485 1,364,675
Managed........................................ 12,738,635 13,456,756
Blue Chip...................................... 1,218,742 40,558
</TABLE>
At July 31, 1995, net unrealized appreciation of investments by portfolio
was composed of the following:
<TABLE>
<CAPTION>
NET UNREALIZED
GROSS UNREALIZED APPRECIATION
---------------------------- (DEPRECIATION)
PORTFOLIO APPRECIATION DEPRECIATION OF INVESTMENTS
- ---------------------------------------------- ------------- ------------- ---------------
<S> <C> <C> <C>
Growth Common Stock........................... $ 4,604,542 $ 2,294,458 $ 2,310,084
High Grade Bond............................... 258,361 39,180 219,181
High Yield Bond............................... 227,535 231,428 (3,893)
Managed....................................... 1,152,708 678,831 473,877
Blue Chip..................................... 3,448,339 80,865 3,367,474
</TABLE>
37
<PAGE>
FBL SERIES FUND, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
6. DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS
Dividends from net investment income for the following portfolios are
declared daily and were payable on the last business day of the month as
follows:
<TABLE>
<CAPTION>
HIGH HIGH
GRADE YIELD MONEY
PAYABLE DATE BOND BOND MARKET
- ------------------------------------------------------------------ --------- --------- -----------
<S> <C> <C> <C>
August 31, 1994................................................... $ .0547 $ .0718 $ .0020
September 30, 1994................................................ .0504 .0664 .0024
October 31, 1994.................................................. .0507 .0641 .0022
November 30, 1994................................................. .0530 .0602 .0027
December 30, 1994................................................. .0541 .0675 .0030
January 31, 1995.................................................. .0525 .0664 .0033
February 28, 1995................................................. .0500 .0687 .0030
March 31, 1995.................................................... .0532 .0681 .0034
April 28, 1995.................................................... .0495 .0576 .0031
May 31, 1995...................................................... .0571 .0647 .0036
June 30, 1995..................................................... .0542 .0611 .0033
July 31, 1995..................................................... .0542 .0607 .0033
--------- --------- -----------
Total Dividends Per Share......................................... $ .6336 $ .7773 $ .0353
--------- --------- -----------
--------- --------- -----------
</TABLE>
38
<PAGE>
FBL SERIES FUND, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
6. DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS (CONTINUED)
In addition, dividends and distributions to shareholders from net investment
income and net realized gain on investment transactions were paid during the
year ended July 31, 1995, for the following portfolios:
<TABLE>
<CAPTION>
ORDINARY INCOME DIVIDENDS: DIVIDEND PERCENT QUALIFYING
DECLARATION RECORD PAYABLE AMOUNT PER FOR DEDUCTION BY
PORTFOLIO DATE DATE DATE SHARE CORPORATIONS
- -------------------------------- ----------- --------- --------- ----------- -------------------
<S> <C> <C> <C> <C> <C>
Growth Common Stock............. 12/22/94 12/29/94 12/29/94 $ 0.3913 71%
Managed......................... 10/28/94 10/31/94 11/07/94 0.1100 61
Managed......................... 12/22/94 12/29/94 12/29/94 0.1363 65
Managed......................... 4/27/95 4/28/95 5/05/95 0.1775 64
Managed......................... 7/28/95 7/31/95 7/07/95 0.1375 61
Blue Chip....................... 12/22/94 12/29/94 12/29/94 0.1400 87
</TABLE>
<TABLE>
<CAPTION>
CAPITAL GAINS DISTRIBUTIONS: DIVIDEND
DECLARATION RECORD PAYABLE AMOUNT PER
PORTFOLIO DATE DATE DATE SHARE
- -------------------------------- ----------- --------- --------- -----------
<S> <C> <C> <C> <C> <C>
Growth Common Stock............. 12/22/94 12/29/94 12/29/94 $ 0.7237
High Grade Bond................. 12/22/94 12/29/94 12/29/94 0.0320
High Yield Bond................. 12/22/94 12/29/94 12/29/94 0.10475
Managed......................... 12/22/94 12/29/94 12/29/94 0.2387
</TABLE>
The capital gains distributions related to the Growth Common Stock, High
Yield Bond and Managed Portfolios include net short-term realized gains of
$2,277,014 ($0.4587 per share), $11,910 ($0.01875 per share) and $199,174
($0.1187 per share), respectively, that are taxable to shareholders as ordinary
income dividends.
39
<PAGE>
FBL SERIES FUND, INC.
FINANCIAL HIGHLIGHTS
YEARS ENDED JULY 31, 1995, 1994, 1993, 1992 AND 1991
<TABLE>
<CAPTION>
GROWTH
COMMON STOCK
PORTFOLIO
---------------------------------------------------------------
1995 1994 1993 1992 1991
----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of year....................... $ 13.07 $ 15.13 $ 12.48 $ 11.64 $ 11.02
Income From Investment Operations
Net investment income................................ 0.43 0.60 0.51 0.48 0.58
Net gains or losses on securities (both realized and
unrealized)........................................ 0.65 (0.49) 2.75 0.93 0.65
----------- ----------- ----------- ----------- -----------
Total from investment operations....................... 1.08 0.11 3.26 1.41 1.23
----------- ----------- ----------- ----------- -----------
Less Distributions
Dividends (from net investment income)............... (0.39) (0.60) (0.48) (0.57) (0.61)
Distributions (from capital gains)................... (0.72) (1.57) (0.13)
Distributions in excess of net realized gains........
----------- ----------- ----------- ----------- -----------
Total distributions.................................... (1.11) (2.17) (0.61) (0.57) (0.61)
----------- ----------- ----------- ----------- -----------
Net asset value, end of year............................. $ 13.04 $ 13.07 $ 15.13 $ 12.48 $ 11.64
----------- ----------- ----------- ----------- -----------
----------- ----------- ----------- ----------- -----------
Total Return:
Total investment return based on net asset value (1)... 9.36% 0.34% 27.25% 12.51% 11.67%
Ratios/Supplemental Data:
Net assets, end of year ($000's omitted)............... 70,947 64,315 51,732 39,418 36,193
Ratio of net expenses to average net assets............ 1.62% 1.60% 1.61% 1.69% 1.59%
Ratio of net income to average net assets.............. 3.43% 4.05% 3.80% 3.99% 5.19%
Portfolio turnover rate................................ 85% 93% 92% 87% 59%
Information assuming no voluntary reimbursement by FBL
Investment of excess operating expenses (see NOTE 3):
Per share net investment income........................
Ratio of expenses to average net assets................
Amount reimbursed......................................
</TABLE>
- ------------------------------
Note: Per share amounts have been calculated on the basis of monthly per share
amounts (using average monthly outstanding shares) accumulated for the
period.
(1) Total investment return is calculated assuming an initial investment made at
the net asset value at the beginning of the year, reinvestment of all
dividends and distributions at net asset value during the year, and
redemption on the last day of the year. Contingent deferred sales charge is
not reflected in the calculation of total investment return.
SEE ACCOMPANYING NOTES.
40
<PAGE>
<TABLE>
<CAPTION>
HIGH HIGH
GRADE BOND YIELD BOND
PORTFOLIO PORTFOLIO
----------------------------------------------- -------------------------------------------------
1995 1994 1993 1992 1991 1995 1994 1993 1992 1991
------- ------- ------- ------- ------- -------- -------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net asset value, beginning
of year.................... $10.13 $10.69 $10.68 $10.15 $ 9.95 $10.00 $10.76 $10.47 $ 9.82 $ 9.62
Income From Investment
Operations
Net investment income.... 0.63 0.64 0.70 0.73 0.78 0.78 0.81 0.83 0.90 0.95
Net gains or losses on
securities (both
realized and
unrealized)............ 0.16 (0.40) 0.13 0.62 0.20 0.13 (0.60) 0.46 0.65 0.19
------- ------- ------- ------- ------- -------- -------- ------- ------- -------
Total from investment
operations............... 0.79 0.24 0.83 1.35 0.98 0.91 0.21 1.29 1.55 1.14
------- ------- ------- ------- ------- -------- -------- ------- ------- -------
Less Distributions
Dividends (from net
investment income)..... (0.63) (0.64) (0.70) (0.73) (0.78) (0.78) (0.81) (0.83) (0.90) (0.94)
Distributions (from
capital gains)......... (0.16) (0.12) (0.09) (0.09) (0.16) (0.17)
Distributions in excess
of net realized gains.. (0.03) (0.01)
------- ------- ------- ------- ------- -------- -------- ------- ------- -------
Total distributions........ (0.66) (0.80) (0.82) (0.82) (0.78) (0.88) (0.97) (1.00) (0.90) (0.94)
------- ------- ------- ------- ------- -------- -------- ------- ------- -------
Net asset value, end of year. $10.26 $10.13 $10.69 $10.68 $10.15 $10.03 $10.00 $10.76 $10.47 $ 9.82
------- ------- ------- ------- ------- -------- -------- ------- ------- -------
------- ------- ------- ------- ------- -------- -------- ------- ------- -------
Total Return:
Total investment return
based on net asset
value (1)................ 8.23% 1.77% 8.10% 13.71% 10.29% 9.71% 1.88% 12.95% 16.44% 12.83%
Ratios/Supplemental Data:
Net assets, end of year
($000's omitted)......... 8,345 7,596 8,047 7,676 4,276 6,691 6,425 5,758 4,835 4,029
Ratio of net expenses to
average net assets....... 1.99% 1.90% 1.79% 1.88% 1.62% 2.00% 2.00% 2.00% 1.98% 1.77%
Ratio of net income to
average net assets....... 6.29% 6.12% 6.59% 6.94% 7.78% 7.83% 7.68% 7.84% 8.79% 9.98%
Portfolio turnover rate.... 18% 42% 54% 45% 40% 23% 26% 56% 56% 78%
Information assuming no
voluntary reimbursement by
FBL
Investment of excess
operating expenses (see
NOTE 3):
Per share net investment
income................. $ 0.75 $ 0.79 $ 0.82
Ratio of expenses to
average net assets........ 2.29% 2.17% 2.05%
Amount reimbursed.......... $18,810 $10,754 $3,147
</TABLE>
41
<PAGE>
FBL SERIES FUND, INC.
FINANCIAL HIGHLIGHTS (CONTINUED)
<TABLE>
<CAPTION>
MANAGED
PORTFOLIO
----------------------------------------------------
1995 1994 1993 1992 1991
-------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of year............. $11.62 $12.51 $10.77 $ 9.95 $ 9.92
Income From Investment Operations
Net investment income...................... 0.56 0.55 0.54 0.61 0.66
Net gains or losses on securities (both
realized and unrealized)................. 0.47 (0.62) 1.87 0.82 0.03
-------- -------- -------- -------- --------
Total from investment operations............. 1.03 (0.07) 2.41 1.43 0.69
-------- -------- -------- -------- --------
Less Distributions
Dividends (from net investment income)..... (0.56) (0.50) (0.52) (0.61) (0.66)
Distributions (from capital gains)......... (0.14) (0.32) (0.15)
Distributions in excess of net realized
gains.................................... (0.10)
-------- -------- -------- -------- --------
Total distributions.......................... (0.80) (0.82) (0.67) (0.61) (0.66)
-------- -------- -------- -------- --------
Net asset value, end of year................... $11.85 $11.62 $12.51 $10.77 $ 9.95
-------- -------- -------- -------- --------
-------- -------- -------- -------- --------
Total Return:
Total investment return based on net asset
value (1).................................. 9.40% (0.61)% 23.02% 14.79% 7.05%
Ratios/Supplemental Data:
Net assets, end of year ($000's omitted)..... 21,105 19,100 8,257 3,887 3,935
Ratio of net expenses to average net assets.. 1.94% 1.96% 1.96% 2.07% 1.84%
Ratio of net income to average net assets.... 4.86% 4.42% 4.54% 5.93% 6.51%
Portfolio turnover rate...................... 69% 29% 52% 77% 31%
Information assuming no voluntary reimbursement
by FBL Investment of excess operating expenses
(see NOTE 3):
Per share net investment income.............. $ 0.53
Ratio of expenses to average net assets...... 2.02%
Amount reimbursed............................ $3,497
</TABLE>
42
<PAGE>
<TABLE>
<CAPTION>
MONEY MARKET BLUE CHIP
PORTFOLIO PORTFOLIO
------------------------------------------------ ------------------------------------------------
1995 1994 1993 1992 1991 1995 1994 1993 1992 1991
-------- -------- -------- -------- -------- -------- -------- -------- -------- --------
<C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net asset value, beginning
of year................. $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $18.75 $17.69 $16.78 $15.38 $15.61
Income From Investment
Operations
Net investment income. 0.04 0.02 0.01 0.03 0.05 0.19 0.14 0.13 0.17 0.30
Net gains or losses
on securities (both
realized and
unrealized).......... 4.05 1.06 0.90 1.47 0.77
-------- -------- -------- -------- -------- -------- -------- -------- -------- --------
Total from investment
operations............. 0.04 0.02 0.01 0.03 0.05 4.24 1.20 1.03 1.64 1.07
-------- -------- -------- -------- -------- -------- -------- -------- -------- --------
Less Distributions
Dividends (from net
investment income).. (0.04) (0.02) (0.01) (0.03) (0.05) (0.14) (0.14) (0.12) (0.24) (0.31)
Distributions (from
capital gains)...... (0.99)
Distributions in
excess of net
realized gains......
-------- -------- -------- -------- -------- -------- -------- -------- -------- --------
Total distributions.... (0.04) (0.02) (0.01) (0.03) (0.05) (0.14) (0.14) (0.12) (0.24) (1.30)
-------- -------- -------- -------- -------- -------- -------- -------- -------- --------
Net asset value, end of
year.................... $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $22.85 $18.75 $17.69 $16.78 $ 5.38
-------- -------- -------- -------- -------- -------- -------- -------- -------- --------
-------- -------- -------- -------- -------- -------- -------- -------- -------- --------
Total Return:
Total investment
return based on net
asset value (1)........ 3.60% 1.47% 1.33% 2.82% 5.52% 22.77% 6.75% 6.21% 10.77% 8.36%
Ratios/Supplemental Data:
Net assets, end of year
($000's omitted)....... 2,439 2,627 2,555 2,861 3,672 9,657 6,745 5,415 4,405 3,883
Ratio of net expenses to
average net assets..... 2.00% 1.93% 1.94% 2.00% 1.70% 1.78% 1.83% 1.90% 1.92% 1.63%
Ratio of net income to
average net assets..... 3.51% 1.45% 1.33% 2.83% 5.42% 0.92% 0.75% 0.73% 1.09% 2.06%
Portfolio turnover
rate................... 0% 0% 0% 0% 0% 1% 1% 0% 0% 5%
Information assuming no
voluntary reimbursement
by FBL Investment of
excess operating expenses
(see NOTE 3):
Per share net investment
income................. $ 0.03
Ratio of expenses to
average net assets..... 2.20%
Amount reimbursed....... $4,948
</TABLE>
43
<PAGE>
REPORT OF INDEPENDENT AUDITORS
The Board of Directors and Shareholders
FBL Series Fund, Inc.
We have audited the accompanying statements of assets and liabilities,
including the schedules of investments, of FBL Series Fund, Inc. (comprising,
respectively, the Growth Common Stock, High Grade Bond, High Yield Bond,
Managed, Money Market and Blue Chip Portfolios) as of July 31, 1995, and the
related statements of operations for the year then ended, the statements of
changes in net assets for each of the two years in the period then ended, and
the financial highlights for each of the five years in the period then ended.
These financial statements and financial highlights are the responsibility of
the Fund's management. Our responsibility is to express an opinion on these
financial statements and financial highlights based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned as of July
31, 1995, by correspondence with the custodian and broker. An audit also
includes assessing the accounting principles used and significant estimates made
by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, the financial statements and financial highlights referred
to above present fairly, in all material respects, the financial position of
each of the respective portfolios constituting the FBL Series Fund, Inc. at July
31, 1995, the results of their operations for the year then ended, the changes
in their net assets for each of the two years in the period then ended, and the
financial highlights for each of the five years in the period then ended, in
conformity with generally accepted accounting principles.
/s/ Ernst & Young LLP
Des Moines, Iowa
September 1, 1995
44
<PAGE>
FBL SERIES FUND, INC.
PART C
OTHER INFORMATION
ITEM 24. FINANCIAL STATEMENTS AND EXHIBITS.
(A) FINANCIAL STATEMENTS:
(i) Financial Statements included in Part A of Registration Statement:
Condensed Financial Information at July 31, 1995
(ii) Financial Statements included in Part B of Registration Statement
through incorporation by reference to the 1995 Annual Report to
Shareholders of FBL Series Fund, Inc.:
Report of Independent Auditors
Statements of Assets and Liabilities
at July 31, 1995
Statements of Operations for the year ended
July 31, 1995
Statements of Changes in Net Assets for the years
ended July 31, 1995 and 1994
Schedules of Investments at July 31, 1995
Notes to Financial Statements
C-1
<PAGE>
(B) EXHIBITS:
1. *(a) Articles of Incorporation 1/
*(b) Articles of Amendment which became effective in 1977 and 1978 2/
*(c) Articles of Amendment which became effective on November 30, 1987
3/
*(d) Articles of Amendment which became effective on November 22, 1991
*(e) Articles Supplementary to the Charter which became effective on
November 25, 1991
*2. By-laws, as amended 3/
3. Inapplicable
*4. Specimen copy of uniform common stock certificate 3/
*5. Investment Advisory and Management Services Agreement dated
November 11, 1987 4/
6. *(a) Underwriting Agreement dated December 31, 1983 5/
*(b) Form of Dealer Agreement 4/
*(c) Administrative Services Agreement dated November 25, 1991 9/
7. Inapplicable
_______________________
* Filed herewith
1/ Previously filed with the initial Registration Statement on Form S-5,
filed on or about September 26, 1970.
2/ Previously filed with Post-Effective Amendment No. 10 to the
Registration Statement on Form N-1, filed on or about June 29, 1979.
3/ Previously filed with Post-Effective Amendment No. 22 to the
Registration Statement on Form N-1A, filed on or about December 1, 1987.
4/ Previously filed with Post-Effective Amendment No. 21 to the
Registration Statement on Form N-1A, filed on or about September 18, 1987.
C-2
<PAGE>
5/ Previously filed with Post-Effective Amendment No. 18 to the
Registration Statement on Form N-1A, filed on or about October 2, 1984.
9/ Previously filed with Post-Effective Amendment No. 26 to the
Registration Statement on Form N-1A, filed on or about September 26, 1991.
*8. Custodian Agreement dated January 12, 1993
*9. (a) Fidelity Bond Joint Insureds Agreement 8/
*(b) Joint Insureds D&O and E&O Agreement 3/
*(c) Accounting Services Agreement 3/
*(d) Shareholder Service, Dividend Distributing and Transfer Agent
Agreement dated September 1, 1995
10. Inapplicable
*11. Consent of Ernst & Young LLP
12. Inapplicable
13. Inapplicable
*14. *(a)(1) Form of Prototype Money Purchase
Pension and Profit Sharing Plan, as amended
*(a)(2) Form of Adoption Agreements
*(a)(3) Application Form for Keogh Plan 6/
*(b)(1) Model Individual Retirement Account, Form
5305-A
*(b)(2) Model IRA Disclosure Statement 7/
15. *(a) Distribution and Shareholder Servicing Plan and Agreement dated
as of December 1, 1987 4/
*(b) Distribution and Shareholder Servicing Plan and Agreement dated
December 1, 1987, as amended November 25, 1991 10/
16. Schedule for Computation of Performance Data 11/
*27. Financial Data Schedules
_______________________
* Filed herewith
6/ Previously filed with Post-Effective Amendment No. 20 to the
Registration Statement on Form N-1A, filed on or about November 29, 1986.
C-3
<PAGE>
7/ Previously filed with Post-Effective Amendment No. 14 to the
Registration Statement on Form N-1, filed on or about November 25, 1981.
8/ Previously filed with Post-Effective Amendment No. 23 to the
Registration Statement on Form N-1A, filed on or about November 30, 1988.
10/ Previously filed with Post-Effective Amendment No. 26 to the
Registration Statement on Form N-1A, filed on or about September 26, 1991.
11/ Incorporated by reference from Post-Effective Amendment No. 23 to the
Registration Statement on Form N-1A, filed on or about November 30, 1988.
C-4
<PAGE>
ITEM 25. PERSONS CONTROLLED BY OR UNDER COMMON
CONTROL WITH REGISTRANT.
Inapplicable.
ITEM 26. NUMBER OF HOLDERS OF SECURITIES.
As of October 31, 1995, the number of record holders of each class of
common stock of the Registrant were as follows:
Number of
Title of Class Record Holders
-------------- --------------
Growth Common Stock Portfolio 9,906
High Grade Bond Portfolio 1,306
High Yield Bond Portfolio 1,386
Managed Portfolio 4,640
Money Market Portfolio 198
Blue Chip Portfolio 2,812
ITEM 27. INDEMNIFICATION.
The Maryland Code, Corporations and Associations, Section 2-418,
provides for indemnification of directors, officers, employees and agents.
Article XVI of the Registrant's Articles of Incorporation restricts
indemnification for any officer or director in cases of willful misfeasance,
gross negligence or reckless disregard of the duties involved in the conduct of
their offices. Article XV of the Registrant's By-Laws provides for
indemnification of officers under certain circumstances.
The Investment Advisory and Management Services Agreement between the
Registrant and FBL Investment Advisory Services, Inc. ("Adviser") provides that,
in the absence of willful misfeasance, bad faith, gross negligence or reckless
disregard of obligations or duties thereunder on the part of the Adviser, the
Adviser shall not be liable for any error of judgment or mistake of law, or for
any loss suffered by the Fund in connection with the matters to which such
Agreement relates.
In addition, the Registrant maintains a directors and officers "errors
and omissions" liability insurance policy under which the Registrant and its
directors and officers are named insureds.
Insofar as indemnification for liabilities arising under the
Securities Act of 1933 ("Act") may be permitted to directors, officers and
controlling persons of the Registrant pursuant to the foregoing provisions, or
otherwise, the Registrant has been advised that in the opinion of the Securities
and Exchange Commission such indemnification is against
C-5
<PAGE>
public policy as expressed in the Act and is, therefore, unenforceable. In the
event that a claim for indemnification against such liabilities (other than the
payment by the Registrant of expenses incurred or paid by a director, officer or
controlling person of the Registrant in the successful defense of any action,
suit or proceeding) is asserted by such director, officer or controlling person
in connection with the securities being registered, the Registrant will, unless
in the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question whether
such indemnification by it is against public policy as expressed in the Act and
will be governed by the final adjudication of such issue.
ITEM 28. BUSINESS AND OTHER CONNECTIONS OF
INVESTMENT ADVISER.
Registrant's investment adviser is FBL Investment Advisory Services,
Inc. ("FBL"). In addition to its services to Registrant as investment adviser,
underwriter, shareholder service, transfer and dividend disbursing agent, all as
set forth in parts A and B of this Registration Statement on Form N-1A, FBL acts
as adviser, underwriter, shareholder service, transfer and dividend disbursing
agent for FBL Money Market Fund, Inc., a diversified open-end management
investment company, and FBL Variable Insurance Series Fund , a diversified open-
end series management investment company.
The principal occupations of the principal executive officers and
directors of FBL and their services as officers and employees of Farm Bureau
Multi-State Services, Inc. and its affiliates as disclosed below. The address
of Farm Bureau Multi-State Services, Inc. and its affiliates is 5400 University
Avenue, West Des Moines, Iowa 50266.
C-6
<PAGE>
Name and Position(s)
With FBL Principal Occupations
- ------------------------- --------------------------------------------
STEPHEN M. MORAIN, General Counsel and Assistant Secretary,
Senior Vice President, Iowa Farm Bureau Federation; General Counsel,
General Counsel and Secretary and Director, Farm Bureau
Director Management Corporation; Senior Vice President
and General Counsel, Farm Bureau Multi-State
Services, Inc., Farm Bureau Life Insurance
Company, Universal Assurors Life Insurance
Company, Farm Bureau Mutual Insurance
Company, Utah Farm Bureau Insurance Company,
FBL Financial Services, Inc., FBL Insurance
Brokerage, Inc. and South Dakota Farm Bureau
Mutual Insurance Company; Senior Vice
President, General Counsel, Assistant
Secretary and Director, FBL Series Fund, Inc.
and FBL Money Market Fund, Inc.; Senior Vice
President, General Counsel, Assistant
Secretary and Trustee, FBL Variable Insurance
Series Fund; Senior Vice President, General
Counsel and Director, FBL Marketing Services,
Inc.; Director, Computer Aided Design
Software, Inc. and Iowa Business Development
Finance Corporation; Chairman, Edge
Technologies, Inc.
RICHARD D. WARMING, Vice President, Chief Investment Officer
President and Director and Assistant Treasurer, Farm Bureau Multi-
State Services, Inc., Farm Bureau Life
Insurance Company, Universal Assurors Life
Insurance Company, Western Farm Bureau Life
Insurance Company, FBL Insurance Brokerage,
Inc., Utah Farm Bureau Insurance Company, FBL
Financial Services, Inc., Farm Bureau Mutual
Insurance Company, Western Agricultural
Insurance Company, Western Farm Bureau Mutual
Insurance Company and South Dakota Farm
Bureau Mutual Insurance Company; President
and Director, FBL Leasing Services, Inc.;
Vice President, Chief Investment Officer, FBL
Series Fund, Inc., FBL Money Market Fund,
Inc. and FBL Variable Insurance Series Fund;
Vice President, Chief Investment Officer and
Director, FBL Marketing Services, Inc.; Vice-
President, Secretary and Director,
C-7
<PAGE>
RIK, Inc.; Secretary and Director, FBL Real
Estate Ventures, Ltd.
WILLIAM J. ODDY, Vice President, Chief Operating Officer
Vice President, Chief and Assistant General Manager, Farm
Operating Officer, Bureau Multi-State Services, Inc.; Farm
Assistant General Bureau Life Insurance Company, Universal
Manager, Treasurer and Assurors Life Insurance Company, Western
Director Farm Bureau Life Insurance Company, FBL
Insurance Brokerage, Inc., Utah Farm Bureau
Insurance Company, Farm Bureau Mutual
Insurance Company, South Dakota Farm Bureau
Mutual Insurance Company, FBL Financial
Services, Inc., FBL Series Fund, Inc., FBL
Money Market Fund, Inc. and FBL Variable
Insurance Series Fund; President, Treasurer
and Director, Communications Providers, Inc.;
Vice President, Chief Operating Officer,
Assistant General Manager, Treasurer and
Director, FBL Marketing Services, Inc.;
President and Director, FBL Real Estate
Ventures, Ltd. and RIK, Inc.
DENNIS M. MARKER, Investment Vice President, Administration,
Investment Vice President, Farm Bureau Life Insurance Company,
Administration, Secretary Universal Assurors Life Insurance Company,
and Director Western Farm Bureau Life Insurance Company,
FBL Insurance Brokerage, Inc., Farm Bureau
Mutual Insurance Company, Utah Farm Bureau
Insurance Company and South Dakota Farm
Bureau Mutual Insurance Company; Investment
Vice President, Administration and Assistant
Secretary, FBL Series Fund, Inc., FBL Money
Market Fund, Inc. and FBL Variable Insurance
Series Fund; Vice President and Director, FBL
Leasing Services, Inc.; Investment Vice
President, Administration, Secretary and
Director, FBL Marketing Services, Inc.
THOMAS R. GIBSON, Executive Vice President and General
Executive Vice President, Manager, Farm Bureau Multi-State Services,
General Manager and Inc., Farm Bureau Life Insurance Company,
Director Universal Assurors Life Insurance Company,
Western Farm
C-8
<PAGE>
Name and Position(s)
With FBL Principal Occupations
- ------------------------- --------------------------------------------
Bureau Life Insurance Company, Farm Bureau
Mutual Insurance Company, Utah Farm Bureau
Insurance Company, FBL Insurance Brokerage,
Inc., FBL Financial Services, Inc., South
Dakota Farm Bureau Mutual Insurance Company,
FBL Series Fund, Inc., FBL Money Market Fund,
Inc. and FBL Variable Insurance Series Fund;
Executive Vice President, General Manager and
Director, FBL Marketing Services, Inc.
TIMOTHY J. HOFFMAN, Vice President, Chief Marketing Officer,
Vice President, Chief Farm Bureau Multi-State Services, Inc.,
Marketing Officer and Farm Bureau Life Insurance Company,
Director Universal Assurors Life Insurance Company,
Western Farm Bureau Life Insurance Company,
Farm Bureau Mutual Insurance Company, Utah
Farm Bureau Insurance Company, FBL Financial
Services, Inc., South Dakota Farm Bureau
Mutual Insurance Company, FBL Insurance
Brokerage, Inc., FBL Series Fund, Inc., FBL
Money Market Fund, Inc. and FBL Variable
Insurance Series Fund; President and
Director, FBL Marketing Services, Inc. and
FBL Education Services, Inc.
ITEM 29. PRINCIPAL UNDERWRITERS.
(a) FBL Investment Advisory Services, Inc., the principal underwriter
for Registrant, also acts as the principal investment adviser,
underwriter, shareholder service, transfer and dividend
disbursing agent for FBL Money Market Fund, Inc., a diversified
open-end management investment company and FBL Variable Insurance
Series Fund, a diversified, open-end series management investment
company.
(b) The principal business address of each director and principal
officer of the principal underwriter is 5400 University Avenue,
West Des Moines, Iowa 50266. See Item 28 for information on the
principal officers of FBL Investment Advisory Services, Inc.,
investment adviser and principal underwriter for the Registrant.
(c) Inapplicable.
C-9
<PAGE>
ITEM 30. LOCATION OF ACCOUNTS AND RECORDS.
All accounts, books and other documents required to be maintained by
Section 31(a) of the Investment Company Act of 1940 and the rules thereunder
will be maintained at the offices of the Registrant and the offices of the
Adviser, FBL Investment Advisory Services, Inc., 5400 University Avenue, West
Des Moines, Iowa 50266.
ITEM 31. MANAGEMENT SERVICES.
Inapplicable.
ITEM 32. UNDERTAKINGS.
Inapplicable.
C-10
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the Investment
Company Act of 1940, the registrant certifies that it meets all of the
requirements for effectiveness of this registration statement pursuant to Rule
485(b) under the Securities Act of 1933 and has duly caused this amended
registration statement to be signed on its behalf by the undersigned, thereunto
duly authorized, in the City of West Des Moines and State of Iowa, on the 28th
day of November, 1995.
FBL SERIES FUND, INC.
By: /s/Merlin D. Plagge
------------------------------------
Merlin D. Plagge, President
Pursuant to the requirements of the Securities Act of 1933, this post-effective
amendment to the registration statement has been signed below by the following
persons in the capacity and on the date indicated.
/s/Merlin D. Plagge President and Director November 28, 1995
- ------------------------------ (Principal Executive -------------------
Merlin D. Plagge Officer) (dated)
/s/Eugene R. Maahs Senior Vice President, November 28, 1995
- ------------------------------ Secretary-Treasurer and -------------------
Eugene R. Maahs Director (Principal (dated)
Financial and Accounting
Officer)
/s/Stephen M. Morain Senior Vice President, November 28, 1995
- ------------------------------ General Counsel, -------------------
Stephen M. Morain Assistant Secretary and (dated)
Director
/s/Donald G. Bartling Director November 28, 1995
- ------------------------------ -------------------
Donald G. Bartling* (dated)
/s/John R. Graham Director November 28, 1995
- ------------------------------ -------------------
John R. Graham* (dated)
C-11
<PAGE>
/s/Erwin H. Johnson Director November 28, 1995
- ------------------------------ -------------------
Erwin H. Johnson* (dated)
/s/Ann Jorgensen Director November 28, 1995
- ------------------------------ -------------------
Ann Jorgensen* (dated)
/s/Dale W. Nelson Director November 28, 1995
- ------------------------------ -------------------
Dale W. Nelson* (dated)
/s/Curtis C. Pietz Director November 28, 1995
- ------------------------------ -------------------
Curtis C. Pietz* (dated)
*By/s/Stephen M. Morain Attorney-in-Fact, pursuant to Power of Attorney.
--------------------
Stephen M. Morain
C-12
<PAGE>
INDEX TO EXHIBITS
1. *(a) Articles of Incorporation
*(b) Articles of Amendment which became
effective in 1977 and 1978
*(c) Articles of Amendment which
became effective on
November 30, 1987
*(d) Articles of Amendment which
became effective on November 22, 1991
*(e) Articles Supplementary to the
Charter which became effective on
November 25, 1991
*2. By-laws, as amended
3. Inapplicable
*4. Specimen copy of uniform common
stock certificate
*5. Investment Advisory and Management
Services Agreement dated
November 11, 1987
*6. *(a) Underwriting Agreement dated
December 31, 1983
*(b) Form of Dealer Agreement
________________________
* Filed herewith
<PAGE>
*(c) Administrative Services Agreement
dated November 25, 1991
7. Inapplicable
*8. Custodian Agreement dated January 12, 1993
9. *(a) Fidelity Bond Joint Insureds Agreement
*(b) Joint Insureds D&O and E&O Agreement
*(c) Accounting Services Agreement
*(d) Shareholder Service, Dividend Distribution and Transfer Agent
Agreement dated September 1, 1995
10. Inapplicable
*11. Consent of Ernst & Young LLP
12. Inapplicable
13. Inapplicable
14. *(a)(1) Form of Prototype Money Purchase
Pension and Profit Sharing Plan as amended
*(a)(2) Form of Adoption Agreements
*(a)(3) Application Form for Keogh Plan5/
*(b)(1) Model Individual Retirement Account, Form 5305-A
*(b)(2) Model IRA Disclosure Statement6/
_______________________
<PAGE>
* Filed herewith
<PAGE>
15. *(a) Distribution and Shareholder Servicing Plan and
Agreement dated as of December 1, 1987
*(b) Distribution and Shareholder Servicing Plan and
Agreement dated December 1, 1987, as amended
November 25, 1991.
16. Schedule for Computation of Performance Data
*27. Financial Data Schedules
_______________________
* Filed herewith
<PAGE>
ARTICLES OF INCORPORATION
OF
CHALLENGER INVESTMENT FUND, INC.
We, the undersigned, CHARLES F. CUSTER, whose post office address is One
North LaSalle Street, Chicago, Illinois, JAMES S. WIRT, whose post office
address is One North LaSalle Street, Chicago, Illinois and RUSSELL H. MATTHIAS,
JR., whose post office address is One North LaSalle Street, Chicago, Illinois,
each being at least twenty-one years of age, do under and by virtue of the
General Law of the State of Maryland, authorizing the formation of corporations,
associate ourselves as incorporators with the intention of forming a
corporation.
ARTICLE I
The name of the corporation is CHALLENGER INVESTMENT FUND, INC.,
(hereinafter called the "Corporation").
ARTICLE II
The nature of the business and the objects and purposes to be transacted,
promoted or carried on are to engage in the business of an incorporated
investment company of the management type investing and reinvesting its assets
in accordance with the provisions of these articles of incorporation. The
general nature of its business shall be to buy, hold, sell, exchange, pledge and
otherwise deal in notes, stock, bonds, or other securities of whatsoever
nature; to do any and all acts and things necessary or incidental thereto to the
extent permitted business corporations under the provisions of the laws of the
State of Maryland as from time to time amended; to borrow money or otherwise
obtain credit and to secure the same by mortgaging, pledging or otherwise
subjecting as security the assets of the corporation; and to sell, hold,
purchase and reissue the shares of its own capital stock in accordance with the
provisions of these articles of incorporation.
ARTICLE III
The post office address of the place at which the principal office of the
corporation in this State will be located, c/o The Corporation Trust
Incorporated, First National Bank Building, Light and Redwood Streets,
Baltimore, Maryland, 21202. The resident agent of the corporation is The
Corporation Trust Incorporated, a corporation of this State, the post office
address of which is First National Bank Building, Light and Redwood Streets,
Baltimore, Maryland, 21202.
1
<PAGE>
ARTICLE IV
The total capital stock to be authorized is as follows:
Class of Stock Par Value Number of Shares Amount
- -------------- --------- ---------------- ------
Common $1.00 10,000,000 $10,000,000
Restrictions imposed upon the transfer of shares:
None.
There shall be one class of stock only, known as the common
stock, of $1.00 par value, each share of which shall have equal voting rights as
all other shares.
ARTICLE V
The number of directors of the corporation shall be seven, which
number may be increased or decreased pursuant to the by-laws of the corporation
but shall never be less than three. The election of directors need not be by
ballot. The names of the directors who shall act until the first annual meeting
or until their successors are duly chosen and qualify are:
Dean R. Kleckner
Kenneth C. Thatcher
Donald B. Groves
P. Dillon Hempstead
Charles H. Marshall
Maynard Tollefson
Alice V. Van Wert
ARTICLE VI
The board of directors shall have authority from time to time to
invest the funds of the corporation in stocks, bonds and other securities issued
by corporations, trusts or associations, domestic or foreign; and obligations
issued or guaranteed by the United States of America, or any agency thereof, by
the government of any foreign country, by any State of the United States, or by
any political subdivision or agency of any state or foreign country; and to
change investments from time to time, and to hold uninvested funds in cash.
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ARTICLE VII
(a) The board of directors may from time to time issue and sell or provide
for the issuance and sale of the authorized but unissued shares of the
corporation. All shares of the corporation sold shall be sold for cash which
shall in each case be paid prior to the delivery of any certificate of the
corporation for such shares. The initial issuance of the shares of the
corporation shall not exceed 20,000 shares; which shall be sold at a sales price
such as will produce net proceeds to the corporation before taxes in connection
with such issuance and sale of not less than $10.00 per share. After the sale
of the initial issuance, the remaining shares of this corporation provided in
these articles of incorporation and including such additional shares as may from
time to time hereafter be authorized by vote of the shareholders and including
any shares of the corporation which may have been repurchased by the
corporation, as herein provided, may be sold as the board of directors may from
time to time deem advisable. Such shares shall be sold at a price which will
produce net proceeds to the corporation equal to not less than the net asset
value thereof in effect when such sales are made or the net asset value next
determined after receipt of the order to purchase such shares.
(b) The corporation may issue and sell fractions of shares having pro rata
all the rights of full shares, including, without limitation, the right to vote
and to receive dividends, and wherever the words "share" or "shares" are used in
these articles or in the by-laws they shall be deemed to include fractions of
shares where the context does not clearly indicate that only full shares are
intended.
(c) No shares need be offered to existing shareholders before being
offered to others. In connection with the acquisition of all or substantially
all the assets of another company or trust, the board of directors may issue or
cause to be issued shares of the corporation and accept in payment thereof in
lieu of cash such assets of such company or trust at market value, provided such
assets are of the character in which the board of directors are authorized to
invest the funds of the corporation. No shares shall be sold by the corporation
during any period when the determination of net asset value is suspended by
declaration or resolution of the board of directors pursuant to the provisions
of these articles of incorporation.
ARTICLE VIII
(a) Any shareholder of record in the corporation desiring to dispose of
his shares may deposit his certificate or certificates for such shares with the
corporation or its agent, duly endorsed or accompanied by a proper instrument of
transfer, with a request that the corporation redeem the shares represented
thereby. Upon any such deposit being made, the corporation shall be required to
redeem said shares but only at the net asset value of such shares next
determined following their deposit. When authorized by the board of directors,
the corporation may deduct from such redemption a charge not exceeding 1% of the
net asset value of such shares. Payment for such shares shall be made by the
corporation within seven days after the date upon which the shares are
deposited. Whenever the board of directors, by declaration of resolution, has
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suspended the determination of net asset value pursuant to the provisions of
these articles of incorporation, the right of any shareholder to require the
corporation to redeem his shares shall be likewise suspended. At any time
such suspension is in effect any shareholder may withdraw his certificate or
certificates from deposit or may leave the same on deposit, in which case the
redemption price shall be the net asset value next determined after the
suspension is terminated.
(b) The corporation may by agreement with any shareholder purchase shares
of the corporation at a price not exceeding the net asset value in effect at the
time when such purchase or contract to purchase is made or the net asset value
next to be determined.
(c) Any shares of its stock purchased or redeemed by the corporation
pursuant to the provisions of this article shall be deemed retired and shall
thereafter have the status of authorized but unissued stock.
ARTICLE IX
(a) The net asset value of each share of the corporation outstanding shall
be determined by or under the direction of the board of directors as of the
close of the New York Stock Exchange on each day on which said exchange is open.
The board of directors may also determine or cause to be determined the net
asset value as of any particular time in addition to the close of the New York
Stock Exchange on any day on which said Exchange is open. Such net asset value
shall be determined (1) by appraising securities in the portfolio of the
corporation which are traded on the New York Stock Exchange or any other
national securities exchange at the last sale price, or, if no sale, at the
last bid price, (2) by appraising all other securities not so traded at the bid
price if market quotations are available, (3) by appraising all other
securities and other assets at fair value in the best judgement of the board of
directors, (4) by deducting from the total appraised value of the assets, any
actual and accrued liabilities determined in accordance with good accounting
practice, and (5) by dividing the total net asset value of the corporation thus
obtained by the number of shares of the corporation then outstanding in the
hands of the public. When the net asset value is determined as of a time other
than the close of the New York Stock Exchange, such determination may be
calculated or estimated in such manner as shall be deemed adequate to reflect a
fair approximate estimate of the probable change in net asset value which has
occurred since such close.
(b) The board of directors may suspend the determination of net asset
value for all or any part of any period during which the New York Stock Exchange
is closed, other than a period during which such Exchange is normally closed, or
during which trading on the New York Stock Exchange is restricted by
governmental order, or during which an emergency exists such as would make
disposal by the corporation of securities owned by the corporation unreasonable
or impracticable, or would make determination of the net asset value of the
assets of the corporation impracticable. The determination of whether trading
on the New York Stock Exchange is restricted or whether such an emergency, as
herein provided, exists shall be by applicable rules and regulations of the
Securities and Exchange Commission or other governmental authority. The
suspension shall become effective at such time as the board of directors shall
specify in their declaration or resolution,
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but not later than the close of business on the next succeeding business day
following the declaration or resolution. After such suspension becomes
effective, there shall be no determination of net asset value until the board of
directors shall declare the suspension terminated. The suspension shall
terminate in any event on the first day on which the New York Stock Exchange is
open, the restricted trading on the New York Stock Exchange shall have expired,
or the emergency shall have expired in accordance with the official ruling of
the Securities and Exchange Commission or other governmental authority, or in
the absence of such ruling, upon the determination of the board of directors.
(c) The board of directors may delegate any of its powers and duties under
this article with respect to appraisal of assets and liabilities and
determination of net asset value or with respect to suspension of the
determination of net asset value to an officer or officers or agent or agents of
the corporation designated from time to time by the board of directors.
ARTICLE X
(a) The corporation may employ a custodian, which shall be a bank or trust
company having an aggregate capital, surplus and undivided profits of at least
$2,000,000. Such custodian shall have authority to act as agent for the
corporation, subject to such restrictions, limitations and other requirements,
if any, as may be contained in the by-laws of the corporation, to hold the
securities owned by the corporation and deliver the same upon written order; to
receive and receipt for any monies due to the corporation and deposit the same
in its own banking department or elsewhere as the board of directors may direct;
and to disburse such funds upon orders or vouchers.
(b) The corporation may also employ such custodian as its agent to keep
the books and accounts of the corporation, and to furnish clerical and
accounting services; and to determine the net asset value of the shares of the
corporation in accordance with the provisions of these articles of
incorporation. The compensation to be paid to the custodian for such services
as it may render to the corporation shall be in such amount as may be agreed
upon by the corporation and the custodian. When so directed by the board of
directors, the custodian shall deliver and pay over all property of the
corporation held by it as specified in such directions.
(c) The board of directors in its discretion may employ a transfer agent,
registrar or dividend disbursing agent for the corporation under such terms and
conditions as the board shall deem advisable.
ARTICLE XI
(a) The board of directors may in its discretion from time to time enter
into a contract or contracts with any one or more parties as an underwriter,
providing for the sale of the shares of this corporation at a price to net the
corporation not less than the amount provided for in Article VII hereof, whereby
the corporation may either agree to sell the shares to the underwriter or
underwriters or appoint the underwriter or underwriters to be its agent or
agents in the sale of such shares.
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Such contract or contracts may be either exclusive or non-exclusive, and may
contain such other terms and conditions as the board of directors may deem
advisable. Such contract or contracts may also provide for the repurchase of
shares of this corporation by such underwriter as agent of the corporation.
(b) The board of directors may in its discretion from time to time enter
into an investment advisory or management contract with any other person, firm
or corporation, hereinafter called the "Investment Adviser", to furnish advice
to the corporation with respect to the desirability of investing in, purchasing
or selling securities or other property, or to determine what securities or
other property shall be purchased or sold by the corporation, and to furnish to
the board of directors such management, investment advisory, statistical and
research facilities and such other services and facilities, if any, as the board
of directors may deem desirable upon such terms and conditions as the board of
directors may determine. The compensation to be paid under the terms of such
contract or contracts shall be subject to the limitations contained in Article
XII of these articles of incorporation.
(c) The board of directors, subject to the provisions of this Article, may
in its discretion enter into an underwriting contract and an investment advisory
contract with the same person, firm or corporation. Any contract may be entered
into with any person, firm or corporation irrespective of whether or not one or
more of the directors of officers of this corporation may also be an officer,
director, shareholder or member of such other person, firm or corporation, and
such contract shall not be invalidated or rendered voidable by reason of any
such relationship. No person holding such relationship shall be liable because
of such relationship for any loss or expense to the corporation under or by
reason of such contract, or accountable for any profit realized directly or
indirectly therefrom, provided that such contract when executed was reasonable
and fair, consistent with the provisions of these articles of incorporation and
approved by a majority of the board of directors of this corporation who are not
so related, or by the vote of a majority of the outstanding shares of this
corporation.
(d) Any contract entered into pursuant to the terms of this article shall
be consistent with and subject to the requirements of the Investment Company Act
of 1940, including any amendment thereto or other applicable act of Congress
hereafter enacted, with respect to its duration, termination, authorization,
approval, assignment or renewal. No amendment to any contract for investment
advisory services shall be effective unless approved by affirmative vote of a
majority of the outstanding shares of the corporation.
ARTICLE XII
(a) Subject to the limitations contained in this article the directors
shall be entitled to reasonable remuneration from the corporation for their
services as directors in such amount as may from time to time be fixed by vote
of the board of directors. The board of directors shall also fix the
compensation of all officers, consultants and agents of the corporation whom
they may elect or appoint.
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(b) The corporation may incur such expenses as are necessary to perform
its function and such expenses may include but are not limited to the following:
Compensation to be paid to any other party to an investment advisory contract
with the corporation entered into pursuant to Article XI; the compensation to be
paid to the officers, consultants and employees of the corporation; office hire;
ordinary office expenses; investment advisory, statistical and research
facilities; directors' fees; legal or accounting expenses; taxes and
governmental fees; cost of stock certificates; reports and notices to
shareholders; association dues; fees and expense of any custodian (including the
expense computing the net asset value as provided in Article IX); transfer
agent; and registrar or dividend disbursing agent. The aggregate annual
expenses of every character exclusive of interest and taxes shall not exceed 1 -
1/2% of the average net assets of the corporation calculated on a monthly or
more frequent basis. During any period during which the determination of net
asset value is suspended, as provided in these articles of incorporation, the
net asset value as last determined and effective shall for the purposes of this
article be deemed to be the net asset value as of the close of business on each
business day until a new net asset value is again determined and made effective
as provided herein.
(c) The provisions of this article shall not preclude the payment of
reasonable fees for legal or accounting services to any firm of which a director
or officer of the corporation may be a member, nor of customary brokerage
charges in connection with the purchase or sale of securities to any firm in the
brokerage business of which a director or officer of the corporation may be a
member, officer, or director, and no part of any such fee, charge or
compensation shall be deemed compensation to such officer or director within the
purview of this article. No compensation, commission, fee or profit which may
be received by the other party to a contract entered into pursuant to Article XI
shall be deemed compensation to any officer or director of the corporation
simply because such officer or director is also an officer, director or member
of such other party.
ARTICLE XIII
The corporation shall not lend any of its assets to the underwriter or
investment adviser or to any officer or director of the underwriter or
investment adviser of this corporation and shall not permit any officer or
director, or any officer or director of the underwriter or investment adviser,
to deal for or on behalf of the corporation with himself as principal or agent,
or with any partnership, association or corporation in which he has a financial
interest; provided that the foregoing provisions shall not prevent (a) officers
and directors of the corporation from buying, holding or selling shares in the
corporation, or from being partners, officers or directors of or otherwise
financially interested in the underwriter or the investment adviser; (b)
employment of legal counsel, registrar, transfer agent, dividend disbursing
agent or custodian who is, or has a partner, shareholder, officer or director
who is, an officer or director of the corporation, if only customary fees are
charged for services to the corporation; or (c) purchases or sales of securities
or other property if such transaction is permitted by or is exempt or exempted
from the provisions of the Investment Company Act of 1940.
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ARTICLE XIV
(a) The board of directors may from time to time declare and pay dividends
and subject to the limitations and conditions contained in this article the
amount of such dividends and the payment thereof shall be within the discretion
of the directors. Ordinary dividends may be paid from undistributed net income
of the corporation. Net income for this purpose shall be calculated on the
basis of good accounting practice and shall include all dividend and interest
income but exclude all capital gains of the corporation whether realized or
unrealized. The income account shall be charged with all current expenses and
taxes other than taxes allocated to capital gains and reserves, if any,
authorized by the board of directors as provided in these articles of
incorporation. Capital losses, whether realized or unrealized, shall not be
charged against such account. Investment income shall include dividends
declared but unreceived by the corporation when the computation is made as of
the record date, or the ex-dividend date if different from the record date.
Stock dividends may be allocated either to income or principal, as the board of
directors in their discretion may determine. The undistributed net income shall
be adjusted to reflect the amounts included in the price of shares of the
corporation issued and sold as well as those repurchased which represent payment
for participation in the undistributed net income. The board of directors may
make such other adjustment as they shall determine with the advice of the
auditors of the corporation, which shall be in accordance with good accounting
practice.
(b) The board of directors may also declare dividends out of accumulated
and undistributed net realized capital gains, in which case such fact shall be
clearly revealed to shareholders and the basis of calculation shall be set
forth.
(c) Inasmuch as the computation of net income and capital gains for
federal income tax purposes may vary from the computation thereof on the books,
the above provision shall be interpreted to give the board of directors the
power in its discretion to distribute for any year as ordinary dividends and as
capital gains distributions, respectively, amounts sufficient to enable the
corporation as a regulated investment company to avoid any liability for federal
income tax in respect to that year. All dividends declared, except as provided
above, shall be deemed liquidating dividends and the shareholders shall be
advised accordingly. The board of directors may at any time declare and
distribute pro rata among the shareholders as of record on the date provided a
stock dividend out of authorized but unissued shares of the corporation. In the
case of a dividend payable in shares of stock or cash at the election of a
shareholder, the board of directors may prescribe whether a shareholder failing
to express his election before a given time shall be deemed to have elected to
take cash rather than shares, or to take shares rather than cash, or to take
shares with cash adjustment of fractions.
(d) The board of directors may, in connection with any dividend declared
or otherwise, extend to the shareholders entitled to receive such dividend the
right to reinvest such dividend or a portion thereof in shares of the
corporation at net asset value. Such right of purchase shall not be considered
an option or warrant to purchase shares of the corporation and shall be
exercised only within the time and under such conditions as may be prescribed by
the board of directors. The board of directors, pursuant to such right or
otherwise, may authorize the purchase of fractional shares upon
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such conditions and under such circumstances as the board of directors may
prescribe in connection therewith.
ARTICLE XV
(a) The board of directors shall submit to the shareholders at least semi-
annually a written financial report of the transactions of the corporation,
including financial statements. The financial statements of such reports shall
be certified to at least annually by independent public accountants.
(b) In the event the holders of two-thirds of the outstanding shares of
the corporation shall vote at any time to wind up and liquidate the corporation,
no further shares of the corporation shall be issued, sold or purchased by the
corporation and the directors shall immediately proceed to wind up the
corporation's affairs, liquidate the assets, pay all liabilities and expenses of
the corporation and distribute the remaining assets, if any, among the
shareholders in proportion to their holding of shares. The board of directors
shall also do any other acts necessary to secure and complete the dissolution of
the corporation.
(c) When the dissolution and liquidation of the corporation has been
directed by vote of the shareholders, the directors then holding office shall
continue in office until the liquidation and dissolution of the corporation has
been completed. During the period of liquidation and until final distribution
to the shareholders has been made, the compensation of the directors and all
other parties shall be determined on the same basis as if the computation of the
net asset value of the shares had been suspended, as provided in these articles
of incorporation.
ARTICLE XVI
No provision contained in these articles of incorporation or in the
by-laws adopted hereunder shall protect or indemnify any director or officer of
the corporation against any liability to the corporation or to its shareholders
to which he would be subject by reason of willful misfeasance, bad faith, gross
negligence or reckless disregard of the duties involved in the conduct of his
office.
ARTICLE XVII
The corporation reserves the right to amend, alter, change or repeal
any provisions contained in these articles of incorporation, in the manner now
or hereafter prescribed by statute, upon the affirmative vote of a majority of
the outstanding shares of the corporation, and all rights conferred upon
shareholders herein are granted subject to this reservation.
We, the undersigned, being each of the incorporators hereinbefore
named for the purpose of forming a corporation in pursuance of the general
corporation laws of the State of Maryland, do make this certificate, hereby
declaring and
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certifying that the facts stated herein are true, and, accordingly, have
hereunto set our hands and seals this 12th day of August 1970.
CHALLENGER INVESTMENT FUND, INC.
__________________________(Seal)
Charles F. Custer
__________________________(Seal)
James S. Wirt
__________________________(Seal)
Russell H. Matthias, Jr.
STATE OF ILLINOIS )
) SS.
COUNTY OF COOK )
BE IT REMEMBERED, That on this 12th day of August 1970, personally
came before me, a Notary Public for the State of Illinois, CHARLES F. CUSTER,
JAMES S. WIRT and RUSSELL H. MATTHIAS, JR., all of the parties to the foregoing
Articles of Incorporation, known to me personally to be such, and severally
acknowledged the said articles to be the act and deed of the signers
respectively, and that the facts therein contained are truly set forth.
GIVEN under my hand and seal of office the day and year aforesaid.
__________________________(Seal)
Notary Public
Notary Public
Cook County, Illinois
<PAGE>
CHALLENGER INVESTMENT FUND, INC.
ARTICLES OF AMENDMENT
Challenger Investment Fund, Inc., a Maryland corporation having its
principal office in Baltimore City, Maryland (hereinafter called the
Corporation), hereby certifies to the State Department of Assessments and
Taxation of Maryland, that:
FIRST: The charter of the Corporation is hereby amended by striking out
Article VIII, Section (a) of the Articles of Incorporation and inserting in lieu
thereof the following:
(a) Any shareholder of record in the corporation desiring to
dispose of his shares may deposit his certificate or certificates for
such shares with the corporation or its agent, duly endorsed or
accompanied by a proper instrument of transfer, with a request that
the corporation redeem the shares represented thereby. Upon any such
deposit being made, the corporation shall be required to redeem said
shares but only at the net asset value of such shares next determined
following their deposit. Payment for such shares shall be made by the
corporation within seven days after the date upon which the shares are
deposited. Whenever the board of directors, by declaration or
resolution, has suspended the determination of net asset value
pursuant to the provisions of these articles of incorporation, the
right of any shareholder to require the corporation to redeem his
shares shall be likewise suspended. At any time such suspension is in
effect any shareholder may withdraw his certificate or certificates
from deposit or may leave the same on deposit, in which case the
redemption price shall be the net asset value next determined after
the suspension is terminated.
SECOND: The board of directors of the Corporation on April 7, 1977 duly
adopted a resolution in which was set forth the foregoing amendment to the
charter, declaring that the said amendment of the charter as proposed was
advisable and directing that it be submitted for action thereon by the
shareholders of the Corporation at the annual meeting to be held on June 15,
1977.
THIRD: Notice setting forth a summary of the changes to be effected by
said amendment of the charter and stating that a purpose of the meeting of the
stockholders would be to take action thereon, was given, as required by law, to
all stockholders entitled to vote thereon. The amendment of the charter of the
Corporation as hereinabove set forth was approved by the stockholders of the
Corporation at said meeting by the affirmative vote of more than two-thirds of
all the votes entitled to be cast thereon.
FOURTH: The amendment of the charter of the Corporation as hereinabove set
forth has been duly advised by the board of directors and approved by the
stockholders of the Corporation.
<PAGE>
IN WITNESS WHEREOF, Challenger Investment Fund, Inc. has caused these
presents to be signed in its name and on its behalf by its President and
witnessed by its Assistant Secretary on July 12 , 1977.
CHALLENGER INVESTMENT FUND, INC.
By
-------------------------------
Dean R. Kleckner, President
WITNESS:
- ---------------------------------------
Ben C. Buckingham, Assistant Secretary
THE UNDERSIGNED, President of Challenger Investment Fund, Inc., who
executed on behalf of said corporation the foregoing Articles of Amendment, of
which this certificate is made a part, hereby acknowledges, in the name and on
behalf of said corporation, the foregoing Articles of Amendment to be the
corporate act of said corporation and further certifies that, to the best of his
knowledge, information and belief, the matters and facts set forth therein with
respect to the approval thereof are true in all material respects, under the
penalties of perjury.
------------------------------
Dean R. Kleckner
<PAGE>
CHALLENGER INVESTMENT FUND, INC.
ARTICLES OF AMENDMENT
Challenger Investment Fund, Inc., a Maryland corporation having its
principal office in Baltimore City, Maryland (hereinafter called the
"Corporation"), hereby certifies to the State Department of Assessments and
Taxation of Maryland, that:
FIRST: The charter of the Corporation is hereby amended by striking
Article I of the Articles of Incorporation, as heretofore amended, and inserting
in lieu thereof the following:
ARTICLE I
The name of the corporation is FARM BUREAU GROWTH FUND, INC., (hereinafter
called the "corporation").
SECOND: The board of directors of the Corporation on April 6, 1978 duly
adopted a resolution in which was set forth the foregoing amendment to the
charter, declaring that the said amendment of the charter as proposed was
advisable and directing that it be submitted for action thereon by the
shareholders of the Corporation at the annual meeting to be held on June 13,
1978.
THIRD: Notice setting forth the said amendment of the charter and
stating that a purpose of the meeting of the stockholders would be to take
action thereon, was given, as required by law, to all stockholders entitled to
vote thereon. The amendment of the charter of the Corporation as hereinabove
set forth was approved by the stockholders of the Corporation at said meeting by
the affirmative vote of a majority of all the votes entitled to be cast thereon.
FOURTH: The amendment of the charter of the Corporation as hereinabove
set forth has been duly advised by the board of directors and approved by the
stockholders of the Corporation.
FIFTH: The articles of amendment shall become effective on the 31st day
of July, 1978.
IN WITNESS WHEREOF, Challenger Investment Fund, Inc. has caused these
presents to be signed in its name and on its behalf by its President and
witnessed by its Assistant Secretary on June 30, 1978.
CHALLENGER INVESTMENT FUND, INC.
By:
-----------------------------------------
Dean R. Kleckner, President
WITNESS:
- ------------------------------
Edward F. Seitzinger
Assistant Secretary
THE UNDERSIGNED, President of Challenger Investment Fund, Inc., who
executed on behalf of said corporation the foregoing Articles of Amendment, of
which this certificate is made a part, hereby acknowledges in the name and on
behalf of said corporation, the foregoing Articles of Amendment to be the
corporate act of said corporation and further certifies that, to the best of his
knowledge, information and belief, the matters and facts set forth therein with
respect to the approval thereof are true in all material respects, under the
penalties of perjury.
--------------------------------------------
Dean R. Kleckner
<PAGE>
FARM BUREAU GROWTH FUND, INC.
ARTICLES OF AMENDMENT
Farm Bureau Growth Fund, Inc., a Maryland corporation having its principal
office in Baltimore City, Maryland (hereinafter called the "Corporation"),
hereby certifies, to the State Department of Assessments and Taxation of
Maryland, that:
FIRST: The charter of the corporation is hereby amended by striking out
the following sections of the Articles of Incorporation, as heretofore amended,
and inserting in lieu of each respective section the following:
ARTICLE I
The name of the corporation is FBL SERIES FUND, INC. (hereinafter
called the "Corporation").
ARTICLE IV
(a) The total number of shares of all classes of stock which the
Corporation, by resolution or resolutions of the board of directors, shall
have authority to issue is five billion (5,000,000,000) shares, par value
$0.001 per share, such shares having an aggregate par value of five million
dollars ($5,000,000). Two billion (2,000,000,000) of such shares may be
issued in the following classes, each class containing the number of shares
and having the designations indicated below, subject, however, to the
authority hereinafter granted to the board of directors to further classify
and reclassify any such shares and, incident to such classification or
reclassification, to increase or decrease such number of shares:
Growth Common Stock Portfolio 250,000,000
Aggressive Growth Common Stock Portfolio 250,000,000
Money Market Portfolio 250,000,000
High Quality Bond Portfolio 250,000,000
High Yield Bond Portfolio 250,000,000
Ginnie Mae Portfolio 250,000,000
Blue Chip Index Portfolio 250,000,000
Managed Portfolio 250,000,000
The balance of three billion (3,000,000,000) shares of such stock may be
issued in such classes, or in any new class or classes, each consisting of
such number of shares and having such preferences, conversion or other
rights and such voting powers, restrictions, limitations as to dividends
and qualifications and such terms or conditions of redemption as shall be
determined from time to time by resolution or resolutions providing for
the issuance of such stock adopted by the board of directors, to whom
authority so to fix and determine the same is hereby expressly granted.
(b) Each share of the previously existing sole class of stock of the
Corporation issued and outstanding on the effective date of this revised
Article IV shall thereafter be and be designated as a share of stock of the
<PAGE>
Growth Common Stock Portfolio, and the assets, rights, liabilities and
obligations of the Corporation on that date shall become the assets,
rights, liabilities and obligations of the Growth Common Stock Portfolio.
(c) Each class of stock of the Corporation, now or hereafter
designated, shall have the following described powers, preferences and
rights; and the qualifications, limitations and restrictions thereof shall
be as follows:
(1) All consideration received by the Corporation for the
issue or sale of shares of a particular class, together with all
income, earnings, profits and proceeds thereof, including any proceeds
derived from the sale, exchange or liquidation thereof, and any assets
derived from any reinvestment of such proceeds, in whatever form the
same may be, are herein referred to as "assets belonging to" such
class.
(2) The assets belonging to a particular class of stock
will be charged with the liabilities (including, in the discretion of
the board of directors or its delegate, accrued expenses and reserves)
incurred in respect of such class, and such class shall also be
charged with its share of any other liabilities. The determination of
the board of directors or its delegate shall be final and conclusive
as to the amount of liabilities, including accrued expenses and
reserves, which is to be charged to one or more particular classes.
The power to make such determinations may be delegated by the board of
directors from time to time to one or more of the directors and
officers of the Corporation, or to an agent of the Corporation
appointed for such purpose. The liabilities with which a class is so
charged are herein referred to as the "liabilities belonging to" such
class.
(3) The holders of shares of all classes of stock of the
Corporation (whether now or hereafter classified) shall, at any
meeting of the shareholders, have one vote or fraction thereof for
each share or fraction thereof held. On any matter submitted to a
vote of shareholders, all shares of the Corporation then issued and
outstanding and entitled to vote, irrespective of the class, shall be
voted by class and not in the aggregate except that, when otherwise
expressly permitted by the laws of the State of Maryland, the
Investment Company Act of 1940 and the regulations thereunder or other
applicable law, shares shall be voted in the aggregate.
(4) The relative rights of the shares of each class to
receive dividends shall be as set forth in Article XIV of these
articles of incorporation.
(5) The relative rights of the shares of each class to be
redeemed or repurchased shall be as set forth in Articles VII and VIII
of these articles of incorporation.
(6) The relative rights of the shares of each class upon
winding up and dissolution of the Corporation shall be as set forth in
Article XV of these articles of incorporation.
ARTICLE V
The number of directors of the Corporation shall be eight, which
number may be increased or decreased pursuant to the by-laws of the
Corporation but shall never be less than three. The election of directors
need not be by ballot.
<PAGE>
ARTICLE VII
(a) The board of directors may from time to time issue and sell or
provide for the issuance and sale of the authorized but unissued shares of
the Corporation. Except as otherwise provided in this Article, all shares
of the Corporation sold shall be sold for cash, which shall in each case be
paid prior to the delivery of any certificate of the Corporation for such
shares. Shares of this Corporation provided for in these articles of
incorporation, including such additional shares as may from time to time
hereafter be authorized and including any shares of the Corporation which
may have been repurchased by the Corporation, as herein provided, may be
sold as the board of directors may from time to time deem advisable. Such
shares shall be sold at a price which will produce net proceeds to the
Corporation equal to not less than the net asset value thereof in effect
when such sales are made or the net asset value next determined after
receipt of the order to purchase such shares.
(b) The Corporation may issue and sell fractions of shares having pro
rata all the rights of full shares, including, without limitation, the
right to vote and to receive dividends; and wherever the words "share" or
"shares" are used in these articles of incorporation or in the by-laws they
shall be deemed to include fractions of shares where the context does not
clearly indicate that only full shares are intended.
(c) No shares need be offered to existing shareholders before being
offered to others. In connection with the acquisition of all or
substantially all the assets of another company or trust, the board of
directors may issue or cause to be issued shares of any class of the
Corporation's stock and accept in payment thereof in lieu of cash such
assets of such company or trust at market value, provided such assets are
of a character in which the board of directors is authorized to invest the
funds of such class of the Corporation's stock. No shares shall be sold by
the Corporation during any period when the determination of net asset value
is suspended.
ARTICLE VIII
(a) Any shareholder of record in the Corporation desiring to dispose
of his shares may deposit his certificate or certificates for such shares
with the Corporation or its agent, duly endorsed or accompanied by a proper
instrument of transfer, with a request that the Corporation redeem the
shares represented thereby. Upon any such deposit being made, the
Corporation shall be required to redeem said shares upon the terms set
forth in the Corporation's effective registration statement on file with
the Securities and Exchange Commission. Payment for such shares shall be
made by the Corporation within seven days after the date upon which the
shares are deposited. Whenever the board of directors, by declaration or
resolution, has suspended the determination of net asset value pursuant to
the provisions of these articles of incorporation, the right of any
shareholder to require the Corporation to redeem his shares shall be
likewise suspended. At any time such suspension is in effect any
shareholder may withdraw his certificate or certificates from deposit or
may leave the same on deposit, in which case the redemption price shall be
the net asset value next determined after the suspension is terminated.
(b) The Corporation may by agreement with any shareholder purchase
shares of the Corporation at a price not exceeding the net asset value in
effect at the time when such purchase or contract to purchase is made or
the net asset value next to be determined.
<PAGE>
(c) Any shares of its stock purchased or redeemed by the Corporation
pursuant to the provisions of this Article shall be deemed retired and
shall thereafter have the status of authorized but unissued stock.
ARTICLE IX
(a) The net asset value of each share of the Corporation outstanding
shall be determined in accordance with the Corporation's current
prospectus.
(b) The board of directors may suspend the determination of net asset
value for all or any part of any period during which the New York Stock
Exchange is closed, other than a period during which such Exchange is
normally closed, or during which trading on the New York Stock Exchange is
restricted by governmental order, or during which an emergency exists such
as would make disposal by the Corporation of securities owned by the
Corporation unreasonable or impracticable, or would make determination of
the net asset value of the assets of the Corporation impracticable. The
determination of whether trading on the New York Stock Exchange is
restricted or whether such an emergency, as herein provided, exists shall
be by applicable rules and regulations of the Securities and Exchange
Commission or other governmental authority. The suspension shall become
effective at such time as the board of directors shall specify in their
declaration or resolution, but not later than the close of business on the
next succeeding business day following the declaration or resolution.
After such suspension becomes effective, there shall be no determination of
net asset value until the board of directors shall declare the suspension
terminated. The suspension shall terminate in any event on the first day
on which the New York Stock Exchange is open, the restricted trading on the
New York Stock Exchange shall have expired, or the emergency shall have
expired in accordance with the official ruling of the Securities and
Exchange Commission or other governmental authority, or in the absence of
such ruling, upon the determination of the board of directors.
(c) Any redemptions or purchases of shares by the Corporation of any
class of the Corporation's stock shall be made solely from assets belonging
to such class. Any shares of any class of the Corporation's stock
purchased or obtained by the Corporation by purchase or redemption shall be
deemed retired and shall thereafter have the status of authorized but
unissued shares of such class. At any time when a shareholder's ownership
of shares of any class has a value of less than $250, the Corporation may
redeem the shares of such class owned by such a shareholder at a current
price determined in accordance with the Corporation's current prospectus.
(d) Any redemptions or purchases of shares by the Corporation of any
class of the Corporation's stock shall be in cash, except that upon
determination of the board of directors redemptions may be made in kind as
provided in the Corporation's current prospectus.
ARTICLE XI
(a) The board of directors may in its discretion from time to time
enter into a contract or contracts with any one or more parties as an
underwriter, providing for the sale of the shares of this Corporation,
whereby the Corporation may either agree to sell the shares to the
underwriter or underwriters or appoint the underwriter or underwriters to
be its agent or agents in the sale of such shares. Such contract or
contracts may be either exclusive or non-exclusive, and may contain such
other terms and conditions as the board of directors may deem advisable.
<PAGE>
Such contract or contracts may also provide for the repurchase of shares of
this Corporation by such underwriter as agent of the Corporation.
(b) The board of directors may in its discretion from time to time
enter into an investment advisory or management contract with any other
person, firm or corporation, hereinafter called the "Investment Adviser,"
to furnish advice to the Corporation with respect to the desirability of
investing in, purchasing or selling securities or other property, or to
determine what securities or other property shall be purchased or sold by
the Corporation, and to furnish to the board of directors such management,
investment advisory, statistical and research facilities and such other
services and facilities, if any, as the board of directors may deem
desirable upon such terms and conditions as the board of directors
determine. The compensation to be paid under the terms of such contract or
contracts shall be subject to the limitations contained in Article XII of
these articles of incorporation.
(c) The board of directors, subject to the provisions of the Article,
may in its discretion enter into an underwriting contract and an investment
advisory contract with the same person, firm or corporation. Any contract
may be entered into with any person, firm or corporation irrespective of
whether or not one or more of the directors or officers of this Corporation
may also be an officer, director, shareholder or member of such other
person, firm or corporation, and such contract shall not be invalidated or
rendered voidable by reason of any such relationship. No person holding
such relationship shall be liable because of such relationship for any loss
or expense to the Corporation under or by reason of such contract, or
accountable for any profit realized directly or indirectly therefrom,
provided that such contract when executed was reasonable and fair,
consistent with the provisions of these articles of incorporation and
approved by a majority of the board of directors of this corporation who
are not so related, or by the vote of a majority of the outstanding shares
of this Corporation.
(d) Any contract entered into pursuant to the terms of this Article
shall be consistent with and subject to the requirements of the Investment
Company Act of 1940, including any amendment thereto or other applicable
act of Congress hereafter enacted, with respect to its duration,
termination, authorization, approval, assignment or renewal.
ARTICLE XII
(a) Subject to the limitations contained in this Article, the
directors shall be entitled to reasonable remuneration from the Corporation
for their services as directors in such amount as may from time to time be
fixed by vote of the board of directors.
(b) The Corporation may incur such expenses as are necessary to
perform its function and such expenses may include but are not limited to
the following: compensation to be paid to any other party to an investment
advisory contract with the Corporation entered into pursuant to Article XI;
the compensation to be paid to the officers, consultants and employees of
the Corporation; office hire; ordinary office expenses; the costs of
investment advisory, statistical and research facilities; directors' fees;
legal or accounting expenses; taxes and governmental fees; cost of stock
certificates; the costs of reports and notices to shareholders; association
dues; fees and expenses of any custodian (including the expense of
computing the net asset value of any class of the Corporation's stock);
fees and expenses of the transfer agent; and fees and expenses of the
registrar or dividend disbursing agent. During
<PAGE>
any period during which the determination of net asset value is suspended,
as provided in these articles of incorporation, the net asset value as last
determined and effective shall for the purposes of this Article be deemed
to be the net asset value as of the close of business on each business day
until a new net asset value is again determined and made effective as
provided herein.
(c) The provisions of the Article shall not preclude the payment of
reasonable fees for legal or accounting services to any firm of which a
director of officer of the Corporation may be a member, nor of customary
brokerage charges in connection with the purchase or sale of securities to
any firm in the brokerage business of which a director or officer of the
Corporation may be a member, officer or director, and no part of any such
fee, charge or compensation shall be deemed compensation to such officer or
director within the purview of this Article. No compensation, commission,
fee or profit which may be received by the other party to a contract
entered into pursuant to Article XI shall be deemed compensation to any
officer or director of the Corporation simply because such officer or
director is also an officer, director or member of such other party.
ARTICLE XIV
(a) The board of directors may from time to time declare and pay
dividends on any or all classes of stock. The amount of such dividends and
the payment thereof shall be within the discretion of the directors, except
that distributions from assets belonging to a particular class of stock may
be distributed only to the holders of such class.
(b) The board of directors may also declare dividends for a
particular class of stock out of accumulated and undistributed net realized
capital gains.
(c) Inasmuch as the computation of net income and capital gains for
federal income tax purposes may vary from the computation thereof on the
books, the above provision shall be interpreted to give the board of
directors the power in its discretion to distribute for any year as
ordinary dividends and as capital gains distributions, respectively,
amounts sufficient to enable the Corporation (and, if appropriate, each of
its classes of stock) as a regulated investment company to avoid any
liability for federal income tax in respect to that year. All dividends
declared, except as provided above, shall be deemed liquidating dividends
and the shareholders shall be advised accordingly. The board of directors
may at any time declare and distribute pro rata among the shareholders
of record on the date provided a stock dividend out of authorized but
unissued shares of the appropriate class of the Corporation's stock. In
the case of a dividend payable in shares of stock or cash at the election
of a shareholder, the board of directors may prescribe whether a
shareholder failing to express his election before a given time shall be
deemed to have elected to take cash rather than shares, or to take shares
rather than cash, or to take shares with cash adjustment of fractions.
(d) The board of directors may, in connection with any dividend
declared or otherwise, extend to the shareholders entitled to receive such
dividend the right to reinvest such dividend or a portion thereof in shares
of the appropriate class of the Corporation's stock at net asset value.
Such right of purchase shall not be considered an option or warrant to
purchase shares of the appropriate class of the Corporation's stock and
shall be exercised only within the time and under such conditions as may be
prescribed by the board of directors. The board of directors, pursuant to
such right or otherwise, may authorize the purchase of fractional shares
upon such conditions
<PAGE>
and under such circumstances as the board of directors may prescribe in
connection therewith.
ARTICLE XV
(a) The board of directors shall submit to the shareholders at least
semi-annually a written financial report of the transactions of the
Corporation, including financial statements. The financial statements in
such reports shall be certified to at least annually by independent public
accountants.
(b) In the event the holders of two-thirds of the outstanding shares
of the Corporation shall vote at any time to wind up and liquidate the
Corporation, no further shares of the Corporation shall be issued, sold or
purchased by the Corporation and the directors shall immediately proceed to
wind up the Corporation's affairs, liquidate the assets, pay all
liabilities and expenses of the Corporation and distribute the remaining
assets, if any, among the shareholders. The board of directors shall also
do any other acts necessary to secure and complete the dissolution of the
Corporation. In the event of the liquidation or dissolution of the
Corporation (for whatever reason), shareholders of each class shall be
entitled to receive, as a class, out of the assets of the Corporation
available for distribution to shareholders, the assets belonging to such
class; and the assets so distributable to the shareholders of any class
shall be distributed among such shareholders in proportion to the number of
shares of such class held by them and recorded on the books of the
Corporation.
(c) When the dissolution and liquidation of the Corporation has been
directed by vote of the shareholders, the directors then holding office
shall continue in office until the liquidation and dissolution of the
Corporation has been completed. During the period of liquidation and until
final distribution to the shareholders has been made, the compensation of
the directors and all other parties shall be determined on the same basis
as if the computation of the net asset value of the shares had been
suspended, as provided in these articles of incorporation.
SECOND: The board of directors of the Corporation, on August 12, 1987,
duly adopted a resolution in which was set forth the foregoing amendments of the
charter, declaring that the said amendments of the charter as proposed were
advisable and directing that they be submitted for action thereon by the
stockholders of the Corporation at a special meeting to be held on November 11,
1987.
THIRD: Notice setting forth a summary of the changes to be effected by
said amendments of the charter and stating that a purpose of the meeting of the
stockholders would be to take action thereon, was given, as required by law, to
all stockholders entitled to vote thereon. The amendments of the charter of the
Corporation as hereinabove set forth were approved by the stockholders of the
Corporation at said meeting by the affirmative vote of a majority of all the
votes entitled to be cast thereon.
FOURTH: The amendments of the charter of the Corporation as hereinabove
set forth have been duly advised by the board of directors and approved by the
stockholders of the Corporation, the requisite vote under Article XVII of the
Article of Incorporation.
FIFTH: (a) the total number of shares of stock which the Corporation
was heretofore authorized to issue is Ten Million (10,000,000) shares, all of
one class of the par value of One Dollar ($1.00) each and of the aggregate par
value of Ten Million Dollars ($10,000,000).
<PAGE>
(b) The total number of shares of all classes of stock is
increased by this amendment to Five Billion (5,000,000,000) shares of common
stock of the par value of One One Thousandth Dollars ($0.001) each and of the
aggregate par value of Five Million Dollars ($5,000,000).
(c) A description of each class of stock of the Corporation with
the preferences, conversion and other rights, voting powers, restrictions,
limitations as to dividends, qualifications, and terms and conditions of
redemption of each class of the authorized capital stock, is as set forth in
Articles IV, VII, VIII, XIV, and XV of the Articles of Incorporation as amended
by these Articles of Amendment.
SIXTH: The Articles of Amendment shall become effective as of the close
of business on the 30th day of November, 1987.
IN WITNESS WHEREOF, Farm Bureau Growth Fund, Inc. has caused these presents
to be signed in its name and on its behalf by its President (or Vice-President)
and witnessed by its Secretary (or Assistant Secretary) on November 17, 1987.
FARM BUREAU GROWTH FUND, INC.
By:
-------------------------------
President (or Vice President)
Robert R. Joslin - President
----------------------------
(name)
Witness:
- --------------------------------------
Secretary (or Assistant Secretary)
Dennis M. Marker - Assistant Secretary
- --------------------------------------
(name)
THE UNDERSIGNED, President (or Vice-President) of Farm Bureau Growth Fund,
Inc., who executed on behalf of said corporation the foregoing Articles of
Amendment, of which this certificate is made a part, hereby acknowledges, in the
name and on behalf of said corporation, the foregoing Articles of Amendment to
be the corporate act of said corporation and further certifies that, to the best
of his knowledge, information and belief, the matters and facts set forth
therein with respect to the approval thereof are true in all material respects,
under the penalties of perjury.
------------------------------------
Robert R. Joslin - President
-------------------------------------
(name)
<PAGE>
Exhibit 1d
FBL SERIES FUND, INC.
ARTICLES OF AMENDMENT
TO THE ARTICLES OF INCORPORATION
FBL SERIES FUND, INC., a Maryland corporation (hereinafter called the
Corporation) whose principal office in the State of Maryland is c/o The
Corporation Trust Incorporated, 32 South Street, Baltimore, Maryland 21202,
hereby certifies to the State Department of Assessments and Taxation of
Maryland, that:
FIRST: The Charter of the Corporation is hereby amended by restating
Article VI, Section (a) to read as follows:
(a) The total number of shares of all classes of stock which the
Corporation, by resolution or resolutions of the board of directors, shall
have authority to issue is five billion (5,000,000,000) shares, par value
$0.001 per share, such shares having an aggregate par value of five million
dollars ($5,000,000). Two billion (2,000,000,000) of such shares may be
issued in the following classes, each class containing the number of shares
and having the designations indicated below, subject, however, to the
authority hereinafter granted to the board of directors to further classify
and reclassify any such shares and, incident to such classification or
reclassification, to increase or decrease such number of shares:
Growth Common Stock Portfolio 500,000,000
Money Market Portfolio 250,000,000
High Quality Bond Portfolio 500,000,000
High Yield Bond Portfolio 250,000,000
Blue Chip Portfolio 250,000,000
Managed Portfolio 250,000,000
The balance of three billion (3,000,000,000) shares of such stock may
be issued in such classes, or in any new class or classes, each consisting
of such number of shares and having such preferences, conversion or other
rights and such voting powers, restrictions, limitations as to dividends
and qualifications and such terms or conditions of redemption as shall be
determined from time to time by resolution or resolutions providing for the
issuance of such stock adopted by the board of directors, to whom authority
to fix and determine the same is hereby expressly granted.
The Board of Directors, at a meeting held August 15, 1991, unanimously
approved and adopted a resolution in which was set forth the foregoing amendment
to the Corporation's charter and recommended that the shareholders approve this
amendment in conjunction with the Corporation's reorganization whereby all the
assets and liabilities of the Aggressive Growth Common Stock Portfolio would be
transferred to the Growth Common Stock Portfolio in exchange for shares of the
Growth Common Stock Portfolio and all the assets and liabilities of the Ginnie
Mae Portfolio would be transferred to the
<PAGE>
High Quality Bond Portfolio in exchange for shares of the High Quality Bond
Portfolio, and the Aggressive Growth Common Stock Portfolio and Ginnie Mae
Portfolio would be eliminated, with shares representing those portfolios being
reclassified as shares of the Growth Common Stock Portfolio and High Quality
Bond Portfolio, respectively. Approval of the proposed amendment by a majority
of the outstanding voting securities was obtained at a meeting of the
shareholders of the Aggressive Growth Common Stock Portfolio and the Ginnie Mae
Portfolio held on November 13, 1991.
IN WITNESS WHEREOF, FBL SERIES FUND, INC. has caused these presents to be
signed in its name and on its behalf by its President and witnessed by its
Secretary on November 22, 1991.
FBL SERIES FUND, INC.
By:
----------------------------------------------------
Merlin D. Plagge
President
Witness
- ----------------------------
Eugene R. Maahs
Secretary
THE UNDERSIGNED, President of FBL SERIES FUND, INC., who executed on behalf
of said corporation the foregoing Articles of Amendment, of which this
certificate is made a part, hereby acknowledges, in the name and on behalf of
said corporation, the foregoing Articles of Amendment to be the corporate act of
said corporation and further certifies that, to the best of his knowledge,
information and belief, the matters and facts set forth therein with respect to
the approval thereof are true in all material respects, under penalties of
perjury.
------------------------------------------------------
Merlin D. Plagge
<PAGE>
Exhibit 1e
ARTICLES SUPPLEMENTARY TO THE
CHARTER OF
FBL SERIES FUND, INC.
FBL SERIES FUND, INC., a Maryland Corporation (hereinafter called the
Corporation) whose principal office in the State of Maryland is c/o The
Corporation Trust Incorporated, 32 South Street, Baltimore, Maryland 21202,
hereby certifies to the State Department of Assessments and Taxation of
Maryland, that:
FIRST: The name of the "High Quality Bond Portfolio," one of six classes
of shares, par value $.001 per share, of the Corporation, has been changed to
the "High Grade Bond Portfolio," with the same preferences, conversion and other
rights, voting powers, restrictions, limitations as to dividends, qualifications
and terms and conditions of redemption.
SECOND: The shares aforesaid have been duly classified by the board of
directors pursuant to authority and power contained in the charter of the
Corporation.
IN WITNESS WHEREOF, FBL SERIES FUND, INC. has caused these presents to be
signed in its name and on its behalf by its President (or Vice-President) and
attested by its Secretary (or Assistant Secretary) this 25th day of November,
1991.
FBL SERIES FUND, INC.
By:
-----------------------------------------
ATTEST:
By:
-----------------------------------
THE UNDERSIGNED, President (or Vice-President) of FBL SERIES FUND, INC.,
who executed on behalf of said corporation the foregoing Articles Supplementary
to the Articles of Incorporation, of which this certificate is made a part,
hereby acknowledges, in the name and on behalf of said corporation, the
foregoing Articles Supplementary to the Articles of Incorporation to be the
corporate act of said corporation and further certifies that, to the best of his
knowledge, information and belief, the matters and facts set forth therein with
respect to the approval thereof are true in all material respects, under
penalties of perjury.
------------------------------------------
<PAGE>
BY-LAWS
OF
FBL SERIES FUND, INC.
ARTICLE I
SHAREHOLDERS MEETINGS
1. Meetings of the shareholders shall be held at such time and place
within, or without, the State of Maryland as may be determined by the board of
directors and designated in the notice of said meeting.
2. No meeting of the shareholders of this corporation shall be held
unless required by applicable law or otherwise determined by the board of
directors.
3. Meetings of the shareholders, for any purpose or purposes, unless
otherwise prescribed by statute, may be called by the board of directors or the
president at any time, and shall be called by the president or secretary at the
request in writing of one or more shareholders holding at least twenty-five
percent (25%) (or ten percent (10%) if a purpose of the meeting is to determine
if a director is to be removed from office) of the common stock of the
corporation, then issued and outstanding and entitled to vote, requesting a
meeting be called for a purpose requiring action by the shareholders as provided
herein or in the Articles of Incorporation, which purpose shall be specified in
any such written application. Business transacted shall be confined to the
objects stated in the notice.
4. Written notice of every meeting of the shareholders, stating the time,
place and purpose or purposes for which the meeting is called, shall be given by
the secretary to each shareholder entitled to vote thereat and to any
shareholder entitled by law to such notice. Such notice shall be given to each
shareholder by mailing the same, postage prepaid, to the address of the
shareholder as it appears on the books of the corporation not less than ten (10)
nor more than ninety (90) days before the time fixed for such meeting.
5. The holders of a majority of the shares of common stock issued and
outstanding and entitled to vote thereat, present in person or represented by
proxy, shall be requisite and shall constitute a quorum at all meetings of the
shareholders for the transaction of business, except as may be otherwise
provided by statute. If such quorum shall not be present or represented at any
meeting of the shareholders, the shareholders entitled to vote thereat, present
in person or represented by proxy, shall have power to adjourn the meeting from
time to time (provided no adjournment shall be to a date more than one hundred
and twenty (120) days after the original record date), without notice other than
announcement at the meeting, until a quorum shall be present or represented. At
such adjourned meeting at which a quorum shall be present or represented, any
business may be transacted which might have been transacted at the meeting as
originally notified.
6. When a quorum is present at any meeting, the vote of the holders of a
majority of the shares having the right to vote thereat, present in person or
represented by proxy, shall determine any questions brought before such meeting,
unless the question is one upon which by express provision of the statutes,
articles of incorporation or these by-laws, a different vote is required in
which case such express provision shall control.
<PAGE>
7. At any meeting of the shareholders every shareholder having the right
to vote shall be entitled to vote in person or by proxy appointed by an
instrument in writing, subscribed by such shareholder and bearing a date not
more than eleven (11) months prior to said meeting, which instrument shall be
filed with the secretary of the meeting before being voted. Each shareholder
shall have one vote or fraction thereof for each share or fraction thereof held.
8. The board of directors may fix a record date not more than ninety (90)
nor less than ten (10) days prior to the date for which a meeting is called, as
of which the shareholders entitled to vote at such meeting, or any adjournment
thereof, shall be determined, notwithstanding any transfer or the issue of any
share occurring after such record date.
ARTICLE II
DIRECTORS
1. The number of directors which shall constitute the whole board shall
be not less than three (3) nor more than fifteen (15). Within these limits, the
shareholders or a majority of the entire board of directors may increase or
decrease the number of directors, but the tenure of office of any director shall
not be affected by any decrease in the number of directors then in office.
Subject to death, resignation or removal, each director shall hold office until
the next meeting of shareholders called for the purpose of conducting the
election of such director or a successor thereto, and until his successor is
elected and qualified. Directors need not be shareholders of the corporation.
2. If the office of any director or directors becomes vacant for any
reason, a majority of the remaining directors, though less than a quorum, may
choose a successor or successors, provided that immediately after filling any
such vacancy, at least two-thirds (2/3) of the directors then holding office
shall have been elected to such office by the shareholders; otherwise such
vacancy shall be filled by vote of the shareholders at a meeting called for such
purpose.
3. The property and business of the corporation shall be managed by its
board of directors which may exercise all such powers of the corporation and do
all such lawful acts and things as are not by statute, the articles of
incorporation or these by-laws prohibited or directed or required to be
exercised or done by the shareholders.
4. The board of directors may hold its meetings and keep the books of the
corporation at the office of the corporation in the City of West Des Moines,
State of Iowa, or at such other places as they may from time to time determine.
The original or duplicate stock ledger shall be kept at the office of the
corporation in the City of West Des Moines, State of Iowa, or at the office of
any transfer agent which may be employed by the corporation pursuant to Article
X of the articles of incorporation.
5. A regular meeting of the board may be held at the place of and
immediately following the meeting of the shareholders at which such board was
elected, either within or without the State of Maryland; provided the directors
may, by unanimous consent of the whole board in writing, hold their regular
meeting at such other place and time as they may determine. No notice of such
meeting shall be necessary to the newly elected directors in order to legally
constitute the meeting provided a quorum shall be present. Other regular
meetings of the board of directors shall be held without notice at such time and
place, either within or without the State of Maryland, as shall from time to
time be determined by the board.
6. Special meetings of the board of directors may be held at any time
when called by the president or two (2) or more directors. Not less than
twenty-four (24) hours notice of any special meeting shall be given by the
secretary or the officer calling such meeting to each director either in person,
by telephone, by mail or by telegram. Such notice may be
<PAGE>
waived by any director either in person, or in writing, or by telegram. Such
special meetings shall be held at such time and place, within or without the
State of Maryland, as the notice thereof or waiver shall specify. Unless
otherwise specified in the notice thereof, any and all business may be
transacted at any at any meeting of the board of directors.
7. At all meetings of the board of directors one-third (1/3) of the
entire board of directors shall be necessary and sufficient to constitute a
quorum for the transaction of business and the act of the majority of the
directors present at any meeting at which there is a quorum shall be the act of
the board of directors, except as may be otherwise specifically provided by
statute, by the articles of incorporation or by these by-laws. If a quorum
shall not be present at any meeting of the board of directors, the directors
present thereat may adjourn the meeting from time to time, without notice other
than announcement at the meeting, until a quorum shall be present.
ARTICLE III
COMMITTEES
The board of directors may, by resolution or resolutions passed by a
majority of the whole board, elect from their own number an executive committee
to consist of not less than three (3) nor more than five (5) members, which
shall have the power to conduct the current and ordinary business of the
corporation while the board of directors is not in session. The board of
directors may also in the same manner elect from their own number from time to
time other committees, the number composing such committees and the powers
conferred thereon to be determined form the resolution creating the same. The
committees shall keep regular minutes of their proceedings and report the same
to the board of directors when required.
ARTICLE IV
NOTICES
1. Whenever, under the provisions of any statute, the articles of
incorporation or these by-laws, notice is required to be given to any
shareholder or director it shall not be construed to mean personal notice unless
the context otherwise provides. Such notice may be given in writing, by mail,
by depositing the same in a post office or letter box, in a post-paid sealed
wrapper, addressed to such shareholder or director at such address as appears on
the books of the corporation, and such notice shall be deemed to be given at the
time when the same shall be thus mailed.
2. Whenever any notice is required to be given under the provisions of
any statute, the articles of incorporation or by these by-laws, a waiver
thereof in writing signed by the person or persons entitled to said notice,
whether before or after the time stated therein, shall be deemed equivalent
thereto.
ARTICLE V
OFFICERS
1. The officers of the corporation shall be elected annually by the board
of directors. The board of directors may elect one of its own members as
chairman of the board, and shall elect a president, secretary and treasurer.
The board of directors may also elect one or more vice-presidents, one or more
assistant secretaries and one or more assistant treasurers. Two or more
offices, when consistent, may be held by the same person, except that any person
holding the office of president shall not hold the office of vice-president.
The president of the corporation shall be a director. All other officers may
be, but need not be, directors of the corporation.
<PAGE>
2. The board of directors may appoint such other officers, agents and
representatives of the corporation as shall be deemed necessary, with such
powers for such term and to perform such acts and duties on behalf of the
corporation as the board of directors may see fit to the extent authorized or
permitted by law, the articles of incorporation and these by-laws.
3. The chairman of the board, if one shall be elected, shall preside at
all meetings of the shareholders and board of directors, and shall perform such
other duties as the board of directors may from time to time prescribe.
4. The president shall be the chief executive officer or the corporation
and, in the absence of the chairman of the board, or if a chairman is not
elected, shall preside at all meetings of the shareholders and board of
directors. The president shall have power to sign all certificates for shares
of stock. The president shall perform such other duties as the board of
directors shall from time to time prescribe.
5. The vice-presidents, in the order of their seniority or as designated
by the board of directors, shall in the absence or disability of the president,
perform the duties and exercise the powers of the president, and shall perform
such other duties as the board of directors may from time to time prescribe.
6. The secretary shall record all votes and proceedings of the meetings
of the shareholders and of the board of directors in the corporation records.
He shall give, or cause to be given, notice of all meetings of the shareholders
and meetings of the board of directors when notice thereof is required. The
secretary shall have custody of the seal of the corporation and may affix the
same to any instrument requiring the corporate seal and attest to the same with
his signature. He shall have the power to sign all certificates for shares of
stock and shall perform such other duties as the board of directors may from
time to time prescribe.
7. The assistant secretaries in order of their seniority or as directed
by the board of directors, shall in the absence or disability of the secretary,
perform the duties and exercise the powers of the secretary and shall perform
such other duties as the board of directors may prescribe.
8. The treasurer shall deliver all funds and securities of the
corporation which may come into his hands to such bank or trust company as the
board of directors may designate as custodian in accordance with Article X of
the articles of incorporation. He shall keep such record of the financial
transactions of the corporation as the board of directors shall prescribe. The
treasurer shall have power to sign all certificates for shares of stock and
shall perform such other duties as the board of directors may from time to time
prescribe.
9. The assistant treasurers in order of their seniority or as directed by
the board of directors, shall, in the absence or disability of the treasurer,
perform the duties and exercise the powers of the treasurer and shall perform
such other duties as the board of directors may prescribe.
10. The officers of the corporation shall hold office until their
successors are chosen and qualified. Any officer elected or appointed by the
board of directors may be removed at any time by the board of directors. If the
office of any officer shall become vacant for any reason, the vacancy shall be
filled by the board of directors.
ARTICLE VI
STOCK CERTIFICATES
1. The certificates of stock of the corporation shall be in the form
prescribed by the board of directors and shall be signed by the president, or a
vice-president and the secretary or treasurer or an assistant secretary or an
assistant
<PAGE>
treasurer. If the board of directors shall require all certificates for shares
of stock to be signed (1) by a transfer agent or an assistant transfer agent or,
(2) by a transfer clerk, acting on behalf of the corporation, the signature of
any officer of the corporation thereon and the seal of the corporation thereon
may be facsimiles.
2. In the event any officer of the corporation authorized to sign
certificates for shares of stock of the corporation shall die or cease to hold
office, the board of directors may, by resolution, adopt and permit to be
issued, when duly countersigned, certificates bearing the signature, either real
or facsimile, of such officers.
3. The board of directors may direct a new certificate or certificates to
be issued in place of any certificate or certificates theretofore issued by the
corporation alleged to have been lost, mutilated or destroyed upon such terms
and upon such conditions as it may prescribe.
4. The corporation shall be entitled to treat the holder of record of any
share or shares of stock as the holder in fact thereof and, accordingly, shall
not be bound to recognize any equitable or other claim to or interest in such
share or shares on the part of any other person, whether or not it shall have
express or other notice thereof, except as otherwise provided by the laws of the
State of Maryland.
5. Shares of stock shall be transferable, so as to affect the rights of
the corporation, only by transfer recorded on the books of the corporation in
person or by attorney, and upon surrender of the certificates.
6. The board of directors shall have power to fix in advance a date, not
exceeding sixty (60) days preceding the date for the payment of any dividend, or
the date for the allotment of rights, as a record date for the determination of
the shareholders entitled to receive payment of any dividend or to any such
allotment of rights. In such case only such shareholders of record on the date
so fixed shall be considered shareholders for the purpose stated,
notwithstanding any transfer of any shares on the books of the corporation after
any such record date fixed as aforesaid.
ARTICLE VII
INVESTMENT AND OTHER RESTRICTIONS
The investment restrictions of the corporation's Portfolios shall be as set
forth in the corporation's registration statement as filed with the Securities
and Exchange Commission and in effect from time to time, and may be changed only
pursuant to the appropriate vote of shareholders and/or directors as set forth
in such registration statement and in accordance with applicable law.
ARTICLE VIII
CUSTODIAN
1. The Custodian employed by the corporation pursuant to Article X of the
articles of incorporation shall be required to enter into a contract with the
corporation which shall contain in substance the following provisions:
(a) The corporation will cause all securities and funds owned by the
corporation to be delivered or paid to the custodian, except as may be
permitted by the Investment Company Act of 1940.
(b) The custodian will receive and receipt for any monies due to the
corporation and deposit the same in its own banking department or in such
other banking institution, if any, as the board of directors may direct.
<PAGE>
The custodian shall have the sole power to draw upon any such
account.
(c) The custodian shall release and deliver securities owned by the
corporation in the following cases only:
(1) Upon the sale of such securities for the account of the
corporation and the receipt of payment therefor;
(2) To the issuer thereof or its agent when such securities are
called, redeemed, retired or otherwise become payable, provided that
in any such case the cash proceeds thereof shall be delivered to the
custodian;
(3) To the issuer thereof or its agent for transfer into the
name of the corporation or the custodian, or a nominee of either, or
for exchange for a different number of bonds or certificates
representing the same number of shares or aggregate face amount,
provided that in any such case the new securities replacing such
securities are delivered to the custodian;
(4) To the broker selling the same for examination in accord
with the "street delivery" custom;
(5) For exchange or conversion pursuant to any plan of merger,
consolidation, reorganization, recapitalization or readjustment of the
issuer of such securities, or pursuant to provisions for conversion
contained in such securities, provided that in any such case the new
securities and cash, if any, are delivered to the custodian;
(6) In the case of warrants, rights or similar options the
surrender thereof shall be only for the exercise of such warrants,
rights of other options on behalf of the corporation upon interim
receipts or temporary securities for definitive securities.
(7) For the purpose of exchanging interim receipts or temporary
securities for definitive securities;
(8) For the purpose of effecting a loan of the corporation's
securities to any person, firm, corporation or trust upon the receipt
by the custodian of cash or cash equivalent collateral at least equal
to the market value of the securities loaned;
(9) To any bank for the purpose of collateralizing the
obligation of the corporation to repay any monies borrowed by the
corporation from such bank; provided, however, that the custodian may
at the option of such lending bank keep such collateral in its
possession, subject to the rights of such bank given it by virtue of
any promissory note or agreement executed and delivered by the
corporation to such bank; or
(10) For the purpose of redeeming in kind shares of the
corporation upon delivery thereof to the custodian.
(d) The Custodian shall pay out monies of the corporation only upon:
(1) the purchase of securities for the account of the
corporation and the delivery in due course of such securities to the
custodian;
(2) or in connection with the conversion, exchange or surrender
of securities owned by the
<PAGE>
corporation as set forth herein;
(3) for the repurchase or redemption of shares issued by the
corporation;
(4) for the making of any disbursements authorized by the board
of directors pursuant to the articles of incorporation and these by-
laws;
(5) in connection with the payment to a bank of the interest on,
or any portion of the principal of, any loan made by such bank to the
corporation;
(6) in connection with the payment to any person who has
borrowed the corporation's securities of the amount deposited with the
custodian as collateral for such borrowing, upon delivery of such
securities to the custodian; or
(7) the payment of any expenses or liabilities incurred by
the corporation.
(e) The custodian shall make deliveries of securities and payments of
cash only upon written instructions signed by such officer or officers, or
other agent or agents of the corporation, including the investment adviser,
as may be authorized to sign such instructions by resolution of the board
of directors.
The board of directors may from time to time authorize different
persons to sign instructions for different purposes.
2. The contract between the corporation and the custodian may contain any
other provisions not inconsistent with the articles of incorporation or with
these by-laws as the board of directors may approve.
3. Such contract shall be terminable by either party upon written notice
to the other; provided, however, that upon termination of the contract or
inability of the custodian to continue to serve, the custodian shall, upon
written notice of the appointment of another bank or trust company as successor
custodian, deliver and pay over to such successor custodian all securities and
monies held by it for the account of the corporation. In such case the board of
directors shall promptly appoint a successor custodian, but in the event no
successor custodian can be found having the required qualifications and willing
to serve, it shall be the duty of the board of directors to call as promptly as
possible a special meeting of the shareholders to determine whether the
corporation shall function without a custodian or shall be liquidated. If so
directed by vote of the holders of a majority of the outstanding shares of the
corporation, as shown by proper certified resolution, the custodian shall
deliver and pay over all property of the corporation held by it as specified in
such vote.
ARTICLE IX
INVESTMENT ADVISER
The board of directors, with the approval of the shareholders and
consistent with Article XI of the articles of incorporation, may enter into a
contract with any person, firm or corporation to act as investment adviser and
to perform such duties and render such other services as shall be deemed
necessary. Any such contract shall provide that it may be terminated at any
time by the corporation without penalty and upon not more than sixty (60) days'
written notice and shall be automatically terminated in the event of its
assignment by such person, firm or corporation. Any such contract, which shall
continue in effect for a period of more than two (2) years from the date of its
execution, shall be specifically approved at least annually by vote of a
majority of the outstanding voting securities of the corporation or by the board
of directors of
<PAGE>
the corporation, including approval by a majority of the directors who are not
parties to such a contract or affiliated persons of such party (except solely by
reason of being a director of the corporation). Such contract may contain any
other provision not inconsistent with the articles of incorporation and these
by-laws.
ARTICLE X
UNDERWRITER
The board of directors, consistent with Article XI of the articles of
incorporation, may enter into a contract with any person, firm or corporation to
act as underwriter for the corporation and to perform such other duties and
render such other services as shall be deemed necessary. Any such contract
shall provide that it shall be automatically terminated in the event of its
assignment by such person, firm or corporation, and that in the event it shall
continue in effect for a period of more than two (2) years from the date of
execution, it shall be specifically approved at least annually by vote of a
majority of the outstanding voting securities of the corporation or by the board
of directors of the corporation, including approval by a majority of the
directors who are not parties to such contract or affiliated persons of any such
party (except solely by reason of being a director of the corporation). Such
contract may be exclusive or not exclusive and may be, but need not be, with the
same person, firm or corporation, a party to an investment adviser's contract
with the corporation as provided in the articles of incorporation and these by-
laws. Such contract may also contain any provision not inconsistent with the
articles of incorporation and these by-laws.
ARTICLE XI
STOCK TRANSACTIONS BY OFFICERS AND OTHERS
No officer or director of the corporation, and insofar as the corporation
can enforce this prohibition, neither the investment adviser nor an underwriter,
as described in Article IX and Article X, respectively, nor any member, officer,
director, trustee or shareholder of such investment adviser or underwriter shall
take a long or short position in the securities issued by the corporation,
except as follows:
(a) The foregoing provision shall not prohibit an underwriter from
purchasing shares of the corporation from the corporation or from another
underwriter if such purchases are limited to purchases for the purpose of
filling orders for such shares received by such underwriter, and provided
that orders to purchase from the corporation or from another underwriter
are entered with the corporation or the custodian promptly upon receipt by
the purchasing underwriter or, in case of a purchase from another
underwriter, upon receipt by such other underwriter of orders for such
shares, unless the purchasing underwriter is otherwise instructed by a
retail customer;
(b) The foregoing provision shall not prohibit an underwriter from
purchasing shares of the corporation as agent for the account of the
corporation.
(c) The foregoing provision shall not prohibit the purchase of shares
of the corporation from the corporation or from an underwriter by an
officer or director of the corporation or by such underwriter, or by any
member, officer, director, trustee or shareholder of the investment adviser
or of such underwriter at the public
<PAGE>
offering price at the time of such purchase.
(d) The foregoing provision shall not prohibit the purchase of shares
of the corporation at net asset value, pursuant to a uniform offer
described in the prospectus, by any officer, or director of the
corporation, its investment adviser or principal underwriter or by any full
time employee or sales representative of any of the foregoing who has acted
as such for not less than ninety (90) days, or by any trust, pension,
profit-sharing or other benefit plan for such persons; provided, that such
purchases are made upon the written assurance of the purchaser that the
purchase is made for investment purposes and that the shares will not be
re-sold except through redemption or repurchase by or on behalf of the
corporation.
ARTICLE XII
AUDITOR
An auditor shall be selected annually, pursuant to the Investment Company
Act of 1940.
ARTICLE XIII
FISCAL YEAR
The fiscal year of the corporation shall be fixed by resolution of the
board of directors.
ARTICLE XIV
SEAL
The corporate seal of the corporation shall, subject to alteration by the
board of directors, consist of a flat-faced circular die, upon which shall be
engraved or cut the word "Maryland", together with the name of the corporation
and the year of its incorporation.
ARTICLE XV
INDEMNIFICATION
1. The Corporation shall indemnify each present and past officer and
director and his heirs and personal representative to the full extent permitted
by the Corporation's Articles of Incorporation and the Annotated Code of
Maryland Corporations and Associations Sec. 2-418 or any successor statute as
amended from time to time.
2. With respect to a proceeding against an officer or director brought by
or on behalf of the Corporation to obtain a judgement or decree in its favor,
the corporation shall provide the officer or director with the same
indemnification, after the same determination, as it is required to provide with
respect to a proceeding not brought by or on behalf of the Corporation.
3. The board of directors in its sole discretion may authorize or provide
to an employee or agent any
<PAGE>
indemnification described in this article.
4. Any indemnification provided by this Article:
(a) Continues as to any officer, director, employee or agent who has
ceased to be such and inures to the benefit of his heirs and personal
representative; and
(b) Does not exclude any other rights to which a person is or may be
entitled by law, any agreement, vote of stockholders of disinterested
directors, or otherwise as to any action, including:
(i) Action in his official capacity; and
(ii) Action in another capacity while holding the office.
5. The indemnification provided by this Article shall be provided as to
officers and directors, and may be provided as to employees and agents, with
respect to any action, suit or proceeding arising from an act or omission or
alleged act or omission, whether occurring before or after the adoption of this
Article.
6. The provisions of this Article constitute a contract between the
Corporation and each director or officer who serves in any such capacity at any
time while this Article and the relevant provisions of The Annotated Code of
Maryland Corporations and Associations or other applicable law, if any, are in
effect, and repeal or modification of any such law or of this Article shall not
affect any rights or obligations then existing with respect to any state of
facts then or theretofore or thereafter brought or threatened based in whole or
in part upon any such state of facts.
7. Each section or portion thereof of this Article shall be deemed
severable from the remainder, and the invalidity of any such section or portion
shall not affect the validity of the remainder of this Article.
8. Nothing in this Article protects, or purports to protect, or may be
interpreted to construed to protect, an officer or director against any
liability to the Corporation or its security holders to which he 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 office.
ARTICLE XVI
AMENDMENTS
Either the board of directors or the shareholders may make, amend, alter or
repeal the by-laws at any meeting duly held, the notice of which includes notice
of proposed addition, amendment, alteration or repeal of such by-laws; provided,
however, that the provisions concerning investment and other restrictions
contained in Article VII of the by-laws shall not be amended, altered or
repealed unless authorized by the vote of a majority of the outstanding voting
securities of the corporation.
These by-laws include all amendments adopted through November 11, 1987 as
follows:
Article I, Section 8, amended June, 1973.
Article II, Section 4, amended September, 1974.
Article VI, Section 6, amended January, 1977.
Article XV, amended April, 1978.
Article I, Section 2, amended April, 1979.
<PAGE>
Article I, Section 7, amended April, 1980.
Article VII, Section 8, amended November, 1980.
Article I, Sections 1,2,3,5 and 9; Article II, Sections 2 and 5;
Article V, Section 1; amended August, 1987.
Article I, Section 3; Article VII; Article VIII; amended November 11,
1987.
<PAGE>
Account
----------------------------------------------------- Certificate
Discount/Account No. Number
----------------------------------------
Number of Shares
--------------------------------------------
Date
--------------------------------------------------------
COMMON STOCK
PAR VALUE $0.001
NUMBER [LOGO] SHARES
FBL SERIES FUND, INC.
INCORPORATED UNDER THE LAWS OF MARYLAND
SEE REVERSE
FOR CERTAIN DEFINITIONS
- -----------------------------------
PORTFOLIO
302403
- -----------------------------------
PORTFOLIO CUSIP
THIS CERTIFIES OWNERSHIP BY S P E C I M A N
CUSIP 3024031
OF THE INDICATED NUMBER OF FULLY PAID AND NON-ASSESSABLE SHARES OF PAR VALUE
OF ONE TENTH OF ONE CENT ($0.001) EACH, OF THE COMMON STOCK OF FBL SERIES
FUND, INC., TRANSFERABLE ON THE BOOKS OF THE CORPORATION BY THE HOLDER
HEREOF IN PERSON OR BY DULY AUTHORIZED ATTORNEY UPON SURRENDER OF THIS
CERTIFICATE PROPERLY ENDORSED. THIS CERTIFICATE AND THE SHARES REPRESENTED
HEREBY ARE ISSUED AND SHALL BE HELD SUBJECT TO THE PROVISIONS OF
THE ARTICLES OF INCORPORATION AND THE BY-LAWS OF THE CORPORATION AND OF ALL
AMENDMENTS FROM TIME TO TIME MADE THERETO, COPIES OF WHICH ARE ON FILE WITH
THE TRANSFER AGENT.
THIS CERTIFICATE IS NOT VALID UNLESS COUNTERSIGNED BY THE TRANSFER AGENT.
WITNESS THE SEAL OF THE CORPORATION AND THE SIGNATURES OF ITS DULY AUTHORIZED
OFFICERS.
DATED: _______________________________
COUNTERSIGNED:
FBL INVESTMENT ADVISORY SERVICES, INC. BY
(WEST DES MOINES, IOWA) ----------------------------
TRANSFER AGENT PRESIDENT/VICE PRESIDENT
[SEAL]
BY BY
- -------------------------------------- ----------------------------
AUTHORIZED SIGNATURE SECRETARY/ASSISTANT SECRETARY
<PAGE>
The following abbreviations, when used in the inscription on the face of this
certificate, shall be construed as though they were written out in full accord
to applicable laws or regulations:
TEN COM--as tenants in common UNIF GIFT MIN ACT--______Custodian_____
(Cust) (Minor)
JT TEN --as joint tenants with right of under Uniform Gifts to Minors
survivorship and not as tenants Act _________
in common (State)
Additional abbreviations may also be used though not in the above list.
REDEMPTION RIGHTS
The redemption provisions pertaining to the common stock of the corporation, as
set forth in Article VIII of the articles of incorporation of the corporation
are as follows:
ARTICLE VIII
(a) Any shareholder of record in the corporation desiring to dispose of
his shares may deposit his certificate or certificates for such shares with
the corporation or its agent, duly endorsed or accompanied by a proper
instrument, of transfer, with a request that the corporation redeem the
shares represented thereby. Upon any such deposit being made, the corporation
shall be required to redeem said shares upon the terms set forth in the
Corporation's effective registration statement on file with the Securities
and Exchange Commission. Payment for such shares shall be made by the
corporation within seven days after the date upon which the shares are
deposited. Whenever the board of directors, by declaration or resolution,
has suspended the determination of net asset value pursuant to the provisions
of these articles of incorporation, the right of any shareholder to require
the corporation to redeem his shares shall be likewise suspended. At any
time such suspension is in effect any shareholder may withdraw his
certificate or certificates from deposit or may leave the same on deposit, in
which case the redemption price shall be the net asset value next determined
after the suspension is terminated.
(b) The corporation may by agreement with any shareholder purchase shares
of the corporation at a price not exceeding the net asset value in effect at the
time when such purchase or contract to purchase is made or the net asset value
next to be determined.
(c) Any redemptions or purchases of shares by the Corporation of any
class of the Corporation's stock shall be made solely from assets belonging to
such class. Any shares of any class of the Corporation's stock purchased or
obtained by the Corporation by purchase or redemption shall be deemed retired
and shall thereafter have the status of authorized but unissued shares of
such class. At any time when a shareholder's ownership of shares of any class
has a value of less than $250, the Corporation may redeem the shares of such
class owned by such a shareholder at a current price determined in accordance
with the Corporation's current prospectus.
(d) Any redemptions or purchases of shares by the Corporation of any
class of the Corporation's stock shall be in cash, except that upon
determination of the board of directors redemptions may be made in kind as
provided in the Corporation's current prospectus.
REDEMPTION OR ASSIGNMENT FORM
THE UNDERSIGNED TENDERS THIS CERTIFICATE TO THE CORPORATION
*A. For the redemption, in accordance with the corporation's charter, of
__________ shares of the corporation's capital stock represented by this
certificate.
*B. And, for value received hereby sells, assigns and transfers unto
_______________________________ Insert social security or other identifying
[Full Name(s) of Assignee(s)] number of person to whom the certificate is
being assigned.
_______________________________
(Address) /__________/_______/__________/
_______________________________
(City) (State) (Zip)
__________________ shares of the stock represented by this certificate and
hereby irrevocably constitutes and appoints _______________ attorney to transfer
the same on the books of the corporation, with full power of substitution in the
premises.
SIGNATURE(S)
*If redemption, fill in paragraph ____________________________________________
A and cross out paragraph B.
If assignment, fill in paragraph ____________________________________________
B and cross out paragraph A.
If some shares are to be redeemed ____________________________________________
and others assigned, fill in both (Street)
paragraphs. ____________________________________________
(City) (State) (Zip)
CHECK ONE IF APPLICABLE
/ / A new certificate is to be NOTICE: The signature(s) to this form must
issued to the undersigned correspond with the name(s) as written
for any balance of shares upon the face of the certificate in every
represented by the particular, without alteration or enlarge-
certificate and not being ment, or any change whatever.
tendered for redemption
or assignment.
Signature(s) Guaranteed By:
/ / Place the balance of
shares in uncertificated _______________________________________
status on my account. (Bank or Firm)
By ____________________________________
Signature(s) must be guaranteed by a
commercial bank, trust company, or member
firm of a major stock exchange (New York,
American, Midwest or Pacific Coast).
<PAGE>
INVESTMENT ADVISORY AND
MANAGEMENT SERVICES AGREEMENT
This Agreement made this 11th day of November, 1987, by and between FARM
BUREAU GROWTH FUND, INC., a Maryland corporation (the "Fund"), and FBL
INVESTMENT ADVISORY SERVICES, INC., a Delaware corporation ("Adviser");
WITNESSETH:
In consideration of the mutual covenants herein contained, it is agreed as
follows:
1. ADVISORY SERVICES. Adviser shall furnish investment research and
advice to the Fund and shall manage the investment and reinvestment of the
assets of the investment portfolios currently offered and to be offered by the
Fund (the "Portfolios") and its business affairs and matters incidental thereto,
all subject to the supervision of the Board of Directors of the Fund, and the
provisions of the Articles of Incorporation and By-Laws of the Fund and any
resolutions, rules or regulations adopted by the Board of Directors of the Fund.
Adviser shall for all purposes herein provided be deemed to be an independent
contractor and shall, unless otherwise expressly provided or authorized herein,
have no authority to act for or represent the Fund in any way or otherwise be
deemed an agent for the Fund. The Fund shall also be free to retain, at its own
expense, other persons to provide it with any services whatsoever including, but
not limited to, statistical, factual or technical information or advice. The
services of Adviser herein provided are not to be deemed exclusive and Adviser
shall be free to render similar services or other services to others so long as
its services hereunder shall not be impaired thereby.
2. LIMITATIONS ON ADVISORY SERVICES. The Adviser shall perform the
services under this Agreement subject to the supervision and review of the Board
of Directors and in a manner consistent with the objectives, policies, and
restrictions of each Portfolio of the Fund as stated in its Registration
Statement, as amended from time to time, the provisions of the Investment
Company Act of 1940 ("ICA") and the applicable requirements of the Internal
Revenue Code of 1986.
3. DUTIES OF ADVISER. In carrying out its obligations to manage the
investment and reinvestment of the assets of the Fund, the Adviser shall, as
appropriate and consistent with the limitations set forth in Paragraph 2 hereof:
(a) perform research and obtain and evaluate pertinent economic,
statistical, and financial data relevant to the investment
policies of each Portfolio of the Fund as set forth in the
<PAGE>
prospectus for the Fund, as amended from time to time;
(b) make and carry out day-to-day decisions to acquire or dispose of
permissible investments, manage the investments and any other
property of the Fund, and provide or obtain such services as may
be necessary in managing, acquiring or disposing of investments;
and
(c) determine the composition of the assets of each of the
Portfolios, including the purchase, retention or sale of the
securities and cash contained in those Portfolios.
4. REPORT TO BOARD. The Adviser, either through persons employed by it
or at its expense, shall furnish to the Board at least once every quarter a
schedule of investments and other assets held in the Portfolios and a statement
of all purchases and sales for the Portfolios, except short term money market
instruments, made during the period since the last report.
5. RECORDS. The Adviser agrees to preserve for the period prescribed by
the rules and regulations of the Securities and Exchange Commission all records
the Adviser maintains for the Fund as are required to be maintained pursuant to
said rules. The Adviser agrees that all such records shall be the property of
the Fund and shall be made available, within five (5) business days of the
request, to the Fund's accountants or auditors during regular business hours at
the Adviser's offices upon prior written notice. In the event of termination of
this Agreement for any reason, all such records shall be returned promptly to
the Fund, free from any claim or retention of rights by the Adviser. In
addition, the Adviser will provide any materials, reasonably related to the
investment advisory services provided hereunder, as may be reasonably requested
in writing by the Directors or officers of the Fund or as may be required by any
governmental agency having jurisdiction.
6. EXPENSES. Adviser shall at its expense furnish the Fund with office
space (in the offices of Adviser, or other such place or places as may be agreed
upon by the parties) and such office facilities, simple business equipment,
advisory, research and statistical facilities and clerical services and
personnel as may be necessary to administer the investment business of the Fund.
Adviser shall arrange, if desired by the fund, for officers or employees of
Adviser to serve without salary from the Fund as Directors, officers or agents
of the Fund if duly elected or appointed to such positions by the shareholders
of the Fund or by the Board of Directors thereof and subject to their individual
consent and to any limitations imposed by law. Adviser will not be required to
pay any other expenses of the Fund other than those expressly enumerated herein;
and in particular, but without limiting the generality of the foregoing, Adviser
will not be required to pay any of the following fund expenses: (1) expenses for
services rendered by a custodian including those for the safekeeping of the
Fund's securities or other property and for keeping its books of account, (2)
charges and expenses of independent auditors, legal counsel, any transfer or
dividend disbursing agent or any registrar of the Fund, (3) costs of acquiring
and disposing of portfolio
<PAGE>
securities, (4) interest, if any, on obligations incurred by the Fund, (5) the
cost of calculating the net asset value of the Fund as provided in the Articles
of Incorporation and By-Laws of the Fund, of stock certificates and of corporate
reports, (6) membership dues in the Investment Company Institute or any similar
organization, (7) the cost of reports, notices to shareholders and other
shareholder communications and other like miscellaneous expenses, (8) expenses
of any registration and qualification of shares of the Fund for sale under
Federal securities laws and the securities laws of any State or other
jurisdiction, (9) telephone and personnel costs incurred by Adviser and
allocable to the above, (10) taxes and fees payable to Federal, State or other
Governmental agencies or otherwise, and (11) expenses of underwriting and
selling shares of stock issued by the Fund. The Board shall determine how
expenses are to be allocated among the existing Portfolios, and the
determination of the Board shall be final and binding. The Fund shall not pay
or incur any obligation for any management or administrative expenses for which
the Fund intends to seek reimbursement from Adviser as herein provided without
first obtaining the written approval of Adviser.
7. COMPENSATION. For the services to be rendered and the charges and
expenses assumed and to be paid by the Adviser as provided herein, the Fund
shall pay the Adviser compensation based on an annual percentage of the average
daily net assets of each Portfolio as follows:
Average Daily Net Assets
-----------------------------
First Second Over
$200 $200 $400
Portfolio Million Million Million
- --------- ------- ------- -------
Managed. . . . . . . . . . . . . . . . . 0.60% 0.55% 0.50%
Aggressive Growth Common Stock . . . . . 0.60% 0.55% 0.50%
High Yield Bond. . . . . . . . . . . . . 0.55% 0.50% 0.45%
Growth Common Stock. . . . . . . . . . . 0.50% 0.45% 0.40%
Ginnie Mae Portfolio . . . . . . . . . . 0.50% 0.45% 0.40%
High Quality Bond. . . . . . . . . . . . 0.40% 0.35% 0.30%
Money Market . . . . . . . . . . . . . . 0.40% 0.35% 0.30%
Blue Chip Index. . . . . . . . . . . . . 0.25% 0.25% 0.25%
Compensation under this Agreement shall be calculated and accrued for each
business day by applying the appropriate annual rates to the net assets of the
Portfolio in accordance with the formula set forth above as of the close of the
last business day preceding the day for which the fee is being calculated, and
dividing the sum so computed by the number of business days in the fiscal year.
The fees thus accrued shall be payable monthly, provided that such compensation
shall be paid proportionately for any other period ending with the termination
of this Agreement.
8. LIMITATION OF EXPENSES. In the event that expenses of any Portfolio
chargeable to its income account (including amounts payable hereunder but
exclusive of brokerage fees, distribution services fee, interest, taxes and
extraordinary expenses for any fiscal year ending on a date at which this
Agreement is in effect) shall exceed 1.50% of the average daily net assets of
the Portfolio for said fiscal year, calculated on the basis of the average of
all of the daily valuations of the net assets of the Portfolio in effect as of
the close of each business day
<PAGE>
during said fiscal year, Adviser shall pay to the Portfolio the amount by which
such expenses exceed the applicable limitation, within three days after the
determination of the amount thereof. In no event shall Adviser be required to
reimburse the Portfolio in an amount exceeding its compensation for such period
from such Portfolio under this Agreement.
9. FUND TRANSACTIONS AND BROKERAGE. The Adviser agrees to determine the
securities to be purchased or sold by each Portfolio of the Fund, subject to the
provisions of Paragraphs 2 and 3 above, and to place orders pursuant to its
determinations either directly with the issuer, with any broker-dealer or
underwriter that specializes in the securities for which the order is made, or
with any other broker or dealer selected by the Adviser, subject to the
following limitations.
The Adviser is authorized to select the brokers or dealers that will
execute the purchases and sales of portfolio securities for each Portfolio of
the Fund and will use its best efforts to obtain the most favorable price and
efficient execution of the Fund's orders, taking into account all appropriate
factors, including: price; dealer spread or commission, if any; size and
difficulty of the transaction; the nature of the market for the security; the
reliability, financial condition and general execution and operational
capabilities of the broker-dealer; and the research, statistical, and economic
data or facilities furnished by the broker-dealer to the Fund.
If, in the judgment of the Adviser, the Fund or any Portfolio thereof would
be benefited by supplemental investment research, the Fund or such Portfolio may
pay reasonable increased transaction costs to obtain such information. The
expenses of the Adviser may not necessarily be reduced as a result of receipt of
such supplemental information. The Adviser or any of its affiliates may also
use any investment research obtained for the benefit of the Fund or any
Portfolio thereof in providing investment advice to its other investment
advisory accounts.
10. AVOIDANCE OF INCONSISTENT POSITION. In connection with purchases or
sales of portfolio securities for the account of the Fund or any Portfolio
thereof, neither Adviser nor any officer, director or shareholder of Adviser
shall act as principal or receive any commission other than its compensation
provided for in this Agreement. Such limitation, however, shall not prohibit
the payment of the usual and customary brokerage commissions to any of such
parties in the proper case. It is understood and agreed that Adviser, by virtue
of a separate agreement or agreements with the Fund, may also act as
underwriter, distributor, transfer agent and/or shareholder service agent for
the Fund, and/or perform accounting services for the Fund, and may be
compensated therefor.
The same securities held by the Fund may also be held by separate
investment accounts or other investment companies for which the Adviser may act
as an adviser or by the Adviser or its affiliates. Because of different
investment objectives or other factors, a particular security may be bought by
the adviser or its affiliates
<PAGE>
or for one or more clients when one or more clients are selling the same
security. If purchases or sales of securities for the Fund or other entities
for which the Adviser or its affiliates act as investment adviser or for their
advisory clients arise for consideration at or about the same time, the Fund
agrees that the Adviser may make transactions in such securities, in such manner
as is deemed equitable to all. To the extent that transactions on behalf of
more than one client of the Adviser during the same period may increase demand
for securities being purchased or the supply of securities being sold, the Fund
recognizes that there may be an adverse effect on price.
It is agreed that, on occasions when the Adviser deems the purchase or sale
of a security to be in the best interests of the Fund as well as other accounts
or companies, it may, to the extent permitted by applicable laws and
regulations, but shall not be obligated to, aggregate the securities to be sold
or purchased for the Fund with those to be sold or purchased for other accounts
or companies in order to obtain favorable execution and lower brokerage
commissions. In that event, allocation of the securities purchased or sold, as
well as the expenses incurred in the transaction, will be made by the Adviser
in the manner it considers to be most equitable and consistent with its
fiduciary obligations to the Fund and to such other accounts or companies. The
Fund recognizes that in some cases this procedure may adversely affect the size
of the position obtainable for a Portfolio of the Fund.
11. LIMITATION OF LIABILITY OF ADVISER. Adviser shall not be liable for
any error of judgment or mistake of law, or for any loss suffered by the Fund in
connection with the matters to which this Agreement relates, except loss to the
Fund resulting from willful misfeasance, bad faith or gross negligence on the
part of Adviser in the performance of its obligations and duties under this
Agreement. It is understood that the officers, directors, agents and
shareholders of the Fund are or may become interested in Adviser as officers,
directors, agents, shareholders, or otherwise, and that the officers, directors,
shareholders and agents of Adviser may become similarly interested in the Fund;
and that the existence of any such dual interest shall not affect the validity
of this Agreement or any transaction hereunder except as a provided in the
Articles of Incorporation or By-Laws of the Fund or Articles of Incorporation of
the Adviser, or by the specific provisions of applicable law. Any person, even
though also employed by Adviser, who may be or become an employee of and paid by
the Fund shall be deemed, when acting within the scope of his employment by the
Fund, to be acting in such employment solely for the Fund and not as a an
employee or agent of Adviser.
12. EFFECTIVE DATE AND TERM. This Agreement shall not become effective
unless and until it is approved by the Fund's Board of Directors, including a
majority of Directors who are not parties to this Agreement or "interested
persons" (as defined in the ICA) of any such party to this Agreement and, as to
the Growth Common Stock Portfolio, a vote of a "majority of the outstanding
voting securities" (as defined in the ICA) of such Portfolio. This Agreement
shall come into full force and effect on December 1, 1987, provided that it
shall not become effective as to any subsequently created Portfolio until it has
been approved by the Board of Directors specifically for such Portfolio.
<PAGE>
As to each Portfolio of the Fund, the Agreement shall continue in effect
until November 30, 1988, and shall thereafter continue in effect from year to
year so long as its continuance is approved at least annually in the manner
required by the ICA and the rules and regulations thereunder; provided however
that if the continuation of this Agreement is not approved for a Portfolio, the
Adviser may continue to serve in such capacity for such Portfolio in the manner
and to the extent permitted by the ICA and the rules and regulations thereunder.
In connection with such approvals, the Directors shall request, and the Adviser
shall furnish, such information as may be necessary to evaluate this Agreement.
As to each Portfolio of the Fund, this Agreement:
A. may be terminated without the payment of any penalty upon 60 days'
written notice to the Adviser either by the Board of Directors or by a
majority vote of those persons having voting rights in respect of the
affected Portfolio(s) of the Fund;
B. shall automatically terminate if it is assigned (within the meaning of
the ICA) by the Adviser;
C. may be terminated by the Adviser without payment of any penalty upon
60 days' written notice to the Secretary of the Board of Directors of
the Fund; and
D. may be amended, changed, waived, discharged or terminated only by an
instrument in writing signed by the party against which enforcement of
the change, waiver, discharge or termination is sought. An amendment
of this Agreement shall not be effective until approved by (i) a vote
of the holders of a majority of the outstanding voting securities of
the Portfolio; and (ii) a majority of those Directors of the Fund who
are not parties to this Agreement or "interested persons" (as defined
in the ICA) of any party to this Agreement, cast in person at a
meeting called for the purpose of voting on such approval.
13. NOTICES. Any notices under this Agreement shall be in writing
addressed and delivered or mailed, postage prepaid, to the other party at such
address as such other party may designate for the receipt of such notice.
14. MISCELLANEOUS. The captions in this Agreement are included for
convenience or reference only and in no way define or limit any of the
provisions hereof or otherwise affect their construction or effect. This
Agreement may be executed simultaneously in two or more counterparts, each of
which shall be deemed an original, but all of which together shall constitute
one and the same instrument.
IN WITNESS WHEREOF, the Fund and Adviser have caused this Agreement to be
executed in their
<PAGE>
names and on their behalf and under their corporate seals by and through their
duly authorized officers all on the day and year first above written.
ATTEST: FARM BUREAU GROWTH FUND, INC.
- ----------------------------------- -------------------------------------
By: Its Assistant Secrtary By: Its Vice President
ATTEST: FBL INVESTMENT ADVISORY SERVICES, INC.
- ----------------------------------- -------------------------------------
By: Its Assistant Secretary By: Its Vice President
<PAGE>
UNDERWRITING AGREEMENT
This agreement made this 31st day of December, 1983, between FARM BUREAU
GROWTH FUND, INC., a Maryland corporation (hereinafter called the "Fund"), and
PFS MANAGEMENT SERVICES, INC., a Delaware corporation (hereinafter called the
"Underwriter");
WITNESSETH:
In consideration of the mutual covenants hereinafter contained, it is
agreed as follows:
1. The Fund hereby appoints the Underwriter its exclusive agent for the
distribution of common stock of the Fund in jurisdictions wherein shares of the
Fund may legally be offered for sale; provided, however, that the Fund in its
absolute discretion may (1) issue shares of its common stock in connection with
the acquisition of assets or shares or securities of another corporation or
entity or in connection with a merger or consolidation with any other
corporation as and to the extent permitted by its Articles of Incorporation and
any applicable laws; (2) issue or sell shares directly to the shareholders of
the Fund upon such terms and conditions and for such consideration, if any, as
it may determine, whether in connection with the distribution of subscription or
purchase rights, the payment or reinvestment of dividends or distributions, or
otherwise; or (3) issue or sell shares at net asset value to the shareholders of
any other investment company, for which the Underwriter shall act as exclusive
distributor, who wish to exchange all or a portion of their investment in shares
of such other investment company for shares of the Fund.
2. The Underwriter hereby accepts appointment as exclusive agent for the
distribution of the common stock of the Fund and agrees that it will use its
best efforts with reasonable promptness to sell such part of the authorized
shares of the common stock of the Fund remaining unissued as from time to time
shall be effectively registered under the Securities Act of 1933 ("Securities
Act"), at prices determined as hereinafter provided and on terms hereinafter set
forth, all subject to applicable Federal and state laws and regulations and to
the Articles of Incorporation and By-Laws of the Fund and in accordance with the
current prospectus of the Fund.
3. The Fund agrees that it will use its best efforts to keep effectively
registered under the Securities Act for sale as herein contemplated such shares
of its common stock as the Underwriter shall reasonably request and as the
Securities and Exchange Commission shall permit to be so registered.
4. Notwithstanding any other provision hereof, the Fund may terminate,
suspend or withdraw the offering of shares of its common stock whenever, in its
sole discretion, it deems such action to be desirable.
5. The Underwriter shall sell shares of common stock of the Fund to or
through qualified dealers or others
<PAGE>
in such manner, not inconsistent with the provisions hereof and the then
effective Registration Statement of the Fund under the Securities Act (and
related prospectus), as the Underwriter may determine from time to time,
provided that no dealer or other person shall be appointed or authorized to act
as agent of the Fund without the prior written consent of the Fund and that the
form of each agreement between the Underwriter and any such dealer, or other
person shall have been approved by the Fund.
6. All shares of common stock of the Fund offered for sale or sold by the
Underwriter shall be so offered or sold at the net asset value in accordance
with the then current prospectus. The net asset value per share shall be
computed in accordance with the Articles of Incorporation of the Fund and shall
be determined in the manner and at the times set forth in the then current
prospectus of the Fund related to such shares.
7. The price the Fund shall receive for all shares purchased from the
Fund shall be the net asset value used in determining the public offering price
applicable to the sale of such shares.
8. The Underwriter shall issue and deliver on behalf of the Fund such
confirmations of sales made by it as agent pursuant to this agreement as may be
required. At or prior to the time of delivery by the Fund to or on the order of
the Underwriter of certificates for any shares of common stock of the Fund, the
Underwriter will pay or cause to be paid to the Fund, the amount due the Fund
for the sale of such shares. Certificates shall be issued or shares registered
on the transfer books of the Fund in such names and denominations as the
Underwriter may specify.
9. The Fund will execute any and all documents and furnish any and all
information which may be reasonably necessary in connection with the
qualification of its shares of common stock for sale (including the
qualification of the Fund as a dealer where necessary or advisable) in such
states as the Underwriter may reasonably request (it being understood that the
Fund shall not be required without its consent to qualify to do business in any
jurisdiction or to comply with any requirement which in its opinion is unduly
burdensome). The Underwriter, at its own expense, will effect all
qualifications as dealer or broker or otherwise under all applicable state or
Federal laws required in order that the shares may be sold in as broad a
territory as practicable.
10. The Fund will furnish to the Underwriter from time to time such
information with respect to the Fund and its shares as the Underwriter may
reasonably request for use in connection with the sale of shares of the Fund.
The Underwriter agrees that it will not use or distribute or authorize the use,
distribution or dissemination by its dealers or others in connection with the
sale of such shares any statements, other than those contained in the Fund's
current prospectus, except such supplemental literature or advertising as shall
be lawful under Federal and state securities laws and regulations, and that it
will furnish the Fund with copies of all such material.
11. The Underwriter shall order shares of common stock of the Fund from
the Fund only to the extent that it shall have received purchase orders
therefor. The Underwriter will not make, or authorize any dealers or others to
make
<PAGE>
any short sales of shares of the Fund.
12. The Underwriter, as agent of and for the account of the Fund, may
repurchase the common stock of the Fund at such prices and upon such terms and
conditions as shall be specified in the current prospectus of the Fund.
13. In selling or reacquiring shares of common stock of the Fund for the
account of the Fund, the Underwriter will in all respects conform to the
requirements of all state and Federal laws and the Rules of Fair Practice of the
National Association of Securities Dealers relating to such sale or
reacquisition, as the case may be, and will indemnify and save harmless the Fund
from any damage or expense on account of any wrongful act by the Underwriter or
any employee, representative or agent of the Underwriter. The Underwriter will
observe and be bound by all the provisions of the Articles of Incorporation and
By-Laws of the Fund and the current prospectus of the Fund and of any
fundamental policies adopted by the Fund pursuant to the Investment Company Act
of 1940, notice of which shall have been given by the Fund to the Underwriter
which at the time in any way require, limit, restrict or prohibit or otherwise
regulate any action on the part of the Underwriter.
14. The Underwriter will require each dealer to conform to the provisions
hereof and the Registration Statement (and related prospectus) at the time in
effect under the Securities Act with respect to the public offering price of the
Fund's shares, and neither the Underwriter nor any such dealer shall withhold
the placing of purchase orders so as to make a profit thereby.
15. The Fund will pay or cause to be paid expenses of any registration and
qualification of shares of its common stock for sale under the Federal
securities laws and the securities laws of any state or other jurisdiction in
which the Underwriter may wish to arrange for the sale of the same, the expenses
of other reports and acts required by law, in connection with such registration
and qualification, and the expenses incident to the issuance of shares of common
stock, such as the cost of stock certificates, issue taxes, and fees of the
transfer agent. The Underwriter will pay all expenses (other than expenses
which the Fund may bear pursuant to its Distribution and Shareholder Servicing
Plan and Agreement with the Underwriter or which one or more dealers may bear
pursuant to any agreement with the Underwriter) incident to the sale and
distribution of the shares issued or sold hereunder, including, without limiting
the generality of the foregoing, all (1) expenses of printing and distributing
any prospectus and of preparing, printing and distributing or disseminating any
other literature, advertising and selling aids in connection with the offering
of the shares for sale (except that such expenses need not include expenses
incurred by the Fund in connection with the preparation, printing and
distribution of any report or other communication to stockholders in their
capacity as such), and (2) expenses of advertising in connection with such
offering. No transfer taxes, if any, which may be payable in connection with
the issue or delivery of shares sold as herein contemplated or of the
certificates for such shares shall be borne by the Fund, and the Underwriter
will indemnify and hold harmless the Fund against liability for all such
transfer taxes.
16. This agreement shall become effective on the date hereof and shall
continue until the close of business
<PAGE>
on November 15, 1984 and from year to year thereafter, but only so long as such
continuance is specifically approved at least annually in a manner consistent
with the Investment Company Act of 1940. Either party hereto may terminate this
agreement on any date by giving the other party at least six months' prior
written notice of such termination specifying the date fixed therefor. Without
prejudice to any other remedies of the Fund in any such event the Fund may
terminate this agreement at any time immediately upon any failure of fulfillment
of any of the obligations of the Underwriter hereunder.
17. This agreement shall automatically terminate in the event of its
assignment within the meaning of such term under the Investment Company Act of
1940.
18. Any notice under this agreement shall be in writing, addressed and
delivered or mailed, postage prepaid, to the other party at such address as such
other party may designate for the receipt of such notice.
IN WITNESS WHEREOF, the Fund and the Underwriter have each caused this
agreement to be executed on its behalf by an officer thereunto duly authorized
and its corporate seal to be affixed on the day and year first above written.
FARM BUREAU GROWTH FUND, INC.
By:
---------------------------------
ATTEST:
---------------------------------
William J. Oddy
Assistant Secretary
PFS MANAGEMENT SERVICES, INC.
By:
---------------------------------
ATTEST:
---------------------------------
William J. Oddy
Assistant Secretary
<PAGE>
Exhibit 6b
DEALER AGREEMENT
FBL INVESTMENT ADVISORY SERVICES, INC.
5400 University Avenue
West Des Moines, IA 50265
Gentlemen:
As distributor and principal underwriter , we invite you to become a member
of the group of securities dealers (the "Selling Group") authorized to solicit
applications to purchase shares ("Applications") of the Money Market Portfolio,
Growth Common Stock Portfolio, Aggressive Growth Common Stock Portfolio, High
Quality Bond Portfolio, High Yield Bond Portfolio, Ginnie Mae Portfolio, Blue
Chip Index Portfolio and Managed Portfolio (sometimes referred to collectively
as the "Portfolios" and individually as the "Portfolio") of FBL Series Fund,
Inc. (the "Fund") and to service shareholder accounts as hereinafter described
but only in those states in which the shares of the respective Funds may legally
be offered for sale and only on the following terms:
A. SOLICITATION OF APPLICATIONS
1. Applications received from you and accepted by the appropriate Fund
will be at the public offering price determined in the manner described in the
then current prospectus of such Fund notwithstanding anything to the contrary in
this Agreement. The public offering price for the purchase of the shares of a
Fund is its net asset value per share.
2. The procedure relating to the handling of applications shall be subject
to instructions which we shall forward from time to time to all members of the
Selling Group. All applications are subject to acceptance by us and the Funds
at our West Des Moines, Iowa offices and we and the Funds reserve the right, in
our and their sole discretion, to reject any application.
3. As a member of the Selling Group, you agree:
(a) To purchase shares only from us or from your customers (other
than a securities broker or dealer).
(b) That you will purchase shares from us only to cover purchase
orders already received from your customers, or for your own bona fide
investment.
(c) That you will not purchase shares from your customers at a price
lower than the bid price then quoted by or for such Fund. You may,
however, sell shares for the account of your customer to the Fund, or
to us as agent for such Fund, at the bid price currently quoted by or
for such Fund.
(d) That you will not withhold placing with us orders received from
your customers so as to profit yourself as a result of such
withholding.
4. You agree that you will promptly forward all customers' applications
to us. The Funds will not accept conditional applications.
5. You agree that the Fund's share price applicable to applications will
be such Fund's public offering price next determined after receipt of the
application and payment at the office of such Fund in West Des Moines, Iowa in
accordance with the then current prospectus of such Fund.
<PAGE>
6. Payments for Fund shares purchased must be made at or prior to
acceptance of the application at the Fund's office in West Des Moines, Iowa, as
contemplated by the application forms furnished by us. Delivery of shares will
be made by credit to shareholder accounts or, if requested in writing, by
delivery of certificates.
7. Applications are subject to acceptance by us and the Funds. The Funds
reserve the right in their discretion, without notice to you, to suspend sales
or withdraw the offering of shares entirely.
8. No person is authorized to make any representations concerning any
Fund or its shares except those contained in such Fund's then current prospectus
and any such information as may be authorized by us or such Fund for use as
information supplemental to such prospectus. In soliciting applications for
shares of a Fund, you shall rely solely on the representations contained in such
Fund's then current prospectus and the supplemental information above mentioned.
9. Additional copies of any prospectus or statement of additional
information and any printed information designed as supplemental to such
prospectus will be supplied by us to members of the Selling Group in reasonable
quantities upon request.
10. Your acceptance of this agreement constitutes a representation that
you are (i) a registered security dealer and a member in good standing of the
National Association of Securities Dealers, Inc. and agree to comply with all
applicable state and federal laws and rules and regulations applicable to
transactions hereunder and to the rules of Fair Practice of the National
Association of Securities Dealers, Inc., including specifically Section 26,
Article III thereof. You likewise agree that you will not offer or sell shares
of any Fund in any state or other jurisdiction in which they may not lawfully be
offered for sale.
B. SHAREHOLDER SERVICES
1. You shall provide services to existing and prospective shareholders of
the Funds, including, without limitation, assistance in the establishment and
maintenance of shareholder accounts and records, forwarding purchase and
redemption requests, answering routine client inquiries regarding the Fund,
assistance to clients in changing dividend options, account designations and
addresses, assisting shareholders with tax information and such other services
as we may reasonably request.
2. You shall also prepare such quarterly reports for us as shall
reasonably be required by us.
C. COMPENSATION
1. Your acceptance of this agreement constitutes your agreement to become
a member of the Selling Group and to render the services, and to assume the
obligations, set forth herein for the compensation herein provided. You shall
for all purposes herein provided be deemed to be an independent contractor and
shall have no authority to act for or represent the Funds or us in any way or
otherwise be deemed an agent of the Funds or us, except as expressly provided
above.
2. For the services described herein, we will compensate you for sales of
Fund shares at a commission rate of up to 4% and pay a fee to you after the end
of each month at the annual rate of 0.15 of 1% of the average aggregate net
asset value of the shares of those accounts in the Funds for which you provide
services at a level deemed by us to be satisfactory. For the month and year in
which this Agreement becomes effective or terminates, there shall be an
appropriate proration on the basis of the number of days that the Agreement is
in effect during the month and year, respectively.
<PAGE>
D. GENERAL TERMS
1. This Agreement shall be in substitution of all prior agreements
between us regarding the shares of any Fund.
2. This Agreement shall become effective on the date hereof and shall
continue in effect until terminated. This Agreement shall automatically
terminate in the event of its assignment and shall terminate with respect to a
Fund upon any termination of that Fund's Distribution and Shareholder Servicing
Plan and Agreement (the "Plan"). It may be terminated by you on thirty (30)
days' written notice. It may also be terminated with respect to a Fund at any
time, without payment of any penalty, by vote of a majority of the members of
the Board of Directors of such Fund who are not interested persons of the Fund
and have no direct or indirect financial interest in the operation of the Plan
or in any agreement related to the Plan or by a vote of a majority (as defined
in the Investment Company Act of 1940) of the Fund's outstanding shares on
thirty (30) days' written notice. We reserve the right, in our discretion,
without notice, to modify, cancel or assign this agreement, which shall be
construed in accordance with the laws of the State of Iowa.
3. You acknowledge that we may enter into similar agreements with others
without your consent.
4. If any provision of this Agreement shall be held or made invalid by a
court decision, statue, rule or otherwise, the remainder shall not be affected
thereby.
5. All communications to us shall be sent to FBL Investment Advisory
Services, Inc., 5400 University Avenue, West Des Moines, Iowa, 50265. Any
notice to you shall be duly given if mailed or telegraphed to you at your
address as registered from time to time with the National Association of
Securities Dealers, Inc. This agreement in its entirety is applicable to sales
coming from, and only from, the state or states listed on the attached Schedule
A as from time to time amended by notice to you. Schedule A is by this
reference made a part of this agreement.
FBL INVESTMENT ADVISORY SERVICES, INC.
Dated: By:
------------------------------------------
Variable Products Vice President
The undersigned accepts your invitation to become a member of the Selling
Group and agrees to abide by the foregoing terms and conditions.
Dated: By:
------------------------------------------
<PAGE>
SCHEDULE A
to
DEALER AGREEMENT
Arizona
Colorado
Idaho
Illinois
Iowa
Kansas
Minnesota
Montana
Nebraska
New Mexico
North Dakota
Oklahoma
South Dakota
Utah
Wisconsin
Wyoming
<PAGE>
Exhibit 6c
ADMINISTRATIVE SERVICES AGREEMENT
AGREEMENT dated this 25th day of November, 1991, by and between FBL SERIES
FUND, INC., a Maryland corporation (the "Fund"), and FBL INVESTMENT ADVISORY
SERVICES INC., a Delaware corporation ("FBL").
In consideration of the mutual covenants hereinafter contained, it is
hereby agreed by and between the parties hereto as follows:
1. The Fund hereby appoints FBL to provide information and administrative
services for the benefit of the Fund and its shareholders. In this regard, FBL
shall appoint various broker-dealer firms and other financial services firms
("Firms") to provide related services and facilities for their clients who are
shareholders of the Fund ("clients"). The Firms shall provide such office space
and equipment, telephone facilities and personnel as is necessary or beneficial
for providing information and services to shareholders of the Fund. Such
services and assistance may include, but are not limited to, establishing and
maintaining shareholder accounts and records, processing purchase and redemption
transactions, answering routine client inquiries regarding the Fund and its
special features, assistance to clients in changing dividend and investment
options, account designations and addresses, and such other services as the Fund
or FBL may reasonably request. FBL may also provide some of the above services
for the Fund directly.
FBL accepts such appointment and agrees during such period to render such
services and to assume the obligations herein set forth for the compensation
herein provided. FBL shall for all purposes herein provided be deemed to be an
independent contractor and, unless otherwise expressly provided or authorized,
shall have no authority to act for or represent the Fund in any way or otherwise
be deemed an agent of the Fund. FBL, by separate agreement with the Fund, may
also serve the Fund in other capacities. In carrying out its duties and
responsibilities hereunder, FBL will appoint various Firms to provide
administrative and other services described herein directly to or for the
benefit of shareholders of the Fund who may be clients of such Firms. Such
Firms shall at all times be deemed to be independent contractors retained by FBL
and not by the Fund. FBL and not the Fund will be responsible for the payment
of compensation to such Firms for such services.
2. For the services and facilities described in Section 1, the Fund will
pay to FBL at the end of each calender month an administrative service fee
computed at an annual rate of 0.25 of 1% of the average daily net assets of the
Fund. For the month and year in which this Agreement becomes effective or
terminates, there shall be an appropriate proration on the basis of the number
of days that the Agreement is in effect during such month and year,
respectively. The services of FBL to the Fund under this Agreement are not to
be deemed exclusive, and FBL shall be free to render similar services or other
services to others.
The net asset value for each share of the Fund shall be calculated in
accordance with the provisions of the Fund's current prospectus. On each day
when net asset value is not calculated, the net asset value of a share of the
Fund shall be deemed to be the net asset value of such a share as of the close
of business on the last day on which such calculation was made for the purpose
of the foregoing computations.
<PAGE>
3. The Fund shall assume and pay all charges and expenses of its
operations not specifically assumed or otherwise to be provided by FBL under
this Agreement.
4. This Agreement may be terminated at any time without the payment of
any penalty by the Fund or by FBL on sixty (60) days' written notice to the
other party. Termination of this Agreement shall not affect the right of FBL to
receive payments on any unpaid balance of the compensation described in Section
2 hereof earned prior to such termination. All material amendments to this
Agreement must be approved by vote of the Board of Directors of the Fund.
5. If any provision of this Agreement shall be held or made invalid by a
court decision, statute, rule or otherwise, the remainder shall not be thereby
affected.
6. Any notice under this Agreement shall be in writing addressed and
delivered or mailed, postage prepaid, to the other party at such address as such
other party may designate for the receipt of such notice.
7. This Agreement shall be construed in accordance with applicable
federal law and the laws of the State of Iowa.
IN WITNESS WHEREOF, the Fund and FBL have caused this Agreement to be
executed as of the day and year first above written.
FBL SERIES FUND, INC. FBL INVESTMENT ADVISORY SERVICES, INC.
By: By:
-------------------------------- --------------------------------
Title: Vice President Title: President
----------------------------- -----------------------------
<PAGE>
Exhibit 8
CUSTODIAN ACCOUNT AGREEMENT
THIS CUSTODIAN ACCOUNT AGREEMENT, dated December 15, 1992, is entered into
by and between FARM BUREAU LIFE INSURANCE COMPANY, an insurance company
organized under the laws of Iowa, and its affiliated companies ("Company"), and
BANKERS TRUST COMPANY, a New York banking corporation ("Custodian");
W I T N E S S E T H:
In consideration of the mutual covenants herein contained and other
valuable consideration, the receipt and sufficiency of which is hereby
acknowledged, the parties hereto, intending to be legally bound, agree as
follows:
1. DEFINITIONS
Whenever used in this Agreement, or in any appendices, schedules or
exhibits hereto or amendments hereof, the following words and phrases, unless
the context otherwise requires, shall have the following meanings:
(a) "ACCOUNT SECURITIES" means the Securities, other property and cash
held by Custodian in the Custodian Account, and shall include all income
generated by or the proceeds of any sale of such Securities.
(b) "AUTHORIZED PERSON" means any Person or Persons jointly or severally
authorized from time to time, in a writing in substantially the form of Exhibit
A attached hereto and made a part hereof, delivered to Custodian, to act on
behalf of Investment Adviser or Company with respect to any action required or
permitted to be taken by the Investment Adviser or Company under this Agreement.
Such writing shall clearly indicate the scope of authority of each Authorized
Person.
(c) "CUSTODIAN ACCOUNT" means the one or more custodianship, safekeeping
and cash accounts established and maintained by Custodian or any subcustodian
for Company pursuant to this Agreement, as listed in Exhibit B attached hereto
and made a part hereof.
(d) "DEPOSITORY" means any centralized securities depository system,
domestic or foreign, whether presently or hereafter organized, in which
Custodian participates, and shall include (i) the Depository Trust Company, (ii)
the Participant's Trust Company, or (iii) any other centralized securities
depository system selected by Custodian, but subject to the approval of Company
and any required approval by regulatory authorities applicable to Custodian in
the conduct of its business as Custodian.
(e) The term "HOLD" shall include Custodian's authority to deposit part or
all of the Account Securities with a Depository.
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(f) "INSTRUCTIONS" means a communication received by Custodian from one or
more Authorized Persons directing action or delivering information pursuant
thereto. Instructions may be oral or written and may be delivered (i) by
telephone, (ii) in hard copy, or (iii) by computer, electronic instruction
system or telecommunications terminals, which shall include but not be limited
to, a telex, a TWXS, a facsimile transmission, a bank wire or Custodian's
proprietary POL*ARIS Service; PROVIDED,HOWEVER, THAT the Parties hereto or
Custodian and Investment Adviser, as the case may be, shall have agreed to the
form, the means of transmission and the means of identification of such
Instructions; FURTHER PROVIDED THAT Instructions initially given orally shall be
confirmed within the thirty (30) minute period immediately following the
initial receipt of the Instructions by Custodian in a manner consistent with
clauses (ii) or (iii) above. Instructions shall conform to operating procedures
communicated from time to time by Custodian to Company.
(g) "PARAGRAPH" means a paragraph of this Agreement.
(h) "PERSON" means a natural person, trust, estate, corporation,
association, partnership, joint venture, employee organization, committee,
board, participant, beneficiary, trustee, partner, or venturer, including but
not limited to Company and Investment Advisers, as the context may require.
(i) "SECURITY" or "SECURITIES" includes bonds, debentures, notes, stocks,
evidences of indebtedness and other securities and property.
(j) "INVESTMENT ADVISER" means an entity duly appointed by Company as an
investment manager as further described in paragraph 7.
The plural of any term shall have a meaning corresponding to the singular
thereof as so defined and any neuter pronoun used herein shall include the
masculine or feminine as the context may require.
Any references in this Agreement to any provision of any statute, code or
regulation shall be deemed to incorporate any amended, substitute or successor
provisions, whenever adopted.
2. APPOINTMENT OF CUSTODIAN
(a) APPOINTMENT. Subject to the provisions hereof, Company hereby
employs, appoints and authorizes Custodian to act as custodian of all the
Securities and monies at the time owned by or in the possession of Company
during the period of this Agreement which have been delivered to, or Custodian
has otherwise expressly been given authority to hold in the Custodian Account.
(b) ESTABLISHMENT OF CUSTODIAN ACCOUNT. Custodian hereby agrees to
establish the Custodian Account in the name of Company, or such other name or
names as Company and Custodian may agree upon from time to time, and to hold in
the Custodian Account all Securities or other property and cash deposited with,
delivered to or received by Custodian for deposit in the Custodian Account in
accordance with Instructions; PROVIDED THAT Custodian shall have the right to
refuse to accept any Securities or other property that are not in proper form
for deposit, but Custodian may refuse to accept any Security or other property
only after it discloses to Company the inadequacy or
2
<PAGE>
deficiency in the Security or other property and it grants Company a
commercially reasonable time to correct such inadequacy or deficiency.
Custodian shall have no responsibility or liability for or on account of
Securities or other assets not delivered to Custodian or not accepted by
Custodian as hereinabove provided.
(c) CUSTODIAN'S PERSONNEL. The individual personnel of Custodian duly
authorized to have access to Account Securities, to receive Instructions and to
act thereon are listed in the certification annexed hereto as Exhibit C and, as
amended from time to time, made a part hereof. Custodian shall advise Company
of any change in the individuals so authorized by written notice to Company.
(d) SCOPE OF DUTIES. Custodian's duties and responsibilities shall be
limited to those expressly set forth in this Agreement, and in any appendices,
schedules or exhibits hereto.
3. FORM OF CUSTODY AND SAFEKEEPING
(a) FORM OF CUSTODY. Custodian shall be responsible for safekeeping
Account Securities. Custodian is authorized to (i) retain physical possession
of Account Securities, and/or (ii) deposit Account Securities with a Depository
or Sub-Custodian (hereinafter defined) selected by Custodian pursuant to
paragraph 8(b) and which is approved by the Company; provided, however that if
the Company shall deliver to Custodian foreign securities to be treated as
Account Securities, then Custodian is authorized to (i) retain physical
possession of such foreign securities, and/or ii) deposit such foreign
securities with a Depository or Sub-Custodian selected by Custodian pursuant to
paragraph 8(b). For purposes of this section a foreign security means a
security that is issued by an entity that is not domiciled in the United States
or a United States territory.
(b) PHYSICAL CUSTODY. Custodian shall ensure that Account Securities are
at all times properly identified as belonging solely to Company. In this
regard, Custodian shall physically segregate Account Securities from any
property owned by Custodian. Custodian shall not be required to physically
segregate Account Securities (other than bearer securities which shall be so
segregated) from other securities or property held by Custodian for third
parties, but Custodian shall maintain adequate records showing the true
ownership of Account Securities.
(c) DEPOSITORY CUSTODY. If Custodian deposits Account Securities with a
Depository, Custodian shall maintain adequate records showing the location and
true ownership of such property.
(d) REGISTRATION IN NOMINEE NAME. Custodian is authorized to reregister
securities received in registered form in the name of its nominee, or the
nominee of a Depository, unless alternate registration Instructions are
furnished. In consideration of Custodian's registration of Account Securities
in the name of its nominee, Company agrees to pay on demand to Custodian or its
nominee the amount of any loss or liability for stockholders' assessments, or
otherwise, claimed or asserted against Custodian, such nominee or Depository's
nominee by reason of such registration. Securities may also be held in the
Custodian Account in coupon bearer form, where, in the judgment of Custodian, it
is not practicable or possible to register such securities.
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<PAGE>
4. LIABILITY FOR SAFEKEEPING
(a) LIMITATION OF LIABILITY. Custodian's safekeeping responsibility under
paragraph 3 shall be limited to exercising the care and diligence usually
accorded by Custodian to the safekeeping of its own property; PROVIDED, HOWEVER,
Custodian's responsibility under paragraph 3 is limited to losses occasioned by
the negligence, willful misconduct or bad faith of its employees or by robbery,
burglary, theft or destruction while the securities are in Custodian's physical
possession. With respect to deliveries of securities to a third party,
Custodian shall be deemed no more than an "intermediary" as defined in Section
8-306(3) of the New York Uniform Commercial Code. Custodian shall not be under
any obligation to any Person to insure Custodian or the Custodian Account
against loss. Provided that Custodian shall maintain an off-premises, back-up
information storage site for its custodial books and records which i) shall
include books and records documenting the contents of Company's Custodian
Account; ii) shall enable Custodian to continue to do business in a commercially
reasonable manner; and iii) shall enable Custodian, through the normal course of
business, to physically replace all of the Account Securities controlled by
Custodian on behalf of Company. Custodian shall not be liable under any
circumstances for loss or damage due to war, insurrection, terrorist act, civil
disobedience, hurricane, cyclone, tornado, earthquake, volcanic eruption, other
similar natural disaster, nuclear fusion or fission or radioactivity. Custodian
shall not be liable for loss or damage due to equipment failure, except such as
is due to its own negligence, willful misconduct, or bad faith.
(b) LIABILITY FOR LOSS. In the event of loss or damage to Account
Securities for which Custodian is liable under the foregoing provisions of this
paragraph 4, Custodian shall replace such Account Securities with securities of
the same class and issue, together with all rights and privileges pertaining
thereto; PROVIDED THAT, if the Account Securities so lost are subject to a
contract of sale and Custodian is unable to deliver the Account Securities or
replacements therefor for settlement on the date specified in Instructions,
Custodian shall be liable to Company for the contract price of the Account
Securities so sold plus simple interest thereon at the prime rate as reported in
the Wall Street Journal computed from the specified settlement date to the date
of payment to Company.
5. TRANSACTIONS.
(a) INSTRUCTIONS. Company may from time to time give Custodian, or
appoint an Investment Adviser to give Custodian, Instructions concerning
purchases and sales and other transactions with respect to Account Securities
and Custodian shall effect such transactions subject to the provisions and
undertakings of this paragraph 5. No person shall have access to Account
Securities or the right to order or effect transactions in Account Securities
except as set forth in this Agreement or in Instructions.
(i) AUTHORIZATION TO ACT ON INSTRUCTIONS. Custodian is authorized to
accept, act upon and rely upon Instructions that Custodian believes in
good faith to have been given by an Authorized Person, or that are
transmitted with proper testing or authentication in accordance with
procedures specified by Custodian, or that are transmitted
electronically through Custodian's POL*ARIS communications system or
any similar electronic instruction system acceptable to Custodian.
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<PAGE>
(ii) RELIANCE ON INSTRUCTIONS. Custodian shall incur no liability to
Company or otherwise and shall be fully protected in acting in
compliance with and reliance on Instructions that Custodian reasonably
believes in good faith to be genuine and to be signed, sent or made by
an Authorized Person, including oral Instructions which are promptly
confirmed in accordance with Section 1(f) hereof. If Instructions are
required to be given before the Custodian may act and such
Instructions have not been given, Custodian shall contact Company to
inform it of the absence of required Instructions and shall allow
Company a commercially reasonable time to provide Custodian with
Instructions.
(iii) ERRORS IN INSTRUCTIONS. Custodian shall not be responsible for
any errors or inaccuracies contained in Instructions, which are
properly confirmed, except where such errors or inaccuracies are due
to its own negligence, willful misconduct or bad faith.
(b) DELIVERIES AND RECEIPTS. In accordance with Instructions, Custodian
shall deliver specified Account Securities (including cash in the Custodian
Account) to the Person designated in such Instructions and shall receive in
exchange therefor the Securities and/or cash and/or other property specified
therein. Account Securities may be delivered "free" if the Instructions so
specify and the Instructions are authorized by two, separate, Authorized
Persons. If cash is to be delivered by Custodian, the Custodian Account shall
be charged by Custodian on the actual settlement date. Receipts of cash by
Custodian shall be effected in accordance with paragraph 5(c). Custodian shall
exercise customary care and diligence in examining and verifying the
certificates or other indicia of ownership of the securities or other property
received before accepting or paying for same. If Instructions direct Custodian
to deliver certificates or other physical evidence of ownership of Account
Securities to any Person other than a Depository, Custodian's sole
responsibility shall be to exercise customary care and diligence in effecting
the delivery as instructed and collecting payment therefor. Notwithstanding the
foregoing, if the delivery and/or receipt is effected through the facilities of
a Depository, Custodian's responsibilities shall be limited to using customary
care and diligence in verifying proper consummation of the transaction by the
Depository. Upon completion of a delivery, Custodian shall be discharged
completely of any liability or responsibility from claims with respect to the
safekeeping and custody of Account Securities which may occur at a time
subsequent to the period in which Custodian had control over the Account
Securities. Nothing herein shall relieve the Custodian of responsibility for
any act or omission to act of Custodian which occurred prior to the completion
of such a delivery.
(c) DELIVERY AGAINST PAYMENT. In accordance with Instructions, Custodian
will deliver or cause to be delivered the Account Securities thus designated as
sold for the Custodian Account of Company to the broker or other person
specified in the Instructions relating to such sale, such delivery to be made
only upon receipt of payment therefor in such form as shall be satisfactory to
Custodian and Company, with the understanding that Custodian may deliver or
cause to be delivered Account Securities for payment in accordance with the
reasonable customs prevailing among dealers in securities.
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<PAGE>
(d) TIMELY INSTRUCTIONS. Company, or its Investment Adviser, as the case
may be, shall be responsible for ensuring that Custodian receives timely,
correct and complete Instructions to enable Custodian to effect settlement of
any purchase of Securities or sale of Account Securities on the contract
settlement date. If Custodian does not receive such Instructions within a
reasonable time prior to the contract settlement date and Custodian notifies
Company of the absence of such Instructions, Custodian shall have no liability
of any kind to any Person for failing to effect settlement on the contract
settlement date.
(e) LIMIT OF RESPONSIBILITY. Custodian, in its capacity as such, shall
have no responsibility to manage or recommend investments of Account Securities
or to initiate or effect any purchase, sale, or other investment transaction in
the absence of Instructions from Company or the Investment Adviser. Custodian
shall hold cash in the Custodian Account, subject to receipt of such
instructions, without liability for interest thereon; provided, however, that
should any cash remain in the Custodian Account said cash shall be swept, daily,
into an investment vehicle chosen by Company, subject to the terms and
conditions applicable to such investment vehicle. Custodian shall in no event
be responsible or liable for:
(i) the validity of the issue of any Securities purchased by Company,
the legality of the purchase thereof, or the propriety of the amount
paid therefor;
(ii) the legality of the sale of any Securities by Company, or the
propriety of the amount for which the same are sold;
(iii) the legality or propriety of any borrowing or loan by Company; or
(iv) any money, whether or not represented by any check, draft or other
instrument for the payment of money, received by it on behalf of Company
until Custodian actually receives and collects such money directly by the
final crediting of the Custodian Account or the Account representing
Company's interest in the Depository.
(f) CORPORATE ACTIONS. In no event shall Custodian be responsible to
ascertain or to take any action concerning, any maturities, puts, calls,
conversions, exchanges, reorganizations, voting of proxies, offers, tenders or
similar matters relating to Account Securities, whether physically held by
Custodian or on deposit with a Depository, other than to deliver to Company and,
if directed by Company, to its Investment Adviser, notices and information
relating to any such corporate action received by Custodian from any issuers,
offerors, or otherwise. Custodian's sole responsibility in this regard shall be
to deliver promptly to Company or its Investment Adviser, as the case may be,
such notices proxies, offers tenders or similar matters and properly signed
proxies after Custodian receives them, and Custodian shall not otherwise act
with respect to any such notice unless and until Custodian has received
appropriate Instructions from Company or the Investment Adviser, as the case may
be. Company agrees and will instruct its Investment Adviser that any
Instructions to Custodian with respect to any such corporate actions must be
delivered to Custodian within sufficient time for Custodian to act thereon if
any action by Custodian is required. As used herein, "sufficient time" shall
mean at any time up to the last permissible hour on the date for action
specified by Custodian in
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Custodian's written notice hereunder and Custodian shall have no liability to
any person for Custodian's failure to act upon any such Instructions for the
Custodian Account received by Custodian at any time after such hour and date.
(g) ALLOCATION OF PARTIAL REDEMPTION. Should any Account Securities held
in a Depository be called for a partial redemption by the issuer of such
securities, Custodian is authorized to accept allocation as determined pursuant
to the program therefor then in effect at such Depository or, in the absence of
any such program, Custodian's sole discretion to allot the called portion to the
respective holders in any manner deemed to be fair and equitable in its
judgment.
(h) FOREIGN SECURITIES. With respect to Account Securities issued by
foreign entities or other Account Securities for which adequate corporate
information is not readily available, Custodian's responsibility is expressly
limited to safekeeping. With respect to such Account Securities, Custodian
assumes no responsibility for following such Account Securities or their issuers
for coupon payments, redemptions, exchanges or similar matters affecting such
Account Securities. Collections of monies in foreign currency, to the extent
possible, will be converted into U.S. dollars at customary rates in accordance
with Custodian's normal procedures. All risks and expenses incident to such
foreign collections and conversions are assumed by the Custodian Account, and
Custodian shall have no responsibility for fluctuations in exchange rates
affecting such collections or conversions.
(i) PROCEEDS. Unless Company is informed otherwise in writing by
Custodian, the proceeds of sales, redemptions, collections, and other receipts,
and dividend and interest income will be credited, subject to collection, by
Custodian to the Custodian Account promptly upon receipt and in no event later
than the availability schedule attached hereto, marked Exhibit D and by this
reference incorporated herein.
(j) EXCHANGES. Custodian is authorized, without Instructions, to exchange
temporary for definitive certificates and old certificates for new or
overstamped certificates evidencing a change therein.
(k) DEPOSITORY DELIVERIES. In complying with Instructions for delivery of
eligible transactions, Custodian will make deliveries through (i) the Federal
Reserve System, pursuant to Subpart 0 of the Treasury Department Circular #300
(31 Code of Federal Regulations Part 306), and operating circulares of the
Federal Reserve Bank of New York, or (ii) the facilities of any other Depository
pursuant to Section 8-320 of the New York Uniform Commercial Code and the Rules
and Procedures of such Depository.
(l) AVAILABLE FUNDS. Custodian is not obligated to effect any transaction
or make any payment in connection therewith unless there are sufficient
available funds on deposit in the Custodian Account or funds have otherwise been
made available to Custodian therefor to its satisfaction. Should Custodian not
effect a transaction or make a payment it shall immediately notify Company of
such fact so that Company may make appropriate alternate arrangements to
effectuate the transaction or make the payment. The amount by which payments
made by Custodian with respect to property in, or to be received for, the
Custodian Account, or with respect to other transactions pursuant to this
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Agreement, exceed available funds and result in an account overdraft shall be
deemed a loan from Custodian to Company, payable on demand and bearing interest
at the then current rate customarily charged by Custodian on similar loans. All
such loans shall be based on Custodian's sole determination to make the
underlying advance in each case.
(m) MANDATORY EXCHANGE. Anything in paragraph 5(f) to the contrary
notwithstanding, Custodian will, without Instructions, surrender and exchange
Account Securities for other Securities in connection with any maturity,
reorganization, recapitalization, or similar transaction in which the owner of
the Account Securities is not given an option; provided, however, Custodian
shall be responsible to effect any such exchange only upon receiving actual
notice of the event permitting or requiring such exchange. For purposes of this
subparagraph, actual notice shall mean notice that is received by Custodian from
the issuer of the Security, the agent of the issuer of the Security, a
nationally recognized subscription service, the Company, or from any other
source which would enable Custodian to act in a commercially reasonable manner.
To facilitate any such exchange, Custodian is authorized to surrender against
payment maturing Obligations and Obligations called for redemption; provided,
however, that Custodian deliver to Company notice of such exchange five (5)
business days prior to the actual exchange taking place.
(n) RECEIPT OF PAYMENTS. Subject to the provisions of this Agreement, and
unless and until it receives Instructions to the contrary, Custodian is
authorized to:
(i) present for payment all coupons and other income items held in
the Custodian Account;
(ii) receive payments of interest and principal, dividends, warrants,
and other things of value in connection with Account Securities and
hold such payments in the Custodian Account, with notice thereof to
Company;
(iii) sign for Company all declarations, affidavits, certificates or other
documents that may be required to collect or receive payments or
distributions with respect to Account Securities and disclose, without
further consent of Company, Company's identity to issuers of Account
Securities, or the agents of such issuers, who may request such disclosure.
Recapitalization and stock distributions will be credited upon receipt to the
Custodian Account.
(o) LENDING OF ACCOUNT SECURITIES. Custodian shall have the power and
authority to lend Account Securities only in accordance with the terms of a
separate securities lending agreement, if any, entered into between Custodian
and Company.
6. REPORTS, BOOKS AND RECORDS
(a) RECORDS. On behalf of the Company, Custodian shall keep all original
books and records concerning the Account Securities held in the Custodian
Account and the security transactions directed by Company or its Investment
Adviser. The books and records pertaining to Company that are in the
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possession of Custodian shall be the property of Company. Upon the reasonable
request of Company, copies of any such books and records shall be provided by
Custodian to Company or Company's authorized representative.
(b) REPORTS AND STATEMENTS. Books and records prepared and maintained by
Custodian pursuant to this Agreement shall promptly post each transaction to the
appropriate Custodian Account, as specified in Instructions. Custodian shall
make available to Company, by POL*ARIS or in the manner otherwise agreed upon,
transaction reports and a summary of the transfers to or from the Custodian
Account during said business day. Custodian shall make available to Company, by
POL*ARIS or in the manner otherwise agreed upon, a statement of transactions and
holdings in the Custodian Account on a monthly basis or at such other intervals
as Custodian and Company shall mutually agree. Said monthly reports shall be
delivered to Company prior to the fifth (5th) business day of each calendar
month.
(c) ADDITIONAL BOOKS AND RECORDS. In addition to its internal record
requirements, Custodian shall create and maintain such books and records and
provide such reports with respect to the Custodian Account as Custodian and
Company shall agree upon from time to time.
(d) INSPECTION. The books and records of Custodian pertaining to the
Custodian Account shall be open to inspection and audit at reasonable times by
duly authorized officers, employees and auditors employed by Company. The costs
incurred by Custodian in connection with routine periodic inspections and audits
shall be borne by Custodian. Any such costs incurred in connection with
extraordinary inspections and audits shall be charged to and paid by Company.
(e) OPINION OF COMPANY'S INDEPENDENT ACCOUNTANT. Custodian shall take all
reasonable actions, as Company may from time to time request, to enable the
Company to obtain from year to year favorable opinions from Company's
independent accountants with respect to Custodian's activities hereunder.
(f) REPORTS BY CUSTODIAN'S INDEPENDENT PUBLIC ACCOUNTANTS. Custodian
shall provide Company no less frequently than once per year with reports by
independent public accountants on Custodian's system of internal accounting
control relating to the services provided by Custodian under this Agreement.
Such reports shall state that such system is sufficient to meet the objective of
providing management with reasonable, but not absolute, assurance that assets
for which custodian has responsibility are safeguarded against loss from
unauthorized use or disposition, and that transactions are executed in
accordance with appropriate authorizations and in conformity with the governing
instruments and are recorded properly to permit the preparation of the required
financial reports.
(g) OTHER REPORTS. Custodian shall provide Company with any report
received by Custodian on the system of internal accounting control of any
Depository and with any such reports on its own systems of internal or other
accounting control as Company may reasonably request from time to time.
(h) POL*ARIS. Company has the option to elect to participate in
Custodian's POL*ARIS Service, an electronic communications service that
provides, on a daily basis, the ability to view on-line
9
<PAGE>
or to print out hard copy of all transactions involving the delivery in and out
of Account Securities on a free or payment basis, payments of principal and
interest or dividends, pending transactions and fails, and schedules of
Custodian Account holdings.
(i) SECURITY OF TERMINAL. In the event that Company subscribes
to the POL*ARIS Service, Company shall be fully responsible for the
security of its Connecting terminal(s), access thereto and the proper
and authorized use thereof, and Company's initiation and application
of continuing effective safeguards. In this connection, except for
any instance involving Custodian's own negligence, willful misconduct
or bad faith, and in addition to any other undertakings by Company in
this Agreement, Company agrees to defend and indemnify Custodian and
to hold Custodian harmless from and against any and all suits,
actions, proceedings at law or in equity, claims (groundless or
otherwise), liabilities, losses, damages, payments, settlements,
penalties, fines, costs (including fees and disbursements of counsel
selected by Custodian) and every other expense of every nature
asserted against or incurred by Custodian as a result of any improper
or unauthorized use of such terminal(s) whether on the premises of
Company, an Investment Adviser, or the agent of either; but not
including Custodian or any agent thereof.
(ii) PRICING SERVICES. To the extent that the POL*ARIS Service
provided hereunder shall include market values of the Custodian Account
holdings, Custodian may, at its discretion, obtain such information from
outside sources that Custodian reasonably deems to be reliable. Custodian
does not verify, represent or warrant either the accuracy or the
completeness of any such information transmitted through the POL*ARIS
Service.
7. INVESTMENT ADVISERS AND INVESTMENTS
(a) APPOINTMENT OF INVESTMENT ADVISERS. Company may appoint one or more
Investment Advisers to manage the assets held in the Custodian Account. The
terms and conditions of appointment and authority of any Investment Adviser
shall be the sole responsibility of Company. Company shall promptly notify
Custodian by means of Instructions of the appointment and removal of an
Investment Adviser, the portion of the Custodian Accounts that are subject to
the investment control of such Investment Adviser and all other facts pertinent
to such Investment Adviser's authority to give Instructions, including a
designation of the Authorized Persons of such Investment Adviser.
(b) INVESTMENT REVIEW. Custodian shall be under no duty or obligation to
review any investment or reinvestment made or received upon the Instructions of
Company or any Investment Adviser. Without limiting the generality of the
foregoing, with respect to each transaction, the Authorized Person giving the
Instructions shall have the entire responsibility for assuring that the
transaction does not violate the prohibitions of any applicable state or federal
law, applicable Investment Adviser agreement, any restrictions or guidelines
applicable to the Investment Adviser in an Investment Adviser agreement, or
court order or judgment affecting the administration of the Custodian Account or
adversely affect the tax treatment of the Custodian Account.
10
<PAGE>
8. AGENTS, DEPOSITORIES AND SUB-CUSTODIANS
(a) AGENTS. Custodian may at any time or from time to time, appoint at its
own expense, (and may at any time remove) any other bank, trust company or
responsible commercial agent as its agent to carry out such of the provisions of
this Agreement as Custodian may from time to time direct, PROVIDED THAT the
appointment of any such agent shall not relieve Custodian of any of its
responsibilities and liabilities under this Agreement.
(b) SUB-CUSTODIANS AND DEPOSITORIES. Custodian may appoint at its own
expense and risk one or more banking institutions or Depositories, domestic or
foreign, to act as Sub-Custodian or as Depository of Account Securities,
PROVIDED THAT Company shall have informed Custodian by means of Instructions
that such entity has been approved by all requisite action as a Sub-Custodian or
Depository for Account Securities and Custodian shall have received no
subsequent Instructions rescinding such approval, and FURTHER PROVIDED THAT the
appointment of any Sub-Custodian or Depository shall not relieve Custodian of
any of its responsibilities or liabilities under this Agreement.
9. LEGAL PROCEEDINGS
Other than legal proceedings which are initiated in response to Custodian's
willful misconduct, negligence or bad faith, Custodian shall not be required to
initiate, appear in or defend any legal proceedings or take any other similar
action with respect to the Custodian Account or Account Securities unless
Custodian has been indemnified to its satisfaction against any loss and expense
(including attorneys' fees) likely to be suffered or incurred thereby.
Notwithstanding anything herein to the contrary, Custodian shall be required to
affirmatively assist Company in any legal proceeding or similar action with
respect to the Custodian Account Securities.
10. INDEMNIFICATION OF CUSTODIAN
(a) INDEMNIFICATION. In its capacity as Custodian, Custodian shall not be
liable for any act or failure to act of Company or Company's Investment Adviser.
Custodian shall not be liable for any error of judgment or mistake of law or,
except as expressly provided to the contrary in paragraph 4, for any loss
suffered by the Custodian Account unless resulting from willful misconduct, bad
faith or negligence on the part of Custodian in the performance of its duties or
from the disregard by Custodian of its obligations and duties under this
Agreement. Except as otherwise expressly provided to the contrary in the
preceding sentence, Custodian shall be indemnified against and held harmless
from any and all suits, actions, proceedings at law or in equity, claims
(groundless or otherwise), liabilities, losses, damages, payments, settlements,
penalties, fines, costs (including fees and disbursements of counsel selected by
Custodian and approved by Company, which approval shall not be unreasonably
withheld) and every other reasonable expense of every nature asserted against or
incurred by Custodian in any way arising from Custodian's appointment hereunder.
If amounts due Custodian pursuant to this paragraph 10 are not paid out of the
Custodian Account for any reason, they shall be paid by Company. Custodian
agrees to inform Company in writing of any event which comes to its notice as a
result of which the Custodian Account or Company might become liable to
indemnify Custodian under these
11
<PAGE>
provisions, provided that any reasonable delay in so doing shall not in any way
affect the Custodian Account's or Company's obligation to Custodian hereunder.
Custodian's right to indemnification shall survive the termination of this
Agreement.
(b) PARTICIPATION IN LITIGATION. In the event any action or proceeding
shall be brought against Custodian, in its capacity as such, it shall notify
Company of the commencement thereof, and, subject to all provisions hereof and
to the extent that it shall wish, Company shall be entitled to participate
therein or to assume the defense thereof. After notice from Company to
Custodian of its election so to assume the defense of such action or proceeding
and to pay all fees and expenses of such counsel, Company shall not be liable to
Custodian for any legal expenses of other counsel or any other expenses, in each
case subsequently incurred by Custodian, in connection with the defense thereof
other than reasonable costs of investigation, unless either Company or Custodian
shall have been advised at any time by counsel, agreeable to both Company and
Custodian, that the assumption or continuation of such defense by Company would
be inappropriate under applicable standards of professional conduct on account
of actual or potential differing interests between Company and Custodian or
under fiduciary principles applicable to the Custodian Account. Custodian may,
at any time, waive its right to indemnification hereunder and assume its own
defense.
(c) BREACH OF REPRESENTATION OR WARRANTY. Company's liability under the
foregoing indemnification shall cover, without limitation, all loss, liability,
claims, damages and expenses resulting from a breach of any representation or
warranty delivered herein by Company.
11. REPRESENTATIONS AND WARRANTIES OF COMPANY
Company hereby represents, warrants and covenants to Custodian that:
(a) the employment of Custodian and the allocation of fees, expenses and
other charges to the Custodian Account as herein provided, is not prohibited by
law or any governing documents or contracts relating to the Custodian Account or
the maintenance of custodian accounts for Company as contemplated herein;
(b) the terms of this Agreement do not violate any obligation by which
Company is bound, whether arising by contract, operation of law or otherwise;
(c) this Agreement has been duly authorized by appropriate action and when
executed and delivered will be binding upon Company in accordance with its
terms;
(d) Company will deliver to Custodian such evidence of such authorization
as Custodian may reasonably require, whether by way of a certified resolution,
opinion of counsel or otherwise;
(e) Custodian, in its capacity as such, is not required to maintain any
fidelity bond insurance with respect to Account Securities pursuant to the
requirements of any law applicable to Company;
12
<PAGE>
(f) Company has furnished Custodian the names and original or facsimile
signatures of all Authorized Persons currently authorized to act on behalf of
Company pursuant to this Agreement; and
(g) with respect to matters covered by this Agreement, Custodian shall be
entitled to assume any document delivered herewith remains in effect and any
Authorized Person or Investment Adviser named herein or pursuant hereto
continues to be authorized to act hereunder until Custodian is notified by means
of Instructions as to any amendment, change or substitute.
12. REPRESENTATIONS AND WARRANTIES OF CUSTODIAN
Custodian hereby represents, warrants and covenants to Company that:
(a) the terms of this Agreement do not violate any obligation by which
Custodian is bound, whether arising by contract, operation of law or otherwise;
(b) this Agreement has been duly authorized by appropriate action and when
executed and delivered will be binding upon Custodian in accordance with its
terms;
(c) Custodian will deliver to Company such evidence of such authorization
as Company may reasonably require, whether by way of a certified resolution,
opinion of counsel or otherwise;
(d) Custodian, in its capacity as such, is not required to maintain any
fidelity bond insurance with respect to Account Securities pursuant to the
requirements of any law applicable to Custodian;
(e) Custodian has furnished Company the names of all Persons currently
authorized to act on behalf of Custodian hereunder; and
(f) with respect to any matters covered by this Agreement, Company shall
be entitled to assume any document delivered herewith remains in effect and any
Person named herein or pursuant hereto continues to be authorized to act
hereunder until it is notified of any amendment, change or substitute.
13. FEES, EXPENSES AND OTHER CHARGES
(a) FEE SCHEDULES. For the services provided hereunder, Company shall pay
Custodian monthly in arrears a fee calculated and accrued in accordance with
Custodian's applicable fee schedule set forth in Exhibit E, attached hereto and
as amended from time to time made a part hereof. Such fee schedule does not
include reasonable out-of-pocket disbursements of Custodian for which Custodian
shall be entitled to be reimbursed by Company. Except for fees and expenses
which are the result of Custodian's negligence, willful misconduct or bad faith,
Custodian shall be entitled to reimbursement for all reasonable out-of-pocket
fees and expenses of counsel arising from the performance of Custodian's duties
hereunder, such reasonable out-of-pocket disbursements, fees and expenses shall
include but shall not be limited to the items specified in Exhibit F, attached
hereto. Exhibit F may be modified by Custodian upon not less than sixty (60)
days prior written notice to Company.
13
<PAGE>
(b) PAYMENT. Custodian will invoice Company as soon as practicable after
the end of each calendar month and said invoices will be detailed in accordance
with the applicable fee schedule(s) and will include reimbursable out-of-pocket
disbursements.
14. TERM AND TERMINATION
(a) TERM. This Agreement shall become effective on the date first set
forth above.
(b) NOTICE OF TERMINATION. Company may terminate this Agreement and the
Custodian Account upon thirty (30) days written notice to the Custodian. The
Custodian may terminate this Agreement and the Custodian Account upon ninety
(90) days written notice to the Company.
(c) DELIVERY OF ACCOUNT SECURITIES AND OTHER PROPERTY. Upon termination,
Custodian shall deliver in proper form for transfer all Account Securities
specified in the notice of termination, or cause such to be delivered, to a
successor custodian designated by Company or, if a successor custodian has not
accepted an appointment by the effective date of termination of the Custodian
Account, to Company if the Board of Directors or Board of Trustees of the
Company has authorized the Company to maintain the custody of its own assets in
accordance with Rule 17f-2 under the 1940 Act, and if not, then to a custodian
appointed by a court of competent jurisdiction. Custodian shall be entitled to
be reimbursed for any reasonable expenses incurred in connection with such
delivery unless such termination is at Custodian's request. Custodian agrees to
cooperate with Company and any substitute or successor custodian appointed by
Company during a reasonable transition period.
(d) In the event a notice of termination is given by Custodian, Company
shall, on or before the specified termination date, deliver to Custodian a
resolution of the Board of Directors Company designating a successor custodian
or custodians. In the absence of such designation by Company, Custodian shall
deliver all of the effected Account Securities to the designee of Company which
will, upon delivery, be deemed to be the successor custodian.
15. TAXES
(a) FILINGS. Custodian shall have no responsibility to file any tax
returns regarding the Custodian Account or the Account Securities. Custodian is
authorized and empowered to execute any certificates of ownership or other
reports, declarations or affidavits that it is or may hereafter be required to
execute and furnish under any regulation of the Internal Revenue Service, or by
or under any other authority of the United States or any jurisdiction, which are
required in connection with any property that is now or may hereafter be held in
the Custodian Account. The authority granted to Custodian in this section 15 is
conditioned upon Company's prior exhaustion of all its rights of challenge and
appeal regarding said regulations or United States authority. Company agrees to
notify Custodian immediately in writing of any material change in status that
may affect any such certificates, reports or other required documents or the
contents thereof.
(b) INDEMNIFICATION. Company agrees to indemnify the Subcustodian and any
nominee in whose name Account Securities or other property of Company is
registered against any liability
14
<PAGE>
Custodian or such nominee may incur by reason of taxes assessed to Custodian or
such nominee resulting directly or indirectly from the fact that Account
Securities or other property of Company are registered in the name of Custodian
or such nominee; PROVIDED, HOWEVER, said indemnity obligation is subject to
Company's prior exhaustion of all lawful or legal challenge or appeal rights
regarding any tax or related liability. Custodian's right to indemnification as
aforesaid shall survive the termination of this Agreement.
16. ADVICE
Custodian may from time to time consult with counsel to Company or with an
Authorized Person in connection with its obligations arising hereunder and shall
be fully protected in acting upon the written advice or instructions of such
counsel or Authorized Person, as the case may be.
17. ADDRESSES
Except as provided to the contrary with respect to Instructions and until
further notice from either party, any notices delivered pursuant to this
Agreement, and all other communications shall be in writing and shall be
delivered or sent to the following addresses or such other addresses as from
time to time may be specified hereunder:
If to Company:
Farm Bureau Insurance Companies
5400 University Avenue
West Des Moines, IA 50266
Attn: Investment Accounting
If to Custodian:
Banker's Trust
16 Wall Street
New York, N.Y. 10005
Attn: David F. Hoyt
All notices and other communications shall be effective when received. The
party seeking to rely on notice having been given under this paragraph 16 shall
be responsible for ascertaining the facts thereof.
18. MISCELLANEOUS
(a) INFORMATION TO AND CONSENT OF CUSTODIAN. During the term of this
Agreement, Company shall furnish to Custodian at its office, prior to any
distribution thereof, copies of any materials prepared for distribution to any
Persons who are not parties hereto that refer in a material way to Custodian.
Company shall not distribute or permit the distribution of such materials if
Custodian reasonably objects in writing within five (5) business days (or such
other time as may be mutually
15
<PAGE>
agreed) after receipt thereof. Company shall furnish or otherwise make
available to Custodian such other information relating to the business affairs
of Company as Custodian at any time, or from time to time, reasonably requests
in order to discharge its obligations hereunder.
(b) SCOPE OF THE AGREEMENT. This Agreement contains the whole of the
understanding between the parties with respect to the subject matter hereof.
(c) AMENDMENT. This Agreement may be amended at any time by a written
instrument signed by an Authorized Person of Company and by a duly authorized
officer of Custodian.
(d) SEVERABILITY. If any provision of this Agreement is determined to be
invalid or unenforceable, such determination shall not affect the validity or
enforceability of any other provisions of this Agreement.
(e) NO WAIVER. No term or provision hereof shall be deemed waived and no
breach excused unless such waiver or consent shall be in writing and signed by
the party claimed to have waived or consented. No waiver of any term or
provision hereof shall be deemed a continuing waiver unless it is so designated.
Any consent by any party to a breach by the other, whether express or implied,
shall not constitute a consent to or excuse for any other breach.
(f) CAPTIONS. The captions of this Agreement are included for convenience
of reference only and in no way define or delimit any of the provisions hereof
or otherwise affect their construction or effect.
(g) ASSIGNMENT. This Agreement shall be binding upon and inure to the
benefit of the parties hereto and their heirs, successors, and assigns; PROVIDED
HOWEVER, this Agreement shall not be assignable by Company without the written
consent of Custodian, or by Custodian without the written consent of Company,
and any attempted assignment without such written consent shall be null and
void.
(h) GOVERNING LAW. This Agreement shall be governed by and construed in
accordance with the laws of the State of New York.
IN WITNESS WHEREOF, the parties hereto have caused this instrument to be
executed as of the day and year first above written.
FARM BUREAU LIFE INSURANCE BANKERS TRUST COMPANY
COMPANY
By: By:
-------------------- --------------------
-------------------- --------------------
Its: Its:
--------------- ---------------
16
<PAGE>
APPENDIX A:
MUTUAL FUND CUSTODY ACCOUNT-
FBL SERIES FUND, INC.
THIS MUTUAL FUND CUSTODY ACCOUNT AGREEMENT (hereinafter the "Appendix"),
dated January 12, 1993, is entered into by and between FBL SERIES FUND, INC.,
a Maryland corporation ("Company") and BANKERS TRUST COMPANY, a New York
banking corporation ("Bankers Trust").
WHEREAS, both Bankers Trust and Company desire to have the Mutual Fund
Custody Account- FBL Series Fund, Inc. governed by the terms and provisions
of the Custodian Account Agreement dated December 15, 1992 (the "Agreement"),
as hereby amended;
NOW, THEREFORE, in consideration of the mutual covenants contained in the
Agreement and this Appendix and other valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, the parties hereto, intending to be
legally bound, agree as follows:
1. Section 1 entitled DEFINITIONS is amended as follows:
(d) "DEPOSITORY" means any centralized securities depository system,
domestic or foreign, whether presently or hereafter organized, in which
Custodian participates, and shall include (i) the Depository Trust Company, (ii)
the Federal Reserve Book-Entry System, (iii) the Participant's Trust Company, or
(iv) any other centralized securities depository system selected by Custodian,
but subject to the approval of Company's Board of Directors or Trustees and any
required approval by regulatory authorities applicable to Custodian in the
conduct of its business as Custodian. The term "Depository" shall further mean
and include any other person to be named in a certificate issued by Custodian
and approved by Company's Board of Directors or Company's Board of Trustees and
authorized to act as a depository under the 1940 Act, including its successor or
successors and its nominee or nominees.
(f) "INSTRUCTIONS" means a communication received by Custodian from one or
more Authorized Persons directing action or delivering information pursuant
thereto in regard to Company's Account Securities, Securities or Portfolios.
Instructions may be oral or written and may be delivered (i) by telephone, (ii)
in hard copy, or (iii) by computer, electronic instruction system or
telecommunications terminals, which shall include but not be limited to, a
telex, a TWXS, a facsimile transmission, a bank wire or Custodian's proprietary
POL*ARIS Service; PROVIDED,HOWEVER, THAT the Parties hereto or Custodian and
Investment Adviser, as the case may be, shall have agreed herein to the form,
the means of transmission and the means of identification of such Instructions;
FURTHER PROVIDED THAT Instructions initially given orally shall be confirmed
within the thirty (30) minute period immediately following the initial receipt
of the Instructions by Custodian in a manner consistent with clauses (ii) or
(iii) above. Instructions shall conform to operating procedures communicated
from time to time by Custodian to Company.
(k) "1940 ACT" refers to the Investment Company Act of 1940, and the Rules
and Regulations thereunder, all as amended from time to time.
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<PAGE>
(l) "PORTFOLIO" means Account Securities grouped together in a separate
investment portfolio of Company. Company shall provide Custodian with a listing
of Company's Portfolios.
2. Section 6 entitled REPORTS, BOOKS AND RECORDS is amended as follows:
(a) RECORDS. On behalf of Company, Custodian shall keep all original
books and records concerning the Account Securities and the Security
transactions directed by Company or its Investment Advisor. The books and
records pertaining to Company that are in the possession of Custodian shall be
the property of Company. Such books and records shall be prepared and
maintained as required by the 1940 Act and other applicable securities laws and
rules and regulations. Upon the reasonable request of Company, copies of any
such books and records shall be provided by Custodian to Company or Company's
authorized representative.
(b) REPORTS AND STATEMENTS. Books and records prepared and maintained by
Custodian pursuant to this Agreement shall reflect the prompt posting of each
transaction to the appropriate Custodian Account and Portfolio, as specified in
Instructions. Custodian shall make available to Company, by POL*ARIS or in the
manner otherwise agreed upon, transaction reports and a summary of the transfers
to or from the Custodian Account during said business day. Custodian shall make
available to Company, by POL*ARIS or in the manner otherwise agreed upon, a
statement of transactions and holdings in the Custodian Account on a monthly
basis or at such other intervals as Custodian and Company shall mutually agree.
Said monthly reports shall be delivered to Company prior to the fifth (5th)
business day of each calendar month.
(c) ADDITIONAL BOOKS AND RECORDS. In addition to its internal record
requirements, Custodian shall create and maintain such books and records and
provide such reports with respect to the Custodian Account as Custodian and
Company shall agree upon from time to time. Custodian is not the fund
accountant for Company. Custodian shall cooperate with the fund accountant and
shall make available to the fund accountant the transaction reports and
statements referred to in paragraph 6(b) above, but Custodian shall not be
responsible for reconciling books and records with those of the fund accountant
or for keeping books and records normally kept by the fund accountant.
(d) INSPECTION. The books and records of Custodian pertaining to the
Custodian Account shall be open to inspection and audit at reasonable times by
duly authorized officers, employees and auditors employed by Company and by
employees and agents of the Securities and Exchange Commission. The costs
incurred by Custodian in connection with routine periodic inspections and audits
shall be borne by Custodian. Any such reasonable costs incurred in connection
with extraordinary inspections and audits shall be charged to and paid in
accordance with paragraph 13.
3. Section 8 entitled AGENTS, DEPOSITORIES AND SUB-CUSTODIANS is amended as
follows:
(a) AGENTS. Custodian may at any time or from time to time, appoint at its
own expense, (and may at any time remove) any other bank, trust company or
responsible commercial agent as its agent to carry out such of the provisions of
this Agreement as Custodian may from time to time direct,
22
<PAGE>
PROVIDED THAT such agent agrees with custodian to comply with all relevant
provisions of the 1940 Act and applicable rules and regulations thereunder; and
FURTHER PROVIDED THAT the appointment of any such agent shall not relieve
Custodian of any of its responsibilities and liabilities under this Agreement.
(b) SUB-CUSTODIANS AND DEPOSITORIES. Custodian may appoint at its own
expense and risk one or more banking institutions or Depositories, domestic or
foreign, to act as Sub-Custodian or as Depository of Account Securities,
PROVIDED THAT such entity agrees with Custodian to comply with all provisions of
the 1940 Act and applicable rules and regulations thereunder; and FURTHER
PROVIDED THAT Company shall have informed Custodian by means of Instructions
that such entity has been approved by all requisite action as a Sub-Custodian or
Depository for Account Securities and Custodian shall have received no
subsequent Instructions rescinding such approval; and FURTHER PROVIDED THAT the
appointment of any Sub-Custodian or Depository shall not relieve Custodian of
any of its responsibilities or liabilities under this Agreement.
4. Section 12 entitled REPRESENTATIONS AND WARRANTIES OF CUSTODIAN is amended
as follows:
(g) Custodian is qualified as a custodian under Section 26(a) of the 1940
Act and covenants that it will remain so qualified or upon ceasing to be so
qualified shall promptly notify Company in writing.
5. Section 13 entitled FEES, EXPENSES AND OTHER CHARGES is amended as follows:
(a) FEE SCHEDULES. For the services provided hereunder, Company shall pay
Custodian monthly in arrears a fee calculated and accrued in accordance with
Custodian's applicable fee schedule set forth in Exhibit E, attached hereto and
as amended from time to time made a part hereof. Such fee schedule does not
include reasonable out-of-pocket disbursements of Custodian for which Custodian
shall be entitled to be reimbursed by Company. Except for fees and expenses
which are the result of Custodian's negligence, willful misconduct or bad faith,
Custodian shall be entitled to reimbursement for all reasonable out-of-pocket
fees and expenses of counsel arising from the performance of Custodian's duties
hereunder, such disbursements, fees and expenses shall include but shall not be
limited to the items specified in Exhibit F, attached hereto. Exhibit F may be
modified by Custodian upon not less than sixty (60) days prior written notice to
Company.
(i) Should Company designate additional Portfolios after the date of
this Appendix, the parties hereto shall mutually agree upon the fee
due Custodian for the additional responsibilities assumed by Custodian
as a result of administering such newly created Portfolios. Such
mutually agreed upon fee shall be reflected in a written fee schedule
designated for that Portfolio which shall be dated, signed by an
officer of each party hereto, and attached to this Appendix as an
exhibit.
6. Section 14 entitled TERM AND TERMINATION is amended as follows:
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<PAGE>
(b) NOTICE OF TERMINATION. Company may terminate this Agreement and the
Custodian Account upon thirty (30) days written notice to the Custodian,
PROVIDED THAT Company may terminate this Agreement and the Custodian Account
upon less notice if it receives notice from Custodian that it is no longer
qualified as a Custodian under Section 26(a) of the 1940 Act. The Custodian may
terminate this Agreement and the Custodian Account upon ninety (90) days written
notice to the Company.
(d) In the event that a notice of termination is given by Company, it shall
be accompanied by a certified resolution of the Company's Board of Directors or
Trustees electing to terminate this Agreement with respect to any custodian
account and designating a successor custodian or custodians, which the Company
shall deem to be an entity qualified to so act under the 1940 Act.
IN WITNESS WHEREOF, the parties hereto have caused this Appendix to be
executed as of the day and year first above written.
FBL SERIES FUND, INC. BANKERS TRUST COMPANY
By: By:
--------------- ---------------
--------------- ---------------
Its: Its:
---------- ----------
By: By:
--------------- ---------------
--------------- ---------------
Its: Its:
---------- ----------
24
<PAGE>
EXHIBIT A
AUTHORIZED PERSONS
<TABLE>
<CAPTION>
SCOPE OF
NAME TITLE PHONE SIGNATURE AUTHORITY
- ---- ----- ----- --------- ---------
<S> <C> <C> <C> <C>
Richard D. Warming VP-Investments and Asst Treasurer (515) 225-5500 @
--------------------
Dennis M. Marker Investment Administration VP (515) 225-5522 @
--------------------
Janet Lamberts Mutual Funds Manager (515) 225-5523 @
--------------------
Sharon Jerdee Investment Accounting Manager (515) 225-5912 @
--------------------
Jeanne L. Westbrook Smith Cash Management Administrator (515) 225-5520 @
--------------------
Jody L. Kinseth Investment Staff Accountant (515) 225-5899 @
--------------------
Ann M. Grogan Securities Assistant (515) 225-5502 $
--------------------
Faith I. Schroeder Short Term Assistant (515) 225-5422 $
--------------------
Linda Koenig Investment Accounting Asst. (515) 225-5471 $
--------------------
Rita Kurimski Accounting Clerk (515) 225-5945 $
--------------------
</TABLE>
AUTHORITY
@ - Payment Versus Delivery With Out Dollar Limit; Free Deliveries, Limited to
Confirmation of Instructions Only
$ - Payment Versus Delivery With Out Dollar Limit; Free Deliveries, Limited to
Instructions Only
32
<PAGE>
EXHIBIT B
FARM BUREAU FAMILY OF FINANCIAL PLANNING SERVICES
LIST OF CUSTODY ACCOUNTS
Account Number Title
- -------------- -----
098629 FBL Money Market Fund, Inc.
098630 FBL Series Fund, Inc.
Growth Common Stock Portfolio
098631 FBL Series Fund, Inc.
High Grade Bond Portfolio
098632 FBL Series Fund, Inc.
High Yield Bond Portfolio
098633 FBL Series Fund, Inc.
Managed Portfolio
098634 FBL Series Fund, Inc.
Money Market Portfolio
098635 FBL Series Fund, Inc.
Blue Chip Portfolio
098636 FBL Variable Series Fund, Inc.
Growth Common Stock Portfolio
098637 FBL Variable Series Fund, Inc.
High Grade Bond Portfolio
098638 FBL Variable Series Fund, Inc.
High Yield Bond Portfolio
098639 FBL Variable Series Fund, Inc.
Managed Portfolio
098640 FBL Variable Series Fund, Inc.
Money Market Portfolio
098641 FBL Variable Series Fund, Inc.
Blue Chip Portfolio
098642 Farm Bureau Life Insurance Company
(Commissioner's)
098643 Farm Bureau Life Insurance Company
098644 FBL Insurance Company
(Commissioner's)
098645 FBL Insurance Company
098646 Farm Bureau Mutual Insurance Co.
098647 Utah Farm Bureau Insurance Company
098648 South Dakota Farm Bureau Mutual
Insurance Company
098649 Iowa Farm Bureau Federation
098650 Universal Assurors Life Insurance Co.
33
<PAGE>
EXHIBIT C
FARM BUREAU FAMILY OF FINANCIAL PLANNING SERVICES
AUTHORIZED PERSONNEL OF CUSTODIAN
Name Title
---- -----
Elizabeth Cuevas Administrative Assistant
George Flores Account Administrator
Marlene Maynard Assistant Treasurer
Richard McCormick Assistant Treasurer
Peter Mistretta Assistant Vice President
John Ricciardi Assistant Treasurer
Kashim Skeete Assistant Vice President
Bradford Smith Account Administrator
Lorraine Squires Assistant Treasurer
Marva White Assistant Treasurer
34
<PAGE>
EXHIBIT D
FARM BUREAU FAMILY OF FINANCIAL PLANNING SERVICES
INCOME COLLECTION STANDARDS
PD = Payable Date, PD + 1, 2, 3 = One business day after Payable Date, Two
business days, Three business days.
CH = Clearing House Funds, FF = Fed Funds
<TABLE>
<CAPTION>
Form of
Security Type Income Posting Funds
- ------------- -------------- -------
<S> <C> <C>
CMO's
Principal and interest PD + 1** FF
Interest Only PD FF
Cedel / Euro-clear Securities (US $) PD +1 CH
Cedel / Euro-clear Securities (non - US $) PD +3**** CH US$
Coupon Bonds PD CH
DTC Equities (announced) PD FF
DTC Equities (unannounced) When received by BTCo. FF
DTC Fixed Income PD FF
DTC Variable Rates PD CH
Fed. Book Entry PD FF
Fed. Housing Authority Notes PD + 3 CH
Fixed Rate Physical Bonds PD CH
Foreign Securities Upon collection and conversion to US$ CH
Interest Bearing CDs and Deposit Notes PD*** CH
Money Market Preferreds PD + 1 FF
Pass-through Mortgages PD + 3 CH
Physical Equities PD CH
PTC GNMAs (P&I) PD FF
Physical GNMAs (P&I) PD + 2 FF
Physical U.S. Agencies PD + 2 FF
Private Placements When received by BTCo. CH / FF*
Small Business Admin. Loan Certificates When received by BTCo. CH
Unit Investment Trusts PD CH
Variable Rate Physical Bonds PD CH
</TABLE>
* In whichever form funds are received by BTCo.
** Except final paydown, which is paid upon collection in like funds.
*** Those requiring presentation will be paid upon collection in like funds.
**** Provided foreign exchange transaction has been completed by the depository.
35
<PAGE>
EXHIBIT E - PAGE 1
FARM BUREAU FAMILY OF FINANCIAL PLANNING SERVICES
CUSTODY FEE SCHEDULE
<TABLE>
<CAPTION>
Product / Service Price
- --------------------------------------------------------------------------------
<S> <C>
Maintenance $ 75.00
Depository Bonds $ 1.25
Vault Bonds 2.50
Depository Stock 1.25
Vault Stock 2.50
FBE Automated 12.00
FBE Manual 17.00
DTC Automated 9.00
DTC Manual 14.00
DTC ID 6.00
PTC Automated 12.00
PTC Manual 17.00
Physical Automated 20.00
Physical Manual 25.00
Mortgage Backed Principal & Interest 5.00
Private Placement Income 15.00
DTC SDFS Surcharge 5.00
Maturities 6.00
Reorganizations 40.00
Cedel Asset Value .0166 b.p.
Foreign Custody Asset Value .0500 b.p.
Cedel / Euro-CD Transactions 15.00
Foreign Custody Transactions 100.00
Master Limited Partnerships (per CUSIP) 100.00
Money Movements 5.00
POL*ARIS Maintenance 300.00
Per Record Fee .00
</TABLE>
36
<PAGE>
EXHIBIT E - PAGE 2
FARM BUREAU FAMILY OF FINANCIAL PLANNING SERVICES
CASH MANAGEMENT FEE SCHEDULE
<TABLE>
<CAPTION>
Product / Service Price
- ----------------- -------
Cash Connector
- --------------
<S> <C>
BTC Report Accounts (per account) $ 80.00
Money Transfer Repetitive Payment 30.00
Money Transfer A
- ----------------
Cash Connector / SWIFT (input) $ 2.00
Fed / CHIPS / Book Payments 3.00
Fedwire Surcharge .53
Book Transfers 1.00
Repair Surcharge 1.00
Drawdown Request 4.00
Urgent Form
Micro Cash Connector 2.75
Custodian Administrator Remit 10.00
Money Transfer B
- ----------------
Fedwire / CHIPS / Book Receipts $ 3.00
Mail Advice .50
SWIFT Advice .50
Book Transfer Receipt 0.00
Statement Rendition
- -------------------
Maintenance (per account) $ 20.00
Additional Statements (no charge for first statement) 2.00
Credit / Debit Postings .25
FDIC Assessment
- ---------------
Per $100 of the average ledger balances maintained on the
FDIC call dates $ .23
Overdraft Charges
- -----------------
Reserve costs plus additional charge based on prime rate
</TABLE>
37
<PAGE>
EXHIBIT F
FARM BUREAU FAMILY OF FINANCIAL PLANNING SERVICES
OUT-OF-POCKET REIMBURSABLE EXPENSES
Postage
Insurance
Re-registration charges
Shipping Expenses (Overnight Courier)
Custodian will make every attempt to keep out-of-pocket expenses as reasonable
as possible.
38
<PAGE>
FIDELITY BOND
JOINT INSUREDS AGREEMENT
THIS AGREEMENT is made this 10th day of August, 1988, by and between FBL MONEY
MARKET FUND, INC. ("Money Fund"), FBL SERIES FUND, INC. ("Series Fund") both
Maryland corporations; FBL Variable Insurance Series Fund ("Insurance Series
Fund") and FBL Institutional Series Fund ("Institutional Series Fund") both
Massachusetts business trusts (collectively the "Funds").
The Funds, all of which are managed by FBL Investment Advisory Services, Inc.,
have acquired a joint insured brokers blanket bond issued by the Employers
Mutual Casualty Company effective September 26, 1976 ("Bond"). The aggregate
amount of the Bond ("Bond Amount") is equal to the summation of the "Basic
Coverage" for each Fund, as indicated in Exhibit A attached hereto. The Funds
desire to provide herein for an allocation of the premium for the Bond and a
manner of allocating any proceeds received from the Bond.
The Funds, therefore, agree that:
1. ALLOCATION OF PREMIUM. Each Fund shall pay a portion of the
annual joint Bond premium as agreed to in writing no less often than
annually by the Funds and attached hereto as Exhibit A. These
amounts are determined on the basis of the relative costs to each
Fund of a single insured bond in the amount of that Fund's Basic
Coverage as indicated in Exhibit A.
2. LOSS TO ONE FUND. In the event of an insured loss to only one
Fund, the entire proceeds from the Bond for that loss shall be
allocated to the Fund incurring such loss.
3. LOSS TO MORE THAN ONE FUND.
(a) LOSS PERCENTAGES. For purposes of allocating the coverage
of the Bond, each Fund shall have a Loss Percentage as
indicated in Exhibit A, which percentages are based upon the
percentage of the total Bond coverage represented by the
amount of each Fund's Basic Coverage.
(b) INITIAL ALLOCATION. Each Fund involved in an insured loss
which involves another Fund shall receive a portion of the
proceeds from the Bond equal to the lesser of (i) the amount
of that Fund's loss or (ii) an amount equal to the product of
the Bond Amount multiplied by that Fund's Loss Percentage,
which initial allocation assures that each Fund shall receive
the full amount of its loss up to the amount of its Basic
Coverage.
(c) SUBSEQUENT ALLOCATIONS. Any Bond proceeds unallocated after
the initial allocation shall be
<PAGE>
allocated to the Funds for which the loss was not covered by
the initial allocation.
4. AGENT. Series Fund is hereby appointed as the agent for the Funds
for the purpose of making, adjusting, receiving and enforcing
payment of all claims under the bond and otherwise dealing with
Employers Mutual Casualty Company with respect to the Bond. Any
expenses incurred by Series Fund in its capacity as agent in
connection with a claim shall be shared by the Funds in proportion
to the Bond proceeds received by the Funds for the loss. All other
expenses incurred by Series Fund in its capacity as agent shall be
shared by the Funds in the same portion as their Loss Percentages.
5. MODIFICATION AND TERMINATION. This Agreement may be modified or
amended from time to time by mutual written agreement among the
Funds. It may be terminated with respect to any one Fund by not
less than 75 days' written notice to the other Funds. It shall
terminate as of the date that any Fund ceases to be an insured under
the Bond; provided that such termination shall not affect such
Fund's rights and obligations hereunder with respect to any claims
on behalf of such Fund which are paid under the Bond by Employers
Mutual Casualty Company after the date such Fund ceases to be an
insured under the Bond.
6. FURTHER ASSURANCES. Each Fund agrees to perform such further acts
and execute such further documents as are necessary to effectuate
the purposes hereof.
IN WITNESS WHEREOF, the Funds have caused this Agreement to be executed as of
the day and year first above written.
Attest: FBL MONEY MARKET FUND, INC.
By:
- --------------------------- ------------------------------
Its Assistant Secretary Its Vice President
Attest: FBL SERIES FUND, INC.
By:
- --------------------------- ------------------------------
Its Assistant Secretary Its Vice President
Attest: FBL VARIABLE INSURANCE SERIES FUND
By:
- --------------------------- ------------------------------
Its Assistant Secretary Its Vice President
<PAGE>
Attest: FBL INSTITUTIONAL SERIES FUND
By:
- --------------------------- ------------------------------
Its Assistant Secretary Its Vice President
<PAGE>
EXHIBIT A
FIDELITY BOND
JOINT INSUREDS AGREEMENT
For Bond Period September 26, 1995 through September 26, 1996.
<TABLE>
<CAPTION>
<S> <C> <C> <C>
1. Basic Coverage
Fund Basic Coverage
---- --------------
Series Fund 1,350,000
Money Fund 250,000
Insurance Series Fund 975,000
---------
TOTAL 2,575,000
2. Allocation of Premium
Premium for Premium
Separate Allocation Bond
Fund Insured Bond Percentage Premium
---- ------------ ---------- --------
Series Fund 4,925.00 40.55% 3,999.61
Money Fund 2,786.00 22.94% 2,262.52
Ins. Series Fund 4,434.00 36.51% 3,600.87
--------- ------- --------
TOTAL 12,145.00 100.00% 9,863.00
3. Allocation of Bond Proceeds
Fund Loss Percentage
---- ---------------
Series Fund 52.43%
Money Fund 9.71%
Ins. Series Fund 37.86%
-----------
TOTAL 100.00%
</TABLE>
<PAGE>
Attest: FBL SERIES FUND, INC.
By:
- --------------------------- ------------------------
Its Assistant Secretary Its Vice President
Attest: FBL MONEY MARKET FUND, INC.
By:
- --------------------------- ------------------------
Its Assistant Secretary Its Vice President
Attest: FBL VARIABLE INSURANCE SERIES FUND
By:
- ---------------------------- --------------------------
Its Assistant Secretary Its Vice President
<PAGE>
April 13, 1995 EXHIBIT A
to the
DO&EO Joint Insureds Agreement dated August 10, 1988
For Policy Period, 12:01 a.m., January 1, 1995, through 12:01 a.m., January 1,
1996.
<TABLE>
<CAPTION>
<S> <C> <C>
Party Premium %
- ----- ------- -----
FBL Investment Advisory Services, Inc. $23,354 70.34
FBL Marketing Services, Inc. 174 0.52
FBL Variable Insurance Series Fund 2,046 6.16
FBL Series Fund, Inc. 6,495 19.56
FBL Money Market Fund, Inc. 1,134 3.42
------- ------
$33,203 100.00
------- ------
------- ------
</TABLE>
Attest: FBL INVESTMENT ADVISORY SERVICES, INC.
- ----------------------------- By: -----------------------------------
Secretary: Dennis M. Marker Richard D. Warming
Attest: FBL MARKETING SERVICES, INC.
- ----------------------------- By: -----------------------------------
Secretary: Dennis M. Marker Timothy J. Hoffman
Attest: FBL VARIABLE INSURANCE FUND
- ---------------------------- By: -----------------------------------
Secretary: Eugene R. Maahs Merlin D. Plagge
Attest: FBL SERIES FUND, INC.
- ---------------------------- By: -----------------------------------
Secretary: Eugene R. Maahs Merlin D. Plagge
Attest: FBL MONEY MARKET FUND, INC.
- ----------------------------- By: -----------------------------------
Secretary: Eugene R. Maahs Merlin D. Plagge
<PAGE>
ACCOUNTING SERVICES AGREEMENT
BETWEEN
FBL INVESTMENT ADVISORY SERVICES, INC.
AND
FBL SERIES FUND, INC.
THIS AGREEMENT, entered into this 1st day of December, 1987, by and
between FBL Investment Advisory Services, Inc., a Delaware corporation,
hereinafter referred to as "FBL", and FBL Series Fund, Inc., a Maryland
corporation, hereinafter referred to as "Fund".
WITNESSETH:
WHEREAS, the Fund currently issues shares in eight portfolios, which,
together with any subsequently created portfolios, shall hereinafter be referred
to as the "Portfolios";
WHEREAS, the Fund desires to obtain certain accounting and other services
from FBL; and
WHEREAS, FBL desires to provide such services for the Fund;
NOW, THEREFORE, in consideration of the mutual agreements herein
contained, the parties agree as follows:
I. FBL agrees to:
A. Maintain all books, accounts, ledgers, journals, supporting
documents and supplementary records pertaining to the business of the Fund
which constitute the record forming the basis for financial statements
required of the Fund by law or required by resolution of the Fund Board of
Directors.
B. Calculate the net asset value of each of the Portfolios of the
Fund in accordance with the Fund's current prospectus and communicate same
to the Fund's transfer agent on each day that the net asset value per
share is calculated for the Portfolios.
C. Provide the personnel and facilities necessary to process
payment of all Fund expenditures, as authorized by the Fund.
D. Maintain all records of a financial nature pertaining to Fund
portfolio transactions as are required by law or resolution of the Fund
Board of Directors.
<PAGE>
E. Prepare monthly financial statements, any statistical reports
requested by the Fund Board of Directors and supporting accounting work
papers.
F. Provide the Fund Board of Directors the monthly financial
statements and statistical reports.
G. Prepare such other reports and analyses as requested by the Fund
Board of Directors to be presented at their quarterly meetings.
H. Prepare financial statements and any other related per share
data required for inclusion in the annual and semi-annual reports to
shareholders and amendments to the Fund's registration statement.
I. Prepare for timely filing all the Fund's required governmental
(state and federal) reports, tax returns and other filings, which FBL is
not otherwise required to prepare pursuant to the terms of other
agreements in effect between the Fund and FBL.
J. Prepare recommendations to the Fund Board of Directors regarding
the payment of income dividends and capital gains distributions.
K. Maintain or cause to be maintained all other books, accounts and
other documents that are required to be maintained by Rule 31a-1 under the
Investment Company Act of 1940 that are not required to be maintained for
the Fund pursuant to some other agreement between the Fund and FBL or
another party.
L. Preserve or cause to be preserved for the periods required in
Rule 31a-2 under the Investment Company Act of 1940 all records covered by
this Agreement that are required to be maintained by Rule 31a-1.
II. The Fund agrees to:
Pay FBL an annual fee aggregating 0.05% of the average daily net
assets of each Portfolio, accrued daily and payable monthly, with such
payments not to exceed $30,000 per Portfolio per annum.
III. The parties hereto mutually agree:
A. That this Agreement shall become effective on the 1st day of
December 1987, shall remain in effect until November 30, 1988, and shall
continue in effect from year to year thereafter, unless sooner terminated
as hereinafter provided, so long as the continuance of the Agreement is
approved at least annually by a majority of the Directors who are not
parties to the Agreement or "interested persons" as that term is defined
in the Investment Company Act of 1940.
<PAGE>
B. That either party may terminate this Agreement at any time by
giving 60 days' written notice of such termination to the other party.
C. That any amendment to this Agreement must be in writing,
executed by both parties hereto.
D. That notices and other writings delivered or mailed postage
prepaid to the Fund or to FBL at 5400 University Avenue, West Des Moines,
Iowa 50265 shall be deemed to have been properly delivered or given
hereunder to the respective parties.
E. That this Agreement is executed and delivered in the State of
Iowa and is subject to and shall be construed according to the laws of
that State.
IN WITNESS WHEREOF, each of the parties hereto have caused this Agreement
to be executed in its name and on its behalf and under its corporate seal by and
through its duly authorized officers on the day and year above stated.
ATTEST: FBL SERIES FUND, INC.
- ----------------------------- ------------------------------
By: Its Assistant Secretary By: Its Vice President
ATTEST: FBL INVESTMENT ADVISORY SERVICES, INC.
- ----------------------------- ------------------------------
By: Its Assistant Secretary By: Its Vice President
<PAGE>
DIVIDEND DISBURSING AND TRANSFER AGENT AGREEMENT
BETWEEN
CHALLENGER INVESTMENT FUND, INC.
AND
PFS MANAGEMENT SERVICES, INC.
This Dividend Disbursing and Transfer Agent Agreement made this 15th day of
February, 1971 between CHALLENGER INVESTMENT FUND, INC., a Maryland corporation
(hereinafter called the "Fund"), and PFS MANAGEMENT SERVICES, INC., a Delaware
corporation (hereinafter called the "Agent");
WITNESSETH:
WHEREAS, the Fund desires to enter into a Dividend Disbursing and Transfer
Agent Agreement with Agent under which Agent will provide the services as set
forth in detail in this Agreement, and Agent is desirous of providing such
services upon the terms and conditions hereinafter provided,
NOW, THEREFORE, in consideration of the mutual covenants herein contained,
it is agreed as follows:
1. The Agent shall act as stock transfer agent for the Fund and in
this connection, the Agent shall:
(a) keep the stock transfer books or records of the Fund and
addresses of all shareholders, the number and date of issuance of
shares and fractional shares held by each, the number and date of
certificates for the shares and the number and date of cancellation of
each share and each certificate surrendered for cancellation;
(b) handle the issuance and redemption of Fund shares;
(c) effect and record shareholder transfers of ownership and
changes in forms of registration;
(d) cause all shareholder reports and proxies to be properly
addressed and mailed in connection with shareholders meetings;
(e) tabulate all proxies; and
(f) prepare and mail all required shareholder federal and state
and other income tax information forms.
<PAGE>
2. The Agent shall also act as the Fund's dividend agent in
allocating and causing ordinary dividends and capital gains distributions
to be disbursed to shareholders.
3. For its services specified above, the Fund shall pay to the Agent
fees as provided in Exhibit A which is attached hereto and made a part
hereof. Such fees shall be paid by the Fund quarterly.
4. The Agent shall administer all periodic withdrawal plans relating
to Fund shares and receive such compensation therefor as may be provided
from time to time in the then current prospectus of the Fund.
5. The Agent agrees to act in good faith in furnishing the services
provided for herein and shall at all times maintain a staff of trained
personnel for the purpose of performing its obligations under this
Agreement. The Agent assumes no responsibility under this Agreement other
than to render the services called for hereunder, in good faith.
6. The Agent agrees that in all matters relating to the services to
be performed by it hereunder, it will use its best efforts to act in
conformity with the terms of the Articles of Incorporation, By-Laws,
Registration Statements and current Prospectus of the Fund. Each of the
parties agrees that in all matters relating to the performance of the
Agreement, it will use its best efforts to conform to and comply with the
requirements of the Federal Investment Company Act of 1940 and all other
applicable Federal, state or other laws and regulations. Nothing herein
contained shall be deemed to relieve or deprive the Board of Directors of
the Fund of its responsibility for and control of the conduct of the
affairs of the Fund.
7. The services of the Agent as provided herein are not to be deemed
to be exclusive, and it shall be free to render services of any kind to any
other group, firm, individual or association, including other investment
companies, and to engage in any other business or activity.
8. This Agreement, including Exhibit A hereto, may be amended at any
time by mutual written consent of the parties.
9. This Agreement shall be effective as of the date of execution,
and may be terminated by either party hereto upon sixty (60) days' written
notice given by one to the other, provided that no such notice of
termination given by the Agent to the Fund shall be effective unless and
until a substitute person or entity has been engaged by the Fund to perform
the services required hereunder for the Fund, or the Fund has certified to
the Agent that other arrangements have been made by it to provide such
services.
<PAGE>
IN WITNESS WHEREOF, the parties have caused this Agreement to be signed by
their respective officers thereunto duly authorized and their respective
corporate seals to be hereunto affixed, as of the day and year first above
written.
CHALLENGER INVESTMENT FUND, INC.
ATTEST: ---------------------------------------
- -----------------------------------
PFS MANAGEMENT SERVICES, INC.
ATTEST: ---------------------------------------
- -----------------------------------
<PAGE>
EXHIBIT A
TO
SHAREHOLDER SERVICE, DIVIDEND DISBURSING
AND TRANSFER AGENT AGREEEMENT
BETWEEN
FBL MONEY MARKET FUND, INC.
AND
FBL INVESTMENT ADVISORY SERVICES, INC.
SEPTEMBER 1, 1995
ANNUAL PER ACCOUNT MAINTENANCE FEES:
High Grade Bond Portfolio $9.00
High Yield Bond Portfolio 9.00
Money Market Portfolio 9.00
Managed Portfolio 8.00
Blue Chip Portfolio 7.00
Growth Common Stock Portfolio 7.00
An annual minimum account maintenance fee of $12,000 applies to each fund/cusip.
ACTIVITY FEES:
Closed Account Fee 1.50
New Account Set Up 3.00
Transaction Fee 1.00
ACH Fee .25
Telephone Call 1.00
Letter Fee 1.50
Check Writing Fee .05
The annual account maintenance fee is payable monthly at the rate of 1/12 of the
annual fee per fund portfolio account. Activity fees will be paid monthly.
In addition, each Fund Portfolio will pay each month out-of-pocket expenses
incurred or advances made by FBL Investment Advisory Services, Inc. under the
Shareholder Service, Dividend Disbursing and Transfer Agent Agreement. These
items include, but are not limited to, postage, envelopes, checks, continuous
forms, reports and statements, telephone, telegraph, stationary, supplies, costs
of outside mailing firms, record storage and media for storage of records (e.g.,
microfilm, computer tapes).
Executed this 1st day of September , 1995.
------------- -------------------
FBL MONEY MARKET FUND, INC.
Attest:______________________________ _____________________________________
Its Assistant Secretary Its President
FBL INVESTMENT ADVISORY SERVICES, INC.
Attest:______________________________ _____________________________________
Its Secretary Its President
<PAGE>
[ERNST & YOUNG LLP LETTERHEAD]
Exhibit 11
Consent of Independent Auditors
The Board of Directors and Shareholders
FBL Series Fund, Inc.
We consent to the reference to our firm under the captions "Condensed Financial
Information" and "Independent Auditors" in Part A and "Other Information -
Independent Auditors" in Part B and to the incorporation by reference in this
Post Effective Amendment to Form N-1A Registration Statement under the
Securities Act of 1933 (No. 2-38512) and Registration Statement under the
Investment Company Act of 1940 (No. 811-2125) of FBL Series Fund, Inc. of our
report dated September 1, 1995, included in the July 31, 1995 Annual Report of
FBL Series Fund, Inc.
/s/ Ernst & Young LLP
Des Moines, Iowa
November 27, 1995
<PAGE>
Exhibit 14(a)(1)
_________________________________________
_________________________________________
QUALIFIED
RETIREMENT
PLAN
____________
BASIC PLAN
DOCUMENT
_________________________________________
_________________________________________
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
TABLE OF CONTENTS
SECTION ONE DEFINITIONS
1.01 Adoption Agreement . . . . . . . . . . . . . . . . . . . . . 1
1.02 Basic Plan Document. . . . . . . . . . . . . . . . . . . . . 1
1.03 Beneficiary. . . . . . . . . . . . . . . . . . . . . . . . . 1
1.04 Break in Eligibility Service . . . . . . . . . . . . . . . . 1
1.05 Break in Vesting Service . . . . . . . . . . . . . . . . . . 1
1.06 Code . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.07 Compensation . . . . . . . . . . . . . . . . . . . . . . . . 1
1.08 Custodian. . . . . . . . . . . . . . . . . . . . . . . . . . 2
1.09 Disability . . . . . . . . . . . . . . . . . . . . . . . . . 2
1.10 Early Retirement Age . . . . . . . . . . . . . . . . . . . . 2
1.11 Earned Income. . . . . . . . . . . . . . . . . . . . . . . . 2
1.12 Effective Date . . . . . . . . . . . . . . . . . . . . . . . 2
1.13 Eligibility Computation Period . . . . . . . . . . . . . . . 2
1.14 Employee . . . . . . . . . . . . . . . . . . . . . . . . . . 2
1.15 Employer . . . . . . . . . . . . . . . . . . . . . . . . . . 2
1.16 Employer Contribution. . . . . . . . . . . . . . . . . . . . 3
1.17 Employment Commencement Date . . . . . . . . . . . . . . . . 3
1.18 Employer Profit Sharing Contribution . . . . . . . . . . . . 3
1.19 Entry Dates. . . . . . . . . . . . . . . . . . . . . . . . . 3
1.20 ERISA. . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
1.21 Forfeiture . . . . . . . . . . . . . . . . . . . . . . . . . 3
1.22 Fund . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
1.23 Highly Compensated Employee. . . . . . . . . . . . . . . . . 3
1.24 Hours of Service - Means . . . . . . . . . . . . . . . . . . 3
1.25 Individual Account . . . . . . . . . . . . . . . . . . . . . 4
1.26 Investment Fund. . . . . . . . . . . . . . . . . . . . . . . 4
1.27 Key Employee . . . . . . . . . . . . . . . . . . . . . . . . 4
1.28 Leased Employee. . . . . . . . . . . . . . . . . . . . . . . 4
1.29 Nondeductible Employee Contributions . . . . . . . . . . . . 4
1.30 Normal Retirement Age. . . . . . . . . . . . . . . . . . . . 4
1.31 Owner-Employee . . . . . . . . . . . . . . . . . . . . . . . 4
1.32 Participant. . . . . . . . . . . . . . . . . . . . . . . . . 4
1.33 Plan . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
1.34 Plan Administrator . . . . . . . . . . . . . . . . . . . . . 4
1.35 Plan Year. . . . . . . . . . . . . . . . . . . . . . . . . . 4
1.36 Prior Plan . . . . . . . . . . . . . . . . . . . . . . . . . 4
1.37 Prototype Plan . . . . . . . . . . . . . . . . . . . . . . . 4
1.38 Qualifying Participant . . . . . . . . . . . . . . . . . . . 4
1.39 Related Employer . . . . . . . . . . . . . . . . . . . . . . 5
1.40 Related Employer Participation Agreement . . . . . . . . . . 5
1.41 Self-Employed Individual . . . . . . . . . . . . . . . . . . 5
1.42 Separate Fund. . . . . . . . . . . . . . . . . . . . . . . . 5
1.43 Taxable Wage Base. . . . . . . . . . . . . . . . . . . . . . 5
1.44 Termination of Employment. . . . . . . . . . . . . . . . . . 5
1.45 Top-Heavy Plan . . . . . . . . . . . . . . . . . . . . . . . 5
1.46 Trustee. . . . . . . . . . . . . . . . . . . . . . . . . . . 5
1.47 Valuation Date . . . . . . . . . . . . . . . . . . . . . . . 5
1.48 Vested . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
1.49 Year of Eligibility Service. . . . . . . . . . . . . . . . . 5
1.50 Year of Vesting Service. . . . . . . . . . . . . . . . . . . 5
SECTION TWO ELIGIBILITY AND PARTICIPATION
2.01 Eligibility To Participate . . . . . . . . . . . . . . . . . 6
2.02 Plan Entry . . . . . . . . . . . . . . . . . . . . . . . . . 6
2.03 Transfer To Or From Ineligible Class . . . . . . . . . . . . 6
2.04 Return As A Participant After Break In
Eligibility Service. . . . . . . . . . . . . . . . . . . . 6
2.05 Determinations Under This Section. . . . . . . . . . . . . . 6
2.06 Terms Of Employment. . . . . . . . . . . . . . . . . . . . . 6
2.07 Special Rules Where Elapsed Time Method Is Being Used. . . . 6
2.08 Election Not To Participate. . . . . . . . . . . . . . . . . 7
<PAGE>
SECTION THREE CONTRIBUTIONS
3.01 Employer Contributions . . . . . . . . . . . . . . . . . . . 7
3.02 Nondeductible Employee Contributions . . . . . . . . . . . . 9
3.03 Rollover Contributions . . . . . . . . . . . . . . . . . . . 9
3.04 Transfer Contributions . . . . . . . . . . . . . . . . . . . 9
3.05 Limitation On Allocations. . . . . . . . . . . . . . . . . . 9
SECTION FOUR INDIVIDUAL ACCOUNTS OF PARTICIPANTS AND VALUATION
4.01 Individual Accounts. . . . . . . . . . . . . . . . . . . . . 12
4.02 Valuation Of Fund. . . . . . . . . . . . . . . . . . . . . . 12
4.03 Valuation Of Individual Accounts . . . . . . . . . . . . . . 12
4.04 Modification Of Method For Valuing Individual Accounts . . . 12
4.05 Segregation Of Assets. . . . . . . . . . . . . . . . . . . . 12
4.06 Statement of Individual Accounts . . . . . . . . . . . . . . 12
SECTION FIVE TRUSTEE OR CUSTODIAN
5.01 Creation Of Fund . . . . . . . . . . . . . . . . . . . . . . 13
5.02 Investment Authority . . . . . . . . . . . . . . . . . . . . 13
5.03 Financial Organization Custodian Or Trustee Without
Full Trust Powers. . . . . . . . . . . . . . . . . . . . . 13
5.04 Financial Organization Trustee With Full Trust Powers
And Individual Trustee . . . . . . . . . . . . . . . . . . 13
5.05 Division Of Fund Into Investment Funds . . . . . . . . . . . 14
5.06 Compensation And Expenses. . . . . . . . . . . . . . . . . . 14
5.07 Not Obligated To Question Data . . . . . . . . . . . . . . . 14
5.08 Liability For Withholding On Distributions . . . . . . . . . 15
5.09 Resignation Or Removal Of Trustee (Or Custodian) . . . . . . 15
5.10 Degree Of Care - Limitations Of Liability. . . . . . . . . . 15
5.11 Indemnification Of Prototype Sponsor And Trustee
(Or Custodian) . . . . . . . . . . . . . . . . . . . . . . 15
5.12 Investment Managers. . . . . . . . . . . . . . . . . . . . . 15
5.13 Matters Relating To Insurance. . . . . . . . . . . . . . . . 16
5.14 Direction Of Investments By Participant. . . . . . . . . . . 16
SECTION SIX VESTING AND DISTRIBUTION
6.01 Distribution To Participant. . . . . . . . . . . . . . . . . 16
6.02 Form Of Distribution To A Participant. . . . . . . . . . . . 19
6.03 Distributions Upon The Death Of A Participant. . . . . . . . 19
6.04 Form Of Distribution To Beneficiary. . . . . . . . . . . . . 20
6.05 Joint And Survivor Annuity Requirements. . . . . . . . . . . 20
6.06 Distribution Requirements. . . . . . . . . . . . . . . . . . 22
6.07 Annuity Contracts. . . . . . . . . . . . . . . . . . . . . . 24
6.08 Loans To Participants. . . . . . . . . . . . . . . . . . . . 24
6.09 Distribution In Kind . . . . . . . . . . . . . . . . . . . . 25
6.10 Direct Rollovers Of Eligible Rollover Distributions. . . . . 25
6.11 Procedure For Missing Participants Or Beneficiaries. . . . . 26
SECTION SEVEN CLAIMS PROCEDURE
7.01 Filing A Claim For Plan Distributions. . . . . . . . . . . . 26
7.02 Denial Of Claim. . . . . . . . . . . . . . . . . . . . . . . 26
7.03 Remedies Available . . . . . . . . . . . . . . . . . . . . . 26
SECTION EIGHT PLAN ADMINISTRATOR
8.01 Employer Is Plan Administrator . . . . . . . . . . . . . . . 26
8.02 Powers And Duties Of The Plan Administrator. . . . . . . . . 26
8.03 Expenses And Compensation. . . . . . . . . . . . . . . . . . 27
8.04 Information From Employer. . . . . . . . . . . . . . . . . . 27
SECTION NINE AMENDMENT AND TERMINATION
9.01 Right Of Prototype Sponsor To Amend The Plan . . . . . . . . 27
9.02 Right Of Employer To Amend The Plan. . . . . . . . . . . . . 27
9.03 Limitation On Power To Amend . . . . . . . . . . . . . . . . 27
9.04 Amendment Of Vesting Schedule. . . . . . . . . . . . . . . . 28
<PAGE>
9.05 Permanency . . . . . . . . . . . . . . . . . . . . . . . . . 28
9.06 Method And Procedure For Termination . . . . . . . . . . . . 28
9.07 Continuance Of Plan By Successor Employer. . . . . . . . . . 28
9.08 Failure Of Plan Qualification. . . . . . . . . . . . . . . . 28
SECTION TEN MISCELLANEOUS
10.01 State Community Property Laws. . . . . . . . . . . . . . . . 28
10.02 Headings . . . . . . . . . . . . . . . . . . . . . . . . . . 28
10.03 Gender And Number. . . . . . . . . . . . . . . . . . . . . . 28
10.04 Plan Merger Or Consolidation . . . . . . . . . . . . . . . . 28
10.05 Standard Of Fiduciary Conduct. . . . . . . . . . . . . . . . 28
10.06 General Undertaking Of All Parties . . . . . . . . . . . . . 29
10.07 Agreement Binds Heirs, Etc.. . . . . . . . . . . . . . . . . 29
10.08 Determination Of Top-Heavy Status. . . . . . . . . . . . . . 29
10.09 Special Limitations For Owner-Employees. . . . . . . . . . . 30
10.10 Inalienability Of Benefits . . . . . . . . . . . . . . . . . 30
10.11 Cannot Eliminate Protected Benefits. . . . . . . . . . . . . 30
SECTION ELEVEN 401(K) PROVISIONS
11.100 Definitions. . . . . . . . . . . . . . . . . . . . . . . . . 30
11.101 Actual Deferral Percentage (ADP) . . . . . . . . . . . . . . 30
11.102 Aggregate Limit. . . . . . . . . . . . . . . . . . . . . . . 31
11.103 Average Contribution Percentage (ACP). . . . . . . . . . . . 31
11.104 Contributing Participant . . . . . . . . . . . . . . . . . . 31
11.105 Contribution Percentage. . . . . . . . . . . . . . . . . . . 31
11.106 Contribution Percentage Amounts. . . . . . . . . . . . . . . 31
11.107 Elective Deferrals . . . . . . . . . . . . . . . . . . . . . 31
11.108 Eligible Participant . . . . . . . . . . . . . . . . . . . . 31
11.109 Excess Aggregate Contributions . . . . . . . . . . . . . . . 31
11.110 Excess Contributions . . . . . . . . . . . . . . . . . . . . 31
11.111 Excess Elective Deferrals. . . . . . . . . . . . . . . . . . 31
11.112 Matching Contribution. . . . . . . . . . . . . . . . . . . . 32
11.113 Qualified Nonelective Contributions. . . . . . . . . . . . . 32
11.114 Qualified Matching Contributions . . . . . . . . . . . . . . 32
11.115 Qualifying Contributing Participant. . . . . . . . . . . . . 32
11.201 Requirements To Enroll As A Contributing Participant . . . . 32
11.202 Changing Elective Deferral Amounts . . . . . . . . . . . . . 32
11.203 Ceasing Elective Deferrals . . . . . . . . . . . . . . . . . 32
11.204 Return As A Contributing Participant After Ceasing
Elective Deferrals . . . . . . . . . . . . . . . . . . . . 32
11.205 Certain One-Time Irrevocable Elections . . . . . . . . . . . 32
11.300 Contributions. . . . . . . . . . . . . . . . . . . . . . . . 32
11.301 Contributions By Employer. . . . . . . . . . . . . . . . . . 32
11.302 Matching Contributions . . . . . . . . . . . . . . . . . . . 33
11.303 Qualified Nonelective Contributions. . . . . . . . . . . . . 33
11.304 Qualified Matching Contributions . . . . . . . . . . . . . . 33
11.305 Nondeductible Employee Contributions . . . . . . . . . . . . 33
11.400 Nondiscrimination Testing. . . . . . . . . . . . . . . . . . 33
11.401 Actual Deferral Percentage Test (ADP). . . . . . . . . . . . 33
11.402 Limits On Nondeductible Employee Contributions And
Matching Contributions . . . . . . . . . . . . . . . . . . 34
11.500 Distribution Provisions. . . . . . . . . . . . . . . . . . . 35
11.501 General Rule . . . . . . . . . . . . . . . . . . . . . . . . 35
11.502 Distribution Requirements. . . . . . . . . . . . . . . . . . 35
11.503 Hardship Distribution. . . . . . . . . . . . . . . . . . . . 35
11.504 Distribution Of Excess Elective Deferrals. . . . . . . . . . 35
11.505 Distribution Of Excess Contributions . . . . . . . . . . . . 36
11.506 Distribution Of Excess Aggregate Contributions . . . . . . . 36
11.507 Recharacterization . . . . . . . . . . . . . . . . . . . . . 36
11.508 Distribution Of Elective Deferrals If Excess Annual
Additions. . . . . . . . . . . . . . . . . . . . . . . . . 37
11.600 Vesting. . . . . . . . . . . . . . . . . . . . . . . . . . . 37
11.601 100% Vesting On Certain Contributions. . . . . . . . . . . . 37
11.602 Forfeitures And Vesting Of Matching Contributions. . . . . . 37
<PAGE>
QUALIFIED RETIREMENT PLAN AND TRUST
Defined Contribution Basic Plan Document 04
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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 BENEFICIARY
Means the individual or individuals designated pursuant to
Section 6.03(A) of the Plan.
1.04 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).
1.05 BREAK IN VESTING SERVICE
Means a Plan Year (or other vesting computation period described
in Section 1.50) 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).
1.06 CODE
Means the Internal Revenue Code of 1986 as amended from
time-to-time.
1.07 COMPENSATION
A. Basic Definition
For Plan Years beginning on or after January 1, 1989, the
following definition of Compensation shall apply:
As elected by the Employer in the Adoption Agreement (and if
no election is made, W-2 wages will be deemed to have been
selected), Compensation shall mean one of the following:
1. W-2 wages. Compensation is defined as information
required to be reported under Sections 6041 and 6051, and
6052 of the Code (Wages, tips and other compensation as
reported on Form W-2). Compensation is defined as wages
within the meaning of Section 3401(a) of the Code and all
other payments of compensation to an Employee by the
Employer (in the course of the Employer's trade or
business) for which the Employer is required to furnish
the Employee a written statement under Sections 6041(d)
and 6051(a)(3), and 6052 of the Code. Compensation must
be determined without regard to any rules under Section
3401(a) that limit the remuneration included in wages
based on the nature or location of the employment or the
services performed (such as the exception for
agricultural labor in Section 3401(a)(2)).
2. Section 3401(a) wages. Compensation is defined as wages
within the meaning of 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)).
3. 415 safe-harbor compensation. Compensation is defined as
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
includible 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, and
reimbursements or other expense allowances under a
nonaccountable plan (as described in 1.62-2(c)), 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 contract described in Section
403(b) of the Code (whether or not the contributions
are actually excludable from the gross income of the
Employee).
For any Self-Employed Individual covered under the Plan,
Compensation will mean Earned Income.
B. DETERMINATION PERIOD AND OTHER RULES
Compensation shall include only that Compensation which is
actually paid to the Participant during the determination
period. Except as provided elsewhere in this Plan, the
determination period shall be the Plan Year unless the
Employer has selected another period in the Adoption
Agreement. If the Employer makes no election, the
determination period shall be the Plan Year.
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(e)(3), 402(h)(1)(B) or 403(b) of the
Code.
<PAGE>
2
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.
C. LIMITS ON COMPENSATION
For years beginning after December 31, 1988 and before
January 1, 1994, the annual Compensation of each Participant
taken into account for determining all benefits provided
under the Plan for any determination period 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
Plan Years beginning in such calendar year and the first
adjustment to the $200,000 limitation is effective on January
1, 1990.
For Plan Years beginning on or after January 1, 1994, the
annual Compensation of each Participant taken into account
for determining all benefits provided under the Plan for any
Plan Year shall not exceed $150,000, as adjusted 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 determination period beginning in such calendar year.
If the period for determining Compensation used in
calculating an Employee's allocation for a determination
period is a short Plan Year (i.e., shorter than 12 months),
the annual Compensation limit is an amount equal to the
otherwise applicable annual Compensation limit multiplied by
a fraction, the numerator of which is the number of months in
the short Plan Year, and the denominator of which is 12.
In determining the Compensation of a Participant for purposes
of this limitation, the rules of Section 414(q)(6) of the
Code shall apply, except in applying such rules, the term
"family" shall include only the spouse of the Participant and
any lineal descendants of the Participant who have not
attained age 19 before the close of the year. If, as a
result of the application of such rules the adjusted $200,000
limitation is exceeded, then (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 determination period is taken
into account in determining an Employee's allocations or
benefits for the current determination period, the
Compensation for such prior determination period is subject
to the applicable annual Compensation limit in effect for
that prior period. For this purpose, in determining
allocations in Plan Years beginning on or after January 1,
1989, the annual Compensation limit in effect for
determination periods beginning before that date is $200,000.
In addition, in determining allocations in Plan Years
beginning on or after January 1, 1994, the annual
Compensation limit in effect for determination periods
beginning before that date is $150,000.
1.08 CUSTODIAN
Means an entity specified in the Adoption Agreement as Custodian
or any duly appointed successor as provided in Section 5.09.
1.09 DISABILITY
Unless the Employer has elected a different definition in the
Adoption Agreement, 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.
1.10 EARLY RETIREMENT AGE
Means the age specified in the Adoption Agreement. The Plan will
not have an Early Retirement Age if none is specified in the
Adoption Agreement.
1.11 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.
1.12 EFFECTIVE DATE
Means the date the Plan becomes effective as indicated in the
Adoption Agreement. However, as indicated in the Adoption
Agreement, certain provisions may have specific effective dates.
Further, 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.
1.13 ELIGIBILITY COMPUTATION PERIOD
An Employee's initial Eligibility Computation Period shall be the
12 consecutive month period commencing on the Employee's
Employment Commencement Date. The Employee's subsequent
Eligibility Computation Periods shall be the 12 consecutive month
periods commencing on the anniversaries of his or her 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 or her
subsequent Eligibility Computation Periods shall be the Plan
Years commencing with the Plan Year beginning during his or her
initial Eligibility Computation Period. An Employee does not
complete a Year of Eligibility Service before the end of the 12
consecutive month period regardless of when during such period
the Employee completes the required number of Hours of Service.
1.14 EMPLOYEE
Means any person employed by an 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 Section 414(n) or (o) of the Code.
1.15 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. Where this
Plan is being maintained by a union or other entity that
represents its member Employees in the negotiation of collective
bargaining agreements, the term Employer shall mean such union or
other entity.
<PAGE>
3
1.16 EMPLOYER CONTRIBUTION
Means the amount contributed by the Employer each year as
determined under this Plan.
1.17 EMPLOYMENT COMMENCEMENT DATE
An Employee's Employment Commencement date means the date the
Employee first performs an Hour of Service for the Employer.
1.18 EMPLOYER PROFIT SHARING CONTRIBUTION
Means an Employer Contribution made pursuant to the Section of
the Adoption Agreement titled "Employer Profit Sharing
Contributions." The Employer may make Employer Profit Sharing
Contributions without regard to current or accumulated earnings
or profits.
1.19 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
different dates in the Adoption Agreement.
1.20 ERISA
Means the Employee Retirement Income Security Act of 1974 as
amended from time-to-time.
1.21 FORFEITURE
Means that portion of a Participant's Individual Account derived
from Employer Contributions which he or she is not entitled to
receive (i.e., the nonvested portion).
1.22 FUND
Means the Plan assets held by the Trustee for the Participants'
exclusive benefit.
1.23 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.
1.24 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 or other vesting computation
period described in Section 1.50), 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
<PAGE>
4
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 or other vesting computation
period described in Section 1.50 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 or
other vesting computation period described in Section 1.50.
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.
1.25 INDIVIDUAL ACCOUNT
Means the account established and maintained under this Plan for
each Participant in accordance with Section 4.01.
1.26 INVESTMENT FUND
Means a subdivision of the Fund established pursuant to Section
5.05.
1.27 KEY EMPLOYEE
Means any person who is determined to be a Key Employee under
Section 10.08.
1.28 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 excludable from the
employee's gross income under Section 125, Section 402(e)(3),
Section 402(h)(1)(B) 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.
1.29 NONDEDUCTIBLE EMPLOYEE CONTRIBUTIONS
Means 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.
1.30 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 65.
1.31 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.
1.32 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.
1.33 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.
1.34 PLAN ADMINISTRATOR
Means the person or persons determined to be the Plan
Administrator in accordance with Section 8.01.
1.35 PLAN YEAR
Means the 12 consecutive month period which coincides with the
Employer's fiscal year or such other 12 consecutive month period
as is designated in the Adoption Agreement.
1.36 PRIOR PLAN
Means a plan which was amended or replaced by adoption of this
Plan document as indicated in the Adoption Agreement.
1.37 PROTOTYPE SPONSOR
Means the entity specified in the Adoption Agreement that makes
this prototype plan available to employers for adoption.
1.38 QUALIFYING PARTICIPANT
Means a Participant who has satisfied the requirements described
in Section 3.01(B)(2) to be entitled to share in any Employer
Contribution (and Forfeitures, if applicable) for a Plan Year.
<PAGE>
5
1.39 RELATED EMPLOYER
Means an employer that may be required to be aggregated with the
Employer adopting this Plan for certain qualification
requirements under Sections 414(b), (c), (m) or (o) of the Code
(or any other employer that has ownership in common with the
Employer). A Related Employer may participate in this Plan if so
indicated in the Section of the Adoption Agreement titled
"Employer Information" or if such Related Employer executes a
Related Employer Participation Agreement.
1.40 RELATED EMPLOYER PARTICIPATION AGREEMENT
Means the agreement under this prototype Plan that a Related
Employer may execute to participate in this Plan.
1.41 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.
1.42 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 or her and those assets
subject to the Participant's individual direction pursuant to
Section 5.14.
1.43 TAXABLE WAGE BASE
Means, with respect to any taxable year, the contribution and
benefit base in effect under Section 230 of the Social Security
Act at the beginning of the Plan Year.
1.44 TERMINATION OF EMPLOYMENT
A Termination of Employment of an Employee of an Employer shall
occur whenever his or her status as an Employee of such Employer
ceases for any reason other than 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.
1.45 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.
1.46 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.
1.47 VALUATION DATE
Means the date or dates as specified in the Adoption Agreement.
If no date is specified in the Adoption Agreement, the Valuation
Date shall be 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.
1.48 VESTED
Means nonforfeitable, that is, a claim which is unconditional and
legally enforceable against the Plan obtained by a Participant or
the Participant's Beneficiary to that part of an immediate or
deferred benefit under the Plan which arises from a Participant's
Years of Vesting Service.
1.49 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).
An Employee does not complete a Year of Eligibility Service
before the end of the 12 consecutive month period regardless of
when during such period the Employee completes the required
number of Hours of Service.
1.50 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).
Notwithstanding the preceding sentence, where the Employer so
indicates in the Adoption Agreement, vesting shall be computed by
reference to the 12 consecutive month period beginning with the
Employee's Employment Commencement Date and each successive 12
month period commencing on the anniversaries thereof.
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 or her 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
or her Individual Account derived from Employer Contributions
at the time of his or her Termination of Employment; or
(B) upon returning to service, the number of consecutive Breaks
in Vesting Service is less than his or her number of Years of
Vesting Service before such breaks.
Separate subaccounts will be maintained for the Participant's
prebreak and postbreak portions of his or her 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.
<PAGE>
6
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.
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 the Employee 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 unless
otherwise indicated in the Adoption Agreement.
C. The Plan Administrator shall notify each Employee who becomes
eligible to be a Participant under this Plan and shall
furnish the Employee 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 or she 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 or her return to an eligible class of Employees. If
such Employee incurs a Break in Eligibility Service, his or her
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 or she becomes a member of
the eligible class, such Employee shall become a Participant on
the first Entry Date following the date he or she satisfies those
requirements unless otherwise indicated in the Adoption
Agreement.
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 or her 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 or her 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.
2.07 SPECIAL RULES WHERE ELAPSED TIME METHOD IS BEING USED
This Section 2.07 shall apply where the Employer has indicated in
the Adoption Agreement that the elapsed time method will be used.
When this Section applies, the definitions of year of service,
break in service and hour of service in this Section will replace
the definitions of Year of Eligibility Service, Year of Vesting
Service, Break in Eligibility Service, Break in Vesting Service
and Hours of Service found in the Definitions Section of the Plan
(Section One).
For purposes of determining an Employee's initial or continued
eligibility to participate in the Plan or the Vested interest in
the Participant's Individual Account balance derived from
Employer Contributions, (except for periods of service which may
be disregarded on account of the "rule of parity" described in
Sections 1.50 and 2.04) an Employee will receive credit for the
aggregate of all time period(s) commencing with the Employee's
first day of employment or reemployment and ending on the date a
break in service begins. The first day of employment or
reemployment is the first day the Employee performs an hour of
service. An Employee will also receive credit for any period of
severance of less than 12 consecutive months. Fractional periods
of a year will be expressed in terms of days.
For purposes of this Section, hour of service will mean each hour
for which an Employee is paid or entitled to payment for the
performance of duties for the Employer. Break in service is a
period of severance of at least 12 consecutive months. Period of
severance is a continuous period of time during which the
Employee is not employed by the Employer. Such period begins on
the date the Employee retires, quits or is discharged, or if
earlier, the 12 month anniversary of the date on which the
Employee was otherwise first absent from service.
In the case of an individual who is absent from work for
maternity or paternity reasons, the 12 consecutive month period
beginning on the first anniversary of the first date of such
absence shall not constitute a break in service. For purposes of
this
<PAGE>
7
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 the 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.
Each Employee will share in Employer Contributions for the period
beginning on the date the Employee commences participation under
the Plan and ending on the date on which such Employee severs
employment with the Employer or is no longer a member of an
eligible class of Employees.
If the Employer is a member of an affiliated service group (under
Section 414(m) of the Code), a controlled group of corporations
(under Section 414(b) of the Code), a group of trades or
businesses under common control (under Section 414(c) of the
Code), or any other entity required to be aggregated with the
Employer pursuant to Section 414(o) of the Code, service will be
credited for any employment for any period of time for any other
member of such group. Service will also be credited for any
individual required under Section 414(n) or Section 414(o) to be
considered an Employee of any Employer aggregated under Section
414(b), (c), or (m) of the Code.
2.08 ELECTION NOT TO PARTICIPATE
This Section 2.08 will apply if this Plan is a nonstandardized
plan and the Adoption Agreement so provides. If this Section
applies, then an Employee or a Participant may elect not to
participate in the Plan for one or more Plan Years. The Employer
may not contribute for an Employee or Participant for any Plan
Year during which such Employee's or Participant's election not
to participate is in effect. Any election not to participate
must be in writing and filed with the Plan Administrator.
The Plan Administrator shall establish such uniform and
nondiscriminatory rules as it deems necessary or advisable to
carry out the terms of this Section, including, but not limited
to, rules prescribing the timing of the filing of elections not
to participate and the procedures for electing to re-participate
in the Plan.
An Employee or Participant continues to earn credit for vesting
and eligibility purposes for each Year of Vesting Service or Year
of Eligibility Service he or she completes and his or her
Individual Account (if any) will share in the gains or losses of
the Fund during the periods he or she elects not to participate.
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 any 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.
2. Qualifying Participants - A Participant is a Qualifying
Participant and is entitled to share in the Employer
Contribution for any Plan Year if the Participant was a
Participant on at least one day during the Plan Year and
satisfies any additional conditions specified in the
Adoption Agreement. If this Plan is a standardized plan,
unless the Employer specifies more favorable conditions
in the Adoption Agreement, a Participant will not be a
qualifying Participant for a Plan Year if he or she
incurs a Termination of Employment during such Plan Year
with not more than 500 Hours of Service if he or she 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 - This Plan may not
allocate contributions based on an integrated formula if
the Employer maintains any other plan that provides for
allocation of contributions based on an integrated
formula that benefits any of the same Participants. 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
<TABLE>
<CAPTION>
Top-Heavy Nonstandardized and
Integration Level Money Purchase Profit Sharing Non-Top-Heavy Profit Sharing
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Taxable Wage Base (TWB) 5.7% 2.7% 5.7%
More than $0 but not more
than 20% of TWB 5.7% 2.7% 5.7%
More than 20% 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%
</TABLE>
<PAGE>
8
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,
unless the Adoption Agreement indicates otherwise,
Forfeitures shall be allocated in the manner provided in
Section 3.01(B) (for Employer Contributions) to the
Individual Accounts of Qualifying Participants who are
entitled to share in the Employer Contribution for such
Plan Year. Forfeitures shall be allocated as of the last
day of the Plan Year during which the Forfeiture arose
(or any subsequent Plan Year if indicated in the Adoption
Agreement).
2. Money Purchase Pension and Target Benefit Plan - If this
Plan is a money purchase plan or a target benefit plan,
unless the Adoption Agreement indicates otherwise,
Forfeitures shall be applied towards the reduction of
Employer Contributions to the Plan. Forfeitures shall
be allocated as of the last day of the Plan Year during
which the Forfeiture arose (or any subsequent Plan Year
if indicated in the Adoption Agreement).
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 ($150,000 for Plan Years
beginning after December 31, 1993), (increased by any
cost of living adjustment made by the Secretary of
Treasury or the Secretary's 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. The Employer may, in the Adoption
Agreement, limit the Participants who are entitled to
receive the minimum allocation. 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 Nondeductible
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 1.07 of the Plan and shall include any amounts
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(e)(3), 402(h)(1)(B) or 403(b) of the Code even if the
Employer has elected to exclude such contributions in the
definition of Compensation used for other purposes under
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.
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 - When the paired plans are top-heavy,
the top-heavy requirements set forth in Section
3.01(E)(1) of the Plan shall apply.
a. Same eligibility requirements. In satisfying the
top-heavy minimum allocation requirements set forth
in Section 3.01(E) of the Plan, if the Employees
benefiting under each of the paired plans are
identical, the top-heavy minimum allocation shall be
made to the money purchase pension plan.
b. Different eligibility requirements. In satisfying
the top-heavy minimum allocation requirements set
forth in Section 3.01(E) of the Plan, if the
Employees benefiting under each of the paired plans
are not identical, the top-heavy minimum allocation
will be made to both of the paired plans.
A Participant is treated as benefiting under the Plan for
any Plan Year during which the Participant received or is
deemed to receive an allocation in accordance with
Section 1.410(b)-3(a).
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 to
<PAGE>
9
include earnings thereon, with respect to the omitted
Employee in the amount which the Employer would have
contributed with respect to that Employee had he or she
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 to include earnings thereon, which
the Employer would have contributed for the Employee.
3.02 NONDEDUCTIBLE 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.
Nondeductible 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 or her
Individual Account attributable to his or her Nondeductible
Employee Contributions or the amount he or she contributed as
Nondeductible Employee Contributions.
Nondeductible 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 Nondeductible 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 so indicated in the Adoption Agreement, an Employee may
contribute a rollover contribution to the Plan. The Plan
Administrator may require the Employee to submit a written
certification that the contribution qualifies as a rollover
contribution under the applicable provisions of the Code. If it
is later determined that all or part of a rollover contribution
was ineligible to be rolled into the Plan, the Plan Administrator
shall direct that any ineligible amounts, plus earnings
attributable thereto, be distributed from the Plan to the
Employee as soon as administratively feasible.
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.
The Employer may, in a uniform and nondiscriminatory manner, only
allow Employees who have become Participants in the Plan to make
rollover contributions.
3.04 TRANSFER CONTRIBUTIONS
If so indicated in the Adoption Agreement, 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). If it is later determined that all or part
of a transfer contribution was ineligible to be transferred into
the Plan, the Plan Administrator shall direct that any ineligible
amounts, plus earnings attributable thereto, be distributed from
the Plan to the Employee as soon as administratively feasible.
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.
The Employer may, in a uniform and nondiscriminatory manner, only
allow Employees who have become Participants in the Plan to make
transfer contributions.
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, or a simplified employee pension plan, as
defined in Section 408(k) of the Code, maintained by the
Employer, which provides an annual addition as defined in
Section 3.08(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 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
<PAGE>
10
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 (b) 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 Nondeductible 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 maintained by the Employer, an individual
medical account maintained by the Employer, or a simplified
employee pension maintained by the Employer that 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 qualified master or prototype plans, welfare
benefit funds, individual medical accounts and simplified
employee pensions for the same limitation year. If the
annual additions with respect to the Participant under
other qualified master or prototype defined contribution
plans, welfare benefit funds, individual medical accounts
and simplified employee pensions 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 qualified master or
prototype defined contribution plans, welfare benefit
funds, individual medical accounts and simplified
employee pensions 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 simplified employee pension will be
deemed to have been allocated first, followed by annual
additions to a welfare benefit fund or individual medical
account, 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 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. Nondeductible Employee Contributions,
c. Forfeitures,
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
<PAGE>
11
defined in Section 419(e) of the Code, maintained by
the Employer are treated as annual additions to a
defined contribution plan, and
e. allocations under a simplified employee pension.
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: Means Compensation as defined in Section
1.07 of the Plan except that Compensation for purposes of
this Section 3.05 shall not include any amounts
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(e)(3), 402(h)(1)(B) or 403(b) of the Code even if the
Employer has elected to include such contributions in the
definition of Compensation used for other purposes under
the Plan. Further, any other exclusion the Employer has
elected (such as the exclusion of certain types of pay or
pay earned before the Employee enters the Plan) will not
apply for purposes of this Section.
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, individual medical accounts,
and simplified employee pensions, maintained by the
Employer), and the denominator of which is the sum of the
maximum aggregate amounts for the current and all prior
limitation years of service with the Employer (regardless
of whether a defined contribution plan was maintained by
the Employer). The maximum aggregate amount in any
limitation year is the lesser of 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.
The annual addition for any limitation year beginning
before January 1, 1987, shall not be recomputed to treat
all Nondeductible 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 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.
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.
<PAGE>
12
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.
Straight life annuity means an annuity payable in
equal installments for the life of the Participant
that terminates upon the Participants's death.
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 or her 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.
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 the Participant's
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 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.
4.05 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.
4.06 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.
<PAGE>
13
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. Notwithstanding the preceding sentence, a
Trustee may make an agreement with the Employer whereby the
Trustee will manage the investment of all or a portion of the
Fund. Any such agreement shall be in writing and set forth such
matters as the Trustee deems necessary or desirable.
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. The Custodian shall
have no discretionary authority with respect to the management of
the Plan or the Fund but will act only as directed by the entity
who has such authority.
A. PERMISSIBLE INVESTMENTS - The assets of the Plan shall be
invested only in those investments which are available
through the Custodian in the ordinary course of business
which the Custodian may legally hold in a qualified plan and
which the Custodian chooses to make available to Employers
for qualified plan investments. Notwithstanding the
preceding sentence, the Prototype Sponsor may, as a condition
of making the Plan available to the Employer, limit the types
of property in which the assets of the Plan may be invested.
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 and as of any
other times as the Custodian and Plan Administrator may
agree.
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 assessment 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 FINANCIAL ORGANIZATION TRUSTEE WITH FULL TRUST POWERS AND
INDIVIDUAL TRUSTEE
This Section 5.04 applies where a financial organization has
indicated in the Adoption Agreement that it will serve as Trustee
with full trust powers. This Section also applies where one or
more individuals are named in the Adoption Agreement to serve as
Trustee(s).
A. PERMISSIBLE INVESTMENTS - The Trustee may invest the assets
of the Plan in property of any character, real or personal,
including, but not limited to the following: stocks,
including shares of open-end investment companies (mutual
funds); bonds; notes; debentures; options; limited
partnership interests; mortgages; real estate or any
interests therein; unit investment trusts; Treasury Bills,
and other U.S. Government obligations; common trust funds,
combined investment trusts, collective trust funds or
commingled funds maintained by a bank or similar financial
organization (whether or not the Trustee hereunder); savings
accounts, time deposits or money market accounts of a bank or
similar financial organization (whether or not the Trustee
hereunder); annuity contracts; life insurance policies; or in
such other investments as is deemed proper without regard to
investments authorized by statute or rule of law governing
the investment of trust funds but with regard to ERISA and
this Plan.
Notwithstanding the preceding sentence, the Prototype Sponsor
may, as a condition of making the Plan available to the
Employer, limit the types of property in which the assets of
the Plan may be invested.
B. RESPONSIBILITIES OF THE TRUSTEE - The responsibilities of the
Trustee 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 Trustee to maintain physical
custody of stock certificates (or other indicia of
ownership) representing assets within the Fund;
<PAGE>
14
2. To maintain accurate records of contributions, earnings,
withdrawals and other information the Trustee 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
Trustee as of the end of each Plan Year and as of any
other times as the Trustee and Plan Administrator may
agree.
C. POWERS OF THE TRUSTEE - Except as otherwise provided in this
Plan, the Trustee 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 hold any securities or other property of the Fund in
its own name, in the name of its nominee or in bearer
form;
2. To purchase or subscribe for securities issued, or real
property owned, by the Employer or any trade or business
under common control with the Employer but only if the
prudent investment and diversification requirements of
ERISA are satisfied;
3. To sell, exchange, convey, transfer or otherwise dispose
of any securities or other property held by the Trustee,
by private contract or at public auction. No person
dealing with the Trustee shall be bound to see to the
application of the purchase money or to inquire into the
validity, expediency, or propriety of any such sale or
other disposition, with or without advertisement;
4. 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 delegate discretionary powers, 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;
5. To invest any part or all of the Fund (including idle
cash balances) in certificates of deposit, demand or time
deposits, savings accounts, money market accounts or
similar investments of the Trustee (if the Trustee is a
bank or similar financial organization), the Prototype
Sponsor or any affiliate of such Trustee or Prototype
Sponsor, which bear a reasonable rate of interest;
6. To provide sweep services without the receipt by the
Trustee of additional compensation or other consideration
(other than reimbursement of direct expenses properly and
actually incurred in the performance of such services);
7. To hold in the form of cash for distribution or
investment such portion of the Fund as, at any time and
from time-to-time, the Trustee shall deem prudent and
deposit such cash in interest bearing or noninterest
bearing accounts;
8. 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;
9. To settle, compromise, or submit to arbitration any
claims, debts, or damages due or owing to or from the
Plan, to commence or defend suits or legal or
administrative proceedings, and to represent the Plan in
all suits and legal and administrative proceedings;
10. To employ suitable agents and counsel, to contract with
agents to perform administrative and recordkeeping duties
and to pay their reasonable expenses, fees and
compensation, and such agent or counsel may or may not be
agent or counsel for the Employer;
11. To cause any part or all of the Fund, without limitation
as to amount, to be commingled with the funds of other
trusts (including trusts for qualified employee benefit
plans) by causing such money to be invested as a part of
any pooled, common, collective or commingled trust fund
(including any such fund described in the Adoption
Agreement) heretofore or hereafter created by any Trustee
(if the Trustee is a bank), by the Prototype Sponsor, by
any affiliate bank of such a Trustee or by such a Trustee
or the Prototype Sponsor, or by such an affiliate in
participation with others; the instrument or instruments
establishing such trust fund or funds, as amended, being
made part of this Plan and trust so long as any portion
of the Fund shall be invested through the medium thereof;
and
12. Generally to do all such acts, execute all such
instruments, initiate such proceedings, and exercise all
such rights and privileges with relation to property
constituting the Fund as if the Trustee were the absolute
owner thereof.
5.05 DIVISION OF FUND INTO INVESTMENT FUNDS
The Employer may direct the Trustee (or Custodian) 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 or her 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.
<PAGE>
15
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. The Trustee (or Custodian) or other payor
may act as agent for the Plan Administrator to withhold such
taxes and to make the appropriate distribution reports, if the
Plan Administrator furnishes all the information to the Trustee
(or Custodian) or other payor it may need to do withholding and
reporting.
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 or
she shall transfer all of the assets of the Fund then held by
such Trustee (or Custodian) as expeditiously as possible to the
successor Trustee (or Custodian) after paying or reserving such
reasonable amount as he or she shall deem necessary to provide
for the expense in the settlement of the accounts and the amount
of any compensation due him or her and any sums chargeable
against the Fund for which he or she may be liable. If the Funds
as reserved are not sufficient for such purpose, then he or she
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 the transferred 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) shall not be liable for any losses
incurred by the Fund by any direction to invest communicated by
the Employer, Plan Administrator, investment manager appointed
pursuant to Section 5.12 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 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).
The agreement shall set forth, among other matters, the
effective date of the investment manager's appointment and an
acknowledgement by the investment manager that it is a
fiduciary of the Plan under ERISA.
<PAGE>
16
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 MATTERS RELATING TO INSURANCE
A. If a life insurance policy is to be purchased for a
Participant, the aggregate premium for certain life insurance
for each Participant must be less than a certain percentage
of the aggregate Employer Contributions and Forfeitures
allocated to a Participant's Individual Account at any
particular time as follows:
1. Ordinary Life Insurance - For purposes of these
incidental insurance provisions, ordinary life insurance
contracts are contracts with both nondecreasing death
benefits and nonincreasing premiums. If such contracts
are purchased, less than 50% of the aggregate Employer
Contributions and Forfeitures allocated to any
Participant's Individual Account will be used to pay the
premiums attributable to them.
2. Term and Universal Life Insurance - No more than 25% of
the aggregate Employer Contributions and Forfeitures
allocated to any Participant's Individual Account will be
used to pay the premiums on term life insurance
contracts, universal life insurance contracts, and all
other life insurance contracts which are not ordinary
life.
3. Combination - The sum of 50% of the ordinary life
insurance premiums and all other life insurance premiums
will not exceed 25% of the aggregate Employer
Contributions and Forfeitures allocated to any
Participant's Individual Account.
If this Plan is a profit sharing plan, the above
incidental benefits limits do not apply to life
insurance contracts purchased with Employer
Contributions and Forfeitures that have been in the
Participant's Individual Account for at least 2 full
Plan Years, measured from the date such contributions
were allocated.
B. Any dividends or credits earned on insurance contracts for a
Participant shall be allocated to such Participant's
Individual Account.
C. Subject to Section 6.05, the contracts on a Participant's
life will be converted to cash or an annuity or distributed
to the Participant upon commencement of benefits.
D. The Trustee (or Custodian, if applicable) shall apply for and
will be the owner of any insurance contract(s) purchased
under the terms of this Plan. The insurance contract(s) must
provide that proceeds will be payable to the Trustee (or
Custodian), however, the Trustee (or Custodian) 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 6.05. Under no circumstances shall
the Fund 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.
E. The Plan Administrator may direct the Trustee (or Custodian)
to sell and distribute insurance or annuity contracts to a
Participant (or other party as may be permitted) in
accordance with applicable law or regulations.
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 or her 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 or her 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.
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 or the alternate
payee under a qualified domestic relations order (as defined in
Section 414(p) of the Code) to individually direct in accordance
with this Section.
SECTION SIX VESTING AND DISTRIBUTION
6.01 DISTRIBUTION TO PARTICIPANT
A. DISTRIBUTABLE EVENTS
1. Entitlement to Distribution - The Vested portion of a
Participant's Individual Account shall be distributable
to the Participant upon (1) the occurrence of any of the
distributable events specified in the Adoption Agreement;
(2) the Participant's Termination of Employment after
attaining Normal Retirement Age; (3) the termination of
the Plan; and (4) the Participant's Termination of
Employment after satisfying any Early Retirement Age
conditions.
If a Participant separates from service before satisfying
the Early Retirement Age requirement, but has satisfied
the service requirement, the Participant will be entitled
to elect an early retirement benefit upon satisfaction of
such age requirement.
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 the time specified in the Adoption Agreement
for this purpose and, if not specified in the Adoption
Agreement, then no later than 90 days following the later
of:
<PAGE>
17
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 may elect to receive a
distribution of all or part of the Vested portion of his
or her 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 the entire Vested portion of his
or her 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 or her Individual Account attributable to
Employer Contributions for at least 2 full Plan
Years, measured from the date such contributions were
allocated. However, if the distribution is on
account of hardship, the Participant may withdraw up
to his or her entire Vested portion of the
Participant's Individual Account. For this purpose,
hardship shall have the meaning set forth in Section
6.01(A)(4) of the Code.
4. Special Rules for Hardship Withdrawals - If this is a
profit sharing plan and the Adoption Agreement so
provides, a Participant may elect to receive a hardship
distribution of all or part of the Vested portion of his
or her 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 the entire Vested portion of his
or her 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 or her Individual Account attributable to
Employer Contributions for at least 2 full Plan
Years, measured from the date such contributions were
allocated.
For purposes of this Section 6.01(A)(4) and Section
6.01(A)(3) 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).
5. One-Time In-Service Withdrawal Option - If this is a
profit sharing plan and the Employer has elected the one-
time in-service withdrawal option in the Adoption
Agreement, then Participants will be permitted only one
in-service withdrawal during the course of such
Participants employment with the Employer. The amount
which the Participant can withdraw will be limited to the
lesser of the amount determined under the limits set
forth in Section 6.01(A)(3) or the percentage of the
Participant's Individual Account specified by the
Employer in the Adoption Agreement. Distributions under
this Section will be subject to the requirements of
Section 6.05.
6. 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) of the Plan, shall be deemed to be an election to
defer commencement of payment of any benefit sufficient to
satisfy this Section.
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 or her rollover contributions and
transfer contributions.
3. Fully Vested Under Certain Circumstances - A Participant
is fully Vested in his or her Individual Account if any
of the following occurs:
a. the Participant reaches Normal Retirement Age;
b. the Plan is terminated or partially terminated; or
c. there exists a complete discontinuance of
contributions under the Plan.
Further, unless otherwise indicated in the Adoption
Agreement, a Participant is fully Vested if the
Participant dies, incurs a Disability, or satisfies the
conditions for Early Retirement Age (if applicable).
<PAGE>
18
4. Participants in a Prior Plan - If a Participant was a
participant in a Prior Plan on the Effective Date, his or
her 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 or her
Individual Account attributable to Employer Contributions and
Forfeitures shall be determined in accordance with the
vesting schedule elected by the Employer in the Adoption
Agreement (and if no election is made the 6 year graded
schedule will be deemed to have been elected) as described
below:
<TABLE>
<CAPTION>
6 YEAR GRADED 3 YEAR CLIFF
Years of Years of
Vesting Service Vested Percentage Vesting Service Vested Percentage
<S> <C> <C> <C>
1 0 1 0
2 20 2 0
3 40 3 100
4 60
5 80
6 100
</TABLE>
This minimum vesting schedule applies to all benefits within
the meaning of Section 411(a)(7) of the Code, except those
attributable to Nondeductible 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 or her
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. Breaks in Vesting Service - If a Participant neither
receives nor is deemed to receive a distribution pursuant
to Section 6.01(D)(3) or (4) 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. Five Consecutive Breaks in Vesting Service - If a
Participant neither receives nor is deemed to receive a
distribution pursuant to Section 6.01(D)(3) or (4) and
the Participant does not return to the service of the
Employer before incurring 5 consecutive Breaks in Vesting
Service, the portion of the Participant's Individual
Account which is not Vested shall be treated as a
Forfeiture and allocated in accordance with Section
3.01(C).
3. Cash-out of Certain Participants - If the value of the
Vested portion of such Participant's Individual Account
derived from Nondeductible Employee Contributions 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 and
allocated in accordance with Section 3.01(C). 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.
4. 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 or her Individual Account derived
from Nondeductible Employee Contributions and Employer
Contributions, the portion which is not Vested shall be
treated as a Forfeiture and allocated in accordance with
Section 3.01(C).
5. Re-employed Participants - If a Participant receives or
is deemed to receive a distribution pursuant to Section
6.01(D)(3) or (4) 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.
Any restoration of a Participant's Individual Account
pursuant to Section 6.01(D)(5) 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 or
her Individual Account derived from Employer Contributions
and the Participant may increase his or her Vested percentage
in his or her 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.
<PAGE>
19
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 Nondeductible Employee Contributions 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 as soon as administratively feasible.
B. VALUE OF INDIVIDUAL ACCOUNT EXCEEDS $3,500
1. If the value of the Vested portion of a Participant's
Individual Account derived from Nondeductible Employee
Contributions 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 or her Individual Account be paid to him or her 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 or her
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 Retirement Equity Act 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 the Participant's Individual Account in the event
of his or her 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 or her spouse, his or her 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 or plan representative.
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 the
Participant's entire Individual Account has been paid to him
or her, 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 the time
specified in the Adoption Agreement for this purpose and if
not specified in the Adoption Agreement, then 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>
20
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
Nondeductible Employee Contributions 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 Nondeductible
Employee Contributions 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 Retirement Equity Act safe harbor
rules of Section 6.05(F) apply. However, a surviving spouse
Beneficiary may elect any form of payment allowable under the
Plan in lieu of the preretirement survivor annuity. Any such
payment to the surviving spouse must meet the requirements of
Section 6.06.
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) or if
the Beneficiary is the Participant's surviving spouse, the
Beneficiary may, subject to the requirements of Section 6.06,
request in writing that the Participant's Individual Account
be paid 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
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.
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.
<PAGE>
21
7. Vested Account Balance - The aggregate value of the
Participant's Vested account balances derived from
Employer and Nondeductible 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,
Nondeductible 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 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; and, (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. RETIREMENT EQUITY ACT 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.
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.
<PAGE>
22
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,
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 proposed 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
<PAGE>
23
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
Participant shall be distributed using the applicable
life expectancy in Section 6.05(D)(1)(a) above as the
relevant divisor without regard to proposed
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.
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 6.05(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 6.05(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 6.05(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
6.05(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.
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.
<PAGE>
24
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 qualified 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.
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 Proposed 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 LOANS TO PARTICIPANTS
If the Adoption Agreement so indicates, a Participant may receive
a loan from the Fund, subject to the following rules:
A. Loans shall be made available to all Participants on a
reasonably equivalent basis.
B. Loans shall not be made available to Highly Compensated
Employees (as defined in Section 414(q) of the Code) in an
amount greater than the amount made available to other
Employees.
<PAGE>
25
C. Loans must be adequately secured and bear a reasonable
interest rate.
D. No Participant loan shall exceed the present value of the
Vested portion of a Participant's Individual Account.
E. A Participant must obtain the consent of his or her spouse,
if any, to the use of the Individual Account as security for
the loan. Spousal consent shall be obtained no earlier than
the beginning of the 90 day period that ends on the date on
which the loan is to be so secured. The consent must be in
writing, must acknowledge the effect of the loan, and must be
witnessed by a plan representative or notary public. Such
consent shall thereafter be binding with respect to the
consenting spouse or any subsequent spouse with respect to
that loan. A new consent shall be required if the account
balance is used for renegotiation, extension, renewal, or
other revision of the loan. Notwithstanding the foregoing,
no spousal consent is necessary if, at the time the loan is
secured, no consent would be required for a distribution
under Section 417(a)(2)(B). In addition, spousal consent is
not required if the Plan or the Participant is not subject to
Section 401(a)(11) at the time the Individual Account is used
as security, or if the total Individual Account subject to
the security is less than or equal to $3,500.
F. In the event of default, foreclosure on the note and
attachment of security will not occur until a distributable
event occurs in the Plan. Notwithstanding the preceding
sentence, a Participant's default on a loan will be treated
as a distributable event and as soon as administratively
feasible after the default, the Participant's Vested
Individual Account will be reduced by the lesser of the
amount in default (plus accrued interest) or the amount
secured. If this Plan is a 401(k) plan, then to the extent
the loan is attributable to a Participant's Elective
Deferrals, Qualified Nonelective Contributions or Qualified
Matching Contributions, the Participant's Individual Account
will not be reduced unless the Participant has attained age
59 1/2 or has another distributable event. A Participant
will be deemed to have consented to the provision at the time
the loan is made to the Participant.
G. No loans will be made to any shareholder-employee or Owner-
Employee. For purposes of this requirement, a shareholder-
employee means an employee or officer of an electing small
business (Subchapter S) corporation who owns (or is
considered as owning within the meaning of Section 318(a)(1)
of the Code), on any day during the taxable year of such
corporation, more than 5% of the outstanding stock of the
corporation.
If a valid spousal consent has been obtained in accordance
with 6.08(E), then, notwithstanding any other provisions of
this Plan, the portion of the Participant's Vested Individual
Account used as a security interest held by the Plan by
reason of a loan outstanding to the Participant shall be
taken into account for purposes of determining the amount of
the account balance 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
Individual Account (determined without regard to the
preceding sentence) is payable to the surviving spouse, then
the account balance shall be adjusted by first reducing the
Vested Individual Account by the amount of the security used
as repayment of the loan, and then determining the benefit
payable to the surviving spouse.
To avoid taxation to the Participant, no loan to any
Participant can be made to the extent that such loan when
added to the outstanding balance of all other loans to the
Participant 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) 50% of the present
value of the nonforfeitable Individual Account of the
Participant or, if greater, the total Individual Account up
to $10,000. For the purpose of the above limitation, all
loans from all plans of the Employer and other members of a
group of employers described in Sections 414(b), 414(c), and
414(m) of the Code are aggregated. Furthermore, any loan
shall by its terms require that repayment (principal and
interest) be amortized in level payments, not less frequently
than quarterly, over a period not extending beyond 5 years
from the date of the loan, unless such loan is used to
acquire a dwelling unit which within a reasonable time
(determined at the time the loan is made) will be used as the
principal residence of the Participant. An assignment or
pledge of any portion of the Participant's interest in the
Plan and a loan, pledge, or assignment with respect to any
insurance contract purchased under the Plan, will be treated
as a loan under this paragraph.
The Plan Administrator shall administer the loan program in
accordance with a written document. Such written document
shall include, at a minimum, the following: (i) the identity
of the person or positions authorized to administer the
Participant loan program; (ii) the procedure for applying for
loans; (iii) the basis on which loans will be approved or
denied; (iv) limitations (if any) on the types and amounts of
loans offered; (v) the procedure under the program for
determining a reasonable rate of interest; (vi) the types of
collateral which may secure a Participant loan; and (vii) the
events constituting default and the steps that will be taken
to preserve Plan assets in the event of such default.
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 that
is equal to at least $500 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;
c. the portion of any other distribution that is not
includible in gross income (determined without regard
to the exclusion for net unrealized appreciation with
respect to employer securities); and
d. any other distribution(s) that is reasonably expected
to total less than $200 during a year.
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
<PAGE>
26
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.
6.11 PROCEDURE FOR MISSING PARTICIPANTS OR BENEFICIARIES
The Plan Administrator must use all reasonable measures to locate
Participants or Beneficiaries who are entitled to distributions
from the Plan. In the event that the Plan Administrator cannot
locate a Participant or Beneficiary who is entitled to a
distribution from the Plan after using all reasonable measures to
locate him or her, the Plan Administrator may, consistent with
applicable laws, regulations and other pronouncements under
ERISA, use any reasonable procedure to dispose of distributable
plan assets, including any of the following: (1) establish a
bank account for and in the name of the Participant or
Beneficiary and transfer the assets to such bank account, (2)
purchase an annuity contract with the assets in the name of the
Participant or Beneficiary, or (3) after the expiration of 5
years after the benefit becomes payable, treat the amount
distributable as a Forfeiture and allocate it in accordance with
the terms of the Plan and if the Participant or Beneficiary is
later located, restore such benefit to the Plan.
SECTION SEVEN CLAIMS PROCEDURE
7.01 FILING A CLAIM FOR PLAN DISTRIBUTIONS
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 or her 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 or her 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 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.
The Employer may establish an administrative committee that
will carry out the Plan Administrator's duties. Members of
the administrative committee may allocate the Plan
Administrator's duties among themselves.
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
<PAGE>
27
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 or her duties under the
Plan, including, but not limited to, the following:
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 any or
all such expenses. Pursuant to uniform and nondiscriminatory
rules that the Plan Administrator may establish from time-to-
time, administrative expenses and expenses unique to a particular
Participant may be charged to a Participant's Individual Account
or the Plan Administrator may allow Participants to pay such fees
outside of the Plan. The Employer shall furnish the Plan
Administrator with such clerical and other assistance as the Plan
Administrator may need in the performance of his or her duties.
8.04 INFORMATION FROM EMPLOYER
To enable the Plan Administrator to perform his or her duties,
the Employer shall supply full and timely information to the Plan
Administrator (or his or her 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 or her 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 or her 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 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.
Notwithstanding the preceding sentence, a Participant's
Individual Account may be reduced to the extent permitted under
<PAGE>
28
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;
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), 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 plan document.
9.08 FAILURE OF PLAN QUALIFICATION
If the Plan fails to 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 or she would have been entitled to receive
immediately before the merger, consolidation, or transfer (if the
Plan had then terminated). The Trustee (or Custodian) 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.
<PAGE>
29
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 excludable from the Employee's gross income under Section
125, Section 402(e)(3), Section 402(h)(1)(B) 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.
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.
<PAGE>
30
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, unless otherwise
indicated in the Adoption Agreement.
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 or her 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.
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.
Notwithstanding any provision of the Plan to the contrary, a
distribution to an alternate payee under a qualified domestic
relations order shall be permitted even if the Participant
affected by such order is not otherwise entitled to a
distribution and even if such Participant has not attained
earliest retirement age as defined in Section 414(p) of the Code.
10.11 CANNOT ELIMINATE PROTECTED BENEFITS
Pursuant to Section 411(d)(6) of the Code, and the regulations
thereunder, the Employer cannot reduce, eliminate or make subject
to Employer discretion any Section 411(d)(6) protected benefit.
Where this Plan document is being adopted to amend another plan
that contains a protected benefit not provided for in this
document, the Employer may attach a supplement to the Adoption
Agreement that describes such protected benefit which shall
become part of the Plan.
SECTION ELEVEN 401(k) PROVISIONS
In addition to Sections 1 through 10, the provisions of this
Section 11 shall apply if the Employer has established a 401(k)
cash or deferred arrangement (CODA) by completing and signing the
appropriate Adoption Agreement.
11.100 DEFINITIONS
The following words and phrases when used in the Plan with
initial capital letters shall, for the purposes of this Plan,
have the meanings set forth below unless the context indicates
that other meanings are intended.
11.101 ACTUAL DEFERRAL PERCENTAGE (ADP)
Means, for a specified group of Participants for a Plan 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 Fund on behalf of such Participant for
the Plan Year to (2) the Participant's Compensation for such Plan
Year (taking into account only that Compensation paid to the
Employee during the portion of the Plan Year he or she was an
eligible Participant, unless otherwise indicated in the Adoption
Agreement). For purposes of calculating the ADP, Employer
Contributions on behalf of any Participant shall include: (1) any
Elective Deferrals made pursuant to the Participant's deferral
election, (including Excess Elective Deferrals of Highly
Compensated Employees), but excluding (a) Excess Elective
Deferrals of Non-highly Compensated Employees that arise solely
from Elective Deferrals made under the Plan or plans of this
Employer and (b) Elective Deferrals that are taken into account
in the Contribution Percentage test (provided the ADP test is
satisfied both with and without exclusion of these Elective
<PAGE>
31
Deferrals); and (2) at the election of the Employer, Qualified
Nonelective Contributions and Qualified Matching Contributions.
For purposes of computing Actual Deferral Percentages, an
Employee who would be a Participant but for the failure to make
Elective Deferrals shall be treated as a Participant on whose
behalf no Elective Deferrals are made.
11.102 AGGREGATE LIMIT
Means the sum of (1) 125% of the greater of the ADP of the
Participants who are not Highly Compensated Employees for the
Plan Year or the ACP of the Participants who are not Highly
Compensated Employees under the Plan subject to Code Section
401(m) for the Plan Year beginning with or within the Plan Year
of the CODA; and (2) the lesser of 200% or two plus the lesser of
such ADP or ACP. "Lesser" is substituted for "greater" in "(1)"
above, and "greater" is substituted for "lesser" after "two plus
the" in "(2)" if it would result in a larger Aggregate Limit.
11.103 AVERAGE CONTRIBUTION PERCENTAGE (ACP)
Means the average of the Contribution Percentages of the Eligible
Participants in a group.
11.104 CONTRIBUTING PARTICIPANT
Means a Participant who has enrolled as a Contributing
Participant pursuant to Section 11.201 and on whose behalf the
Employer is contributing Elective Deferrals to the Plan (or is
making Nondeductible Employee Contributions).
11.105 CONTRIBUTION PERCENTAGE
Means the ratio (expressed as a percentage) of the Participant's
Contribution Percentage Amounts to the Participant's Compensation
for the Plan Year (taking into account only the Compensation paid
to the Employee during the portion of the Plan Year he or she was
an eligible Participant, unless otherwise indicated in the
Adoption Agreement).
11.106 CONTRIBUTION PERCENTAGE AMOUNTS
Means the sum of the Nondeductible Employee Contributions,
Matching Contributions, and Qualified Matching Contributions made
under the Plan on behalf of the Participant for the Plan Year.
Such Contribution Percentage Amounts shall not include Matching
Contributions that are forfeited either to correct Excess
Aggregate Contributions or because the contributions to which
they relate are Excess Deferrals, Excess Contributions, Excess
Aggregate Contributions or excess annual additions which are
distributed pursuant to Section 11.508. If so elected in the
Adoption Agreement, the Employer may include Qualified
Nonelective Contributions in the Contribution Percentage Amount.
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.
11.107 ELECTIVE DEFERRALS
Means 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. Elective Deferrals
shall not include any deferrals properly distributed as excess
annual additions.
No Participant shall be permitted to have Elective Deferrals made
under this Plan, or any other qualified plan maintained by the
Employer, during any taxable year, in excess of the dollar
limitation contained in Section 402(g) of the Code in effect at
the beginning of such taxable year.
Elective Deferrals may not be taken into account for purposes of
satisfying the minimum allocation requirement applicable to Top-
Heavy Plans described in Section 3.01(E).
11.108 ELIGIBLE PARTICIPANT
Means any Employee who is eligible to make a Nondeductible
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 thereof) or a Qualified Matching
Contribution.
If a Nondeductible 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 Nondeductible Employee Contributions are made.
11.109 EXCESS AGGREGATE CONTRIBUTIONS
Means, with respect to any Plan Year, the excess of:
A. 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
B. 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 11.112 and then
determining Excess Contributions pursuant to Section 11.111.
11.110 EXCESS CONTRIBUTIONS
Means, with respect to any Plan Year, the excess of:
A. The aggregate amount of Employer Contributions actually taken
into account in computing the ADP of Highly Compensated
Employees for such Plan Year, over
B. 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).
11.111 EXCESS ELECTIVE DEFERRALS
Means 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, unless such amounts are distributed no later than
the first April 15 following the close of the Participant's
taxable year.
<PAGE>
32
11.112 MATCHING CONTRIBUTION
Means an Employer Contribution made to this or any other defined
contribution plan on behalf of a Participant on account of an
Elective Deferral or a Nondeductible Employee Contribution made
by such Participant under a plan maintained by the Employer.
Matching Contributions may not be taken into account for purposes
of satisfying the minimum allocation requirement applicable to
Top-Heavy Plans described in Section 3.01(E).
11.113 QUALIFIED NONELECTIVE CONTRIBUTIONS
Means contributions (other than Matching Contributions or
Qualified Matching Contributions) made by the Employer and
allocated to Participants' Individual 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.
Qualified Nonelective Contribution may be taken into account for
purposes of satisfying the minimum allocation requirement
applicable to Top-Heavy Plans described in Section 3.01(E).
11.114 QUALIFIED MATCHING CONTRIBUTIONS
Means Matching Contributions which are subject to the
distribution and nonforfeitability requirements under Section
401(k) of the Code when made.
11.115 QUALIFYING CONTRIBUTING PARTICIPANT
Means a Contributing Participant who satisfies the requirements
described in Section 11.302 to be entitled to receive a Matching
Contribution (and Forfeitures, if applicable) for a Plan Year.
11.200 CONTRIBUTING PARTICIPANT
11.201 REQUIREMENTS TO ENROLL AS A CONTRIBUTING PARTICIPANT
A. Each Employee who satisfies the eligibility requirements
specified in the Adoption Agreement may enroll as a
Contributing Participant as of any subsequent Entry Date (or
earlier if required by Section 2.03) specified in the
Adoption Agreement for this purpose. A Participant who
wishes to enroll as a Contributing Participant must complete,
sign and file a salary reduction agreement (or agreement to
make Nondeductible Employee Contributions) with the Plan
Administrator.
B. Notwithstanding the times set forth in Section 11.201(A) as
of which a Participant may enroll as a Contributing
Participant, the Plan Administrator shall have the authority
to designate, in a nondiscriminatory manner, additional
enrollment times during the 12 month period beginning on the
Effective Date (or the date that Elective Deferrals may
commence, if later) in order that an orderly first enrollment
might be completed. In addition, if the Employer has
indicated in the Adoption Agreement that Elective Deferrals
may be based on bonuses, then Participants shall be afforded
a reasonable period of time prior to the issuance of such
bonuses to elect to defer them into the Plan.
11.202 CHANGING ELECTIVE DEFERRAL AMOUNTS
A Contributing Participant may modify his or her salary reduction
agreement (or agreement to make Nondeductible Employee
Contributions) to increase or decrease (within the limits placed
on Elective Deferrals (or Nondeductible Employee Contributions)
in the Adoption Agreement) the amount of his or her Compensation
deferred into the Plan. Such modification may only be made as of
the dates specified in the Adoption Agreement for this purpose,
or as of any other more frequent date(s) if the Plan
Administrator permits in a uniform and nondiscriminatory manner.
A Contributing Participant who desires to make such a
modification shall complete, sign and file a new salary reduction
agreement (or agreement to make Nondeductible Employee
Contribution) with the Plan Administrator. The Plan
Administrator may prescribe such uniform and nondiscriminatory
rules it deems appropriate to carry out the terms of this
Section.
11.203 CEASING ELECTIVE DEFERRALS
A Participant may cease Elective Deferrals (or Nondeductible
Employee Contributions) and thus withdraw as a Contributing
Participant as of the dates specified in the Adoption Agreement
for this purpose (or as of any other date if the Plan
Administrator so permits in a uniform and nondiscriminatory
manner) by revoking the authorization to the Employer to make
Elective Deferrals (or Nondeductible Employee Contributions) on
his or her behalf. A Participant who desires to withdraw as a
Contributing Participant shall give written notice of withdrawal
to the Plan Administrator at least thirty days (or such lesser
period of days as the Plan Administrator 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 an
account of termination of the Plan.
11.204 RETURN AS A CONTRIBUTING PARTICIPANT AFTER CEASING ELECTIVE
DEFERRALS
A Participant who has withdrawn as a Contributing Participant
under Section 11.203 (or because the Participant has taken a
hardship withdrawal pursuant to Section 11.503) may not again
become a Contributing Participant until the dates set forth in
the Adoption Agreement for this purpose, unless the Plan
Administrator, in a uniform and nondiscriminatory manner, permits
withdrawing Participants to resume their status as Contributing
Participants sooner.
11.205 CERTAIN ONE-TIME IRREVOCABLE ELECTIONS
This Section 11.205 applies where the Employer has indicated in
the Adoption Agreement that an Employee may make a one-time
irrevocable election to have the Employer make contributions to
the Plan on such Employee's behalf. In such event, an Employee
may elect, upon the Employee's first becoming eligible to
participate in the Plan, to have contributions equal to a
specified amount or percentage of the Employee's Compensation
(including no amount of Compensation) made by the Employer on the
Employee's behalf to the Plan (and to any other plan of the
Employer) for the duration of the Employee's employment with the
Employer. Any contributions made pursuant to a one-time
irrevocable election described in this Section are not treated as
made pursuant to a cash or deferred election, are not Elective
Deferrals and are not includible in an Employee's gross income.
The Plan Administrator shall establish such uniform and
nondiscriminatory procedures as it deems necessary or advisable
to administer this provision.
11.300 CONTRIBUTIONS
11.301 CONTRIBUTIONS BY EMPLOYER
The Employer shall make contributions to the Plan in accordance
with the contribution formulas specified in the Adoption
Agreement.
<PAGE>
33
11.302 MATCHING CONTRIBUTIONS
The Employer may elect to make Matching Contributions under the
Plan on behalf of Qualifying Contributing Participants as
provided in the Adoption Agreement. To be a Qualifying
Contributing Participant for a Plan Year, the Participant must
make Elective Deferrals (or Nondeductible Employee Contributions,
if the Employer has agreed to match such contributions) for the
Plan Year, satisfy any age and Years of Eligibility Service
requirements that are specified for Matching Contributions in the
Adoption Agreement and also satisfy any additional conditions set
forth in the Adoption Agreement for this purpose. In a uniform
and nondiscriminatory manner, the Employer may make Matching
Contributions at the same time as it contributes Elective
Deferrals or at any other time as permitted by laws and
regulations.
11.303 QUALIFIED NONELECTIVE CONTRIBUTIONS
The Employer may elect to make Qualified Nonelective
Contributions under the Plan on behalf of Participants as
provided in the Adoption Agreement.
In addition, in lieu of distributing Excess Contributions as
provided in Section 11.505 of the Plan, or Excess Aggregate
Contributions as provided in Section 11.506 of the Plan, and to
the extent elected by the Employer in the Adoption Agreement, the
Employer may make Qualified Nonelective Contributions on behalf
of Participants who are not 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.
11.304 QUALIFIED MATCHING CONTRIBUTIONS
The Employer may elect to make Qualified Matching Contributions
under the Plan on behalf of Participants as provided in the
Adoption Agreement.
11.305 NONDEDUCTIBLE EMPLOYEE CONTRIBUTIONS
Notwithstanding Section 3.02, if the Employer so allows in the
Adoption Agreement, a Participant may contribute Nondeductible
Employee Contributions to the Plan.
If the Employer has indicated in the Adoption Agreement that
Nondeductible Employee Contributions will be mandatory, then the
Employer shall establish uniform and nondiscriminatory rules and
procedures for Nondeductible Employee Contributions as it deems
necessary and advisable including, but not limited to, rules
describing in amounts or percentages of Compensation Participants
may or must contribute to the Plan.
A separate account will be maintained by the Plan Administrator
for the Nondeductible Employee Contributions for each
Participant.
A Participant may, upon a written request submitted to the Plan
Administrator, withdraw the lesser of the portion of his or her
Individual Account attributable to his or her Nondeductible
Employee Contributions or the amount he or she contributed as
Nondeductible Employee Contributions.
Nondeductible 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 Nondeductible Employee
Contributions.
11.400 NONDISCRIMINATION TESTING
11.401 ACTUAL DEFERRAL PERCENTAGE TEST (ADP)
A. LIMITS ON HIGHLY COMPENSATED EMPLOYEES - The Actual Deferral
Percentage (hereinafter "ADP") for Participants who are
Highly Compensated Employees for each Plan Year and the ADP
for Participants who are not 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 not Highly Compensated Employees for
the same 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 not Highly Compensated Employees for
the same 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 not
Highly Compensated Employees by more than 2 percentage
points.
B. 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 Nonelective
Contributions or Qualified Matching Contributions, or
both, if treated as Elective Deferrals for purposes of
the ADP test) allocated to his or her Individual 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 Nonelective Contributions
or Qualified Matching Contributions, or both) were made
under a single arrangement. If a Highly Compensated
Employee participates in two or more cash or deferred
arrangements that have different Plan Years, all cash or
deferred arrangements ending with or within the same
calendar year shall be treated as a single arrangement.
Notwithstanding the foregoing, certain plans shall be
treated as separate if mandatorily disaggregated under
regulations under Section 401(k) of the Code.
2. In the event that this Plan satisfies the requirements of
Sections 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 11.401 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% owner or one of the 10 most highly paid Highly
Compensated Employees, the Elective Deferrals (and
Qualified Nonelective Contributions or Qualified Matching
Contributions, or both, if treated as Elective Deferrals
for purposes of the ADP test) and Compensation of such
Participant shall include the Elective Deferrals (and, if
applicable, Qualified Nonelective 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 not
Highly Compensated Employees and for Participants who are
Highly Compensated Employees.
4. For purposes of determining the ADP test, Elective
Deferrals, Qualified Nonelective Contributions and
Qualified Matching Contributions must be made before the
last day of the 12 month period immediately following the
Plan Year to which contributions relate.
<PAGE>
34
5. The Employer shall maintain records sufficient to
demonstrate satisfaction of the ADP test and the amount
of Qualified Nonelective Contributions or Qualified
Matching Contributions, or both, used in such test.
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.
7. If the Employer elects to take Qualified Matching
Contributions into account as Elective Deferrals for
purposes of the ADP test, then (subject to such other
requirements as may be prescribed by the Secretary of the
Treasury) unless otherwise indicated in the Adoption
Agreement, only the amount of such Qualified Matching
Contributions that are needed to meet the ADP test shall
be taken into account.
8. In the event that the Plan Administrator determines that
it is not likely that the ADP test will be satisfied for
a particular Plan Year unless certain steps are taken
prior to the end of such Plan Year, the Plan
Administrator may require Contributing Participants who
are Highly Compensated Employees to reduce their Elective
Deferrals for such Plan Year in order to satisfy that
requirement. Said reduction shall also be required by the
Plan Administrator in the event that the Plan
Administrator anticipates that the Employer will not be
able to deduct all Employer Contributions from its income
for Federal income tax purposes.
11.402 LIMITS ON NONDEDUCTIBLE EMPLOYEE CONTRIBUTIONS AND MATCHING
CONTRIBUTIONS
A. LIMITS ON HIGHLY COMPENSATED EMPLOYEES - The Average
Contribution Percentage (hereinafter "ACP") for Participants
who are Highly Compensated Employees for each Plan Year and
the ACP for Participants who are not 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 the Plan Year shall not exceed the ACP for
Participants who are not 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 not Highly Compensated Employees for
the same Plan Year multiplied by 2, provided that the ACP
for the Participants who are Highly Compensated Employees
does not exceed the ACP for Participants who are not
Highly Compensated Employees by more than 2 percentage
points.
B. 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, as elected in the Adoption Agreement, the
ACP or the ADP of those Highly Compensated Employees who
also participate in a CODA will be reduced (beginning
with such Highly Compensated Employee whose ACP (or ADP,
if elected) is the highest) so that the limit is not
exceeded. The amount by which each Highly Compensated
Employee's Contribution Percentage Amounts (or ADP, if
elected) is reduced shall be treated as an Excess
Aggregate Contribution (or Excess Contribution, if
elected). 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 the ADP and ACP of the Highly Compensated
Employees does not exceed 1.25 multiplied by the ADP and
ACP of the Participants who are not Highly Compensated
Employees.
2. For purposes of this Section 11.402, the Contribution
Percentage for any Participant who is a Highly
Compensated Employee and who is eligible to have
Contribution Percentage Amounts allocated to his or her
Individual 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 each plan.
If a Highly Compensated Employee participates in two or
more cash or deferred arrangements that have different
plan years, all cash or deferred arrangements ending with
or within the same calendar year shall be treated as a
single arrangement. Notwithstanding the foregoing,
certain plans shall be treated as separate if mandatorily
disaggregated under regulations under Section 401(m) of
the Code.
3. In the event that this Plan satisfies the requirements of
Sections 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 5% owner or one of the 10 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(q)(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 not Highly Compensated Employees and
for Participants who are Highly Compensated Employees.
5. For purposes of determining the Contribution Percentage
test, Nondeductible Employee Contributions are considered
to have been made in the Plan Year in which contributed
to the Fund. Matching Contributions and Qualified
Nonelective Contributions will be considered made for a
Plan Year if made no later than the end of the 12 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 amount
of Qualified Nonelective 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.
8. If the Employer elects to take Qualified Nonelective
Contributions into account as Contribution Percentage
Amounts for purposes of the ACP test, then (subject to
such other requirements as may be prescribed by the
Secretary of the Treasury) unless otherwise indicated in
the Adoption Agreement, only the amount of such Qualified
Nonelective Contributions that are needed to meet the ACP
test shall be taken into account.
9. If the Employer elects to take Elective Deferrals into
account as Contribution Percentage Amounts for purposes
of the ACP test, then (subject to such other requirements
as may be prescribed by the Secretary of the Treasury)
unless otherwise indicated in the Adoption Agreement,
only the amount of such Elective Deferrals that are
needed to meet the ACP test shall be taken into account.
<PAGE>
35
11.500 DISTRIBUTION PROVISIONS
11.501 GENERAL RULE
Distributions from the Plan are subject to the provisions of
Section 6 and the provisions of this Section 11. In the event of
a conflict between the provisions of Section 6 and Section 11,
the provisions of Section 11 shall control.
11.502 DISTRIBUTION REQUIREMENTS
Elective Deferrals, Qualified Nonelective Contributions, and
Qualified Matching Contributions, and income allocable to each
are not distributable to a Participant or his or her Beneficiary
or Beneficiaries, in accordance with such Participant's or
Beneficiary or Beneficiaries' election, earlier than upon
separation from service, death or disability.
Such amounts may also be distributed upon:
A. Termination of the Plan without the establishment of another
defined contribution plan, other than an employee stock
ownership plan (as defined in Section 4975(e) or Section 409
of the Code) or a simplified employee pension plan as defined
in Section 408(k).
B. The disposition by a corporation to an unrelated corporation
of substantially all of the assets (within the meaning of
Section 409(d)(2) of the Code used in a trade or business of
such corporation if such corporation continues to maintain
this Plan after the disposition, but only with respect to
Employees who continue employment with the corporation
acquiring such assets.
C. 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.
D. The attainment of age 59 1/2 in the case of a profit sharing
plan.
E. If the Employer has so elected in the Adoption Agreement, the
hardship of the Participant as described in Section 11.503.
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 Section 401(a)(11) and 417 of the Code. In
addition, distributions after March 31, 1988, that are
triggered by any of the first three events enumerated above
must be made in a lump sum.
11.503 HARDSHIP DISTRIBUTION
A. GENERAL - If the Employer has so elected in the Adoption
Agreement, distribution of Elective Deferrals (and any
earnings credited to a Participant's account as of the end of
the last Plan Year, ending before July 1, 1989) 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.
B. SPECIAL RULES
1. 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.
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 Nondeductible
Employee Contributions) will be suspended for 12
months after the receipt of the hardship
distribution;
c. The distribution is not in excess of the amount of an
immediate and heavy financial need (including amounts
necessary to pay any Federal, state or local income
taxes or penalties reasonably anticipated to result
from the distribution); 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.
11.504 DISTRIBUTION OF EXCESS ELECTIVE DEFERRALS
A. GENERAL RULE - 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. A
Participant is deemed to notify the Plan Administrator of any
Excess Elective Deferrals that arise by taking into account
only those Elective Deferrals made to this Plan and any other
plans of the Employer.
Notwithstanding any other provision 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 Individual Account Excess
Elective Deferrals were assigned for the preceding year and
who claims Excess Elective Deferrals for such taxable year.
B. DETERMINATION OF INCOME OR LOSS - Excess Elective Deferrals
shall be adjusted for any income or loss up to the date of
distribution. The income of loss allocable to Excess
Elective Deferrals is the sum of : (1) 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 Elective Deferrals for the year
and the denominator is the Participant's Individual Account
balance attributable to Elective Deferrals without regard to
any income or loss occurring during such taxable year; and
(2) 10% of the amount determined under (1) 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. Notwithstanding the preceding
sentence, the Plan Administrator may compute the income or
loss allocable to
<PAGE>
36
Excess Elective Deferrals in the manner described in Section
4 (i.e., the usual manner used by the Plan for allocating
income or loss to Participants' Individual Accounts),
provided such method is used consistently for all
Participants and for all corrective distributions under the
Plan for the Plan Year.
11.505 DISTRIBUTION OF EXCESS CONTRIBUTIONS
A. GENERAL RULE - 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
Individual 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 10% 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 of Participants who are
subject to the family member aggregation rules shall be
allocated among the family members in proportion to the
Elective Deferrals (and amounts treated as Elective
Deferrals) of each family member that is combined to
determine the combined ADP.
Excess Contributions (including the amounts recharacterized)
shall be treated as annual additions under the Plan.
B. 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: (1) income or loss allocable to
Participant's Elective Deferral account (and, if applicable,
the Qualified Nonelective 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 Individual Account balance
attributable to Elective Deferrals (and Qualified Nonelective
Contributions or Qualified Matching Contributions, or both,
if any of such contributions are included in the ADP test)
without regard to any income or loss occurring during such
Plan Year; and (2) 10% of the amount determined under (1)
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. Notwithstanding the preceding sentence,
the Plan Administrator may compute the income or loss
allocable to Excess Contributions in the manner described in
Section 4 (i.e., the usual manner used by the Plan for
allocating income or loss to Participants' Individual
Accounts), provided such method is used consistently for all
Participants and for all corrective distributions under the
Plan for the Plan Year.
C. 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 Nonelective 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.
11.506 DISTRIBUTION OF EXCESS AGGREGATE CONTRIBUTIONS
A. GENERAL RULE - 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
of Participants who are subject to the family member
aggregation rules shall be allocated among the family members
in proportion to the Employee and Matching Contributions (or
amounts treated as Matching Contributions) of each family
member that is combined to determine the combined ACP. If
such Excess Aggregate Contributions are distributed more than
2 1/2 months after the last day of the Plan Year in which
such excess amounts arose, a 10% excise tax 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.
B. 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: (1) income or
loss allocable to the Participant's Nondeductible Employee
Contribution account, Matching Contribution account (if any,
and if all amounts therein are not used in the ADP test) and,
if applicable, Qualified Nonelective 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 Individual Account balance(s) attributable
to Contribution Percentage Amounts without regard to any
income or loss occurring during such Plan Year; and (2) 10%
of the amount determined under (1) 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.
Notwithstanding the preceding sentence, the Plan
Administrator may compute the income or loss allocable to
Excess Aggregate Contributions in the manner described in
Section 4 (i.e., the usual manner used by the Plan for
allocating income or loss to Participants' Individual
Accounts), provided such method is used consistently for all
Participants and for all corrective distributions under the
Plan for the Plan Year.
C. FORFEITURES OF EXCESS AGGREGATE CONTRIBUTIONS - Forfeitures
of Excess Aggregate Contributions may either be reallocated
to the accounts of Contributing Participants who are not
Highly Compensated Employees or applied to reduce Employer
Contributions, as elected by the Employer in the Adoption
Agreement.
D. ACCOUNTING FOR EXCESS AGGREGATE CONTRIBUTIONS - Excess
Aggregate Contributions shall be forfeited, if forfeitable or
distributed on a pro rata basis from the Participant's
Nondeductible Employee Contribution account, Matching
Contribution account, and Qualified Matching Contribution
account (and, if applicable, the Participant's Qualified
Nonelective Contribution account or Elective Deferral
account, or both).
11.507 RECHARACTERIZATION
A Participant may treat his or her 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 Nondeductible Employee Contributions made
by that Employee would exceed any stated limit under the Plan on
Nondeductible 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.
<PAGE>
37
11.508 DISTRIBUTION OF ELECTIVE DEFERRALS IF EXCESS ANNUAL ADDITIONS
Notwithstanding any other provision of the Plan, a Participant's
Elective Deferrals shall be distributed to him or her to the
extent that the distribution will reduce an excess annual
addition (as that term is described in Section 3.05 of the Plan).
11.600 VESTING
11.601 100% VESTING ON CERTAIN CONTRIBUTIONS
The Participant's accrued benefit derived from Elective
Deferrals, Qualified Nonelective Contributions, Nondeductible
Employee Contributions , and Qualified Matching Contributions is
nonforfeitable. Separate accounts for Elective Deferrals,
Qualified Nonelective Contributions, Nondeductible 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.
11.602 FORFEITURES AND VESTING OF MATCHING CONTRIBUTIONS
Matching Contributions shall be Vested in accordance with the
vesting schedule for Matching Contributions in the 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. Notwithstanding any
other provisions of the Plan, Matching Contributions or Qualified
Matching Contributions must be forfeited if the contributions to
which they relate are Excess Elective Deferrals, Excess
Contributions, Excess Aggregate Contributions or excess annual
additions which are distributed pursuant to Section 11.508. Such
Forfeitures shall be allocated in accordance with Section
3.01(C).
When a Participant incurs a Termination of Employment, whether a
Forfeiture arises with respect to Matching Contributions shall be
determined in accordance with Section 6.01(D).
<PAGE>
INTERNAL REVENUE SERVICE Department of the Treasury
Plan Description: Prototype Standardized Money Purchase Pension Plan
FFN: 50218352702-002 Case: 9500722 EIN: 42-0623913
BPD: 02 Plan: 002 Letter Serial No: D264074a
Washington, DC 20224
Person to Contact: Ms. Arrington
FARM BUREAU LIFE INSURANCE CO.
Telephone Number: (202) 622-8173
5400 UNIVERSITY AVENUE
Refer Reply to: CP:E:EP:Q:ICU
WEST DES MOINES, IA 50265
Date: 06/06/95
Dear Applicant:
In our opinion, the form of the plan identified above is acceptable under
section 401 of the Internal Revenue Code for use by employers for the benefit of
their employees. This opinion relates only to the acceptability of the form of
the plan under the Internal Revenue Code. It is not an opinion of the effect of
other Federal or local statutes.
You must furnish a copy of this letter to each employer who adopts this plan.
You are also required to send a copy of the approved form of the plan, any
approved amendments and related documents to each Key District Director of
Internal Revenue Service in whose jurisdiction there are adopting employers.
Our opinion on the acceptability of the form of the plan is not a ruling or
determination as to whether an employer's plan qualifies under Code section
401(a). An employer who adopts this plan will be considered to have a plan
qualified under Code section 401(a) provided all the terms of the plan are
followed, and the eligibility requirements and contribution or benefit
provisions are not more favorable for highly compensated employees than for
other employees. Except as stated below, the Key District Director will not
issue a determination letter with regard to this plan.
Our opinion does not apply to the form of the plan for purposes of Code section
401(a)(16) if: (1) an employer ever maintained another qualified plan for one or
more employees who are covered by this plan, other than a specified paired plan
within the meaning of section 7 of Rev. Proc. 89-9, 1989-1 C.B. 780; or (2)
after December 31, 1985, the employer maintains a welfare benefit fund defined
in Code section 419(e), which provides postretirement medical benefits allocated
to separate accounts for key employees as defined in Code section 419A(d)(3).
An employer that has adopted a standardized plan may not rely on this opinion
letter with respect to: (1) whether any amendment or series of amendments to the
plan satisfies the nondiscrimination requirements of section 1.401(a)(4)-5(a) of
the regulations, except with respect to plan amendments granting past service
that meet the safe harbor described in section 1.401(a)(4)-5(a)(5) and are not
part of a pattern of amendments that significantly discriminates in favor of
highly compensated employees; or (2) whether the plan satisfies the effective
availability requirement of section 1.401(a)(4)-4(c) of the regulations with
respect to any benefit, right or feature.
An employer that has adopted a standardized plan as an amendment to a plan other
than a standardized plan may not rely on this opinion letter with respect to
whether a benefit, right or other feature that is prospectively eliminated
satisfies the current availability requirements of section 1.401(a)-4 of the
regulations.
The employer may request a determination (1) as to whether the plan, considered
with all related qualified plans and, if appropriate, welfare benefit funds,
satisfies the requirements of Code section 401(a)(16) as to limitations on
benefits and contributions in Code section 415; (2) regarding the
nondiscriminatory effect of grants of past service; and (3) with respect to
whether a prospectively eliminated benefit, right or feature satisfies the
current availability requirements.
Our opinion does not apply to the form of the plan for purposes of section
401(a) of the Code unless the terms of the plan, as adopted or amended, that
pertain to the requirements of sections 401(a)(4), 401(a)(5), 401(a)(17),
401(l), 410(b) and 414(s) of the Code, as amended by the Tax Reform Act of 1986
or subsequent legislation, (a) are made effective retroactively to the first day
of the first plan year beginning after December 31, 1988 (or such other date on
which these requirements first became effective with respect to this plan); or
(b) are made effective no later than the first day on which the employer is no
longer entitled, under regulations, to rely on a reasonable, good faith
interpretation of these requirements, and the prior provisions of the plan
constitute such an interpretation.
Because you submitted this plan for approval after March 31, 1991, the
continued, interim and extended reliance provisions of sections 13 and 17.03
of Rev. Proc. 89-9, 1989-1 C.B. 780, are not applicable.
<PAGE>
Because you submitted this plan after the later of December 31, 1994, or the
date that was 90 days after the date on which a favorable opinion letter was
issued for your mass submitter's plan, it does not meet the requirements for the
extension of the remedial amendment period provided by Rev. Proc. 95-12, 1995-3
I.R.B. 24.
This letter may not be relied upon with respect to whether the plan satisfies
the qualification requirements as amended by Uruguay Round Agreements Act, Pub.
L. 103-465.
If you, the sponsoring organization, have any questions concerning the IRS
processing of this case, please call the above telephone number. This number is
only for use of the sponsoring organization. Individual participants and/or
adopting employers with questions concerning the plan should contact the
sponsoring organization. The plan's adoption agreement must include the
sponsoring organization's address and telephone number for inquiries by adopting
employers.
If you write to the IRS regarding this plan, please provide your telephone
number and the most convenient time for us to call in case we need more
information. Whether you call or write, please refer to the Letter Serial
Number and File Folder Number shown in the heading of this letter.
You should keep this letter as a permanent record. Please notify us if you
modify or discontinue sponsorship of this plan.
Sincerely Yours,
John Swieca /s/
Chief, Employee Plans Technical Branch 1
<PAGE>
Internal Revenue Service Department of the
Treasury
Plan Description: Prototype Non-standardized Safe Harbor Money Purchase
Pension Plan
FFN: 50318352702-004 Case: 9500724 EIN: 42-0623913
BPD: 02 Plan: 004 Letter Serial No: D364076a
Washington, DC 20224
Person to Contact: Ms. Arrington
FARM BUREAU LIFE INSURANCE CO.
Telephone Number: (202) 622-8173
5400 UNIVERSITY AVENUE
Refer Reply to: CP:E:EP:Q:ICU
WEST DES MOINES, IA 50265
Date: 06/06/95
Dear Applicant:
In our opinion, the form of the plan identified above is acceptable under
section 401 of the Internal Revenue Code for use by employers for the
benefit of their employees. This opinion relates only to the
acceptability of the form of the plan under the Internal Revenue Code. It
is not an opinion of the effect of other Federal or local statutes.
You must furnish a copy of this letter to each employer who adopts this
plan. You are also required to send a copy of the approved form of the
plan, any approved amendments and related documents to each Key District
Director of Internal Revenue Service in whose jurisdiction there are
adopting employers.
Our opinion on the acceptability of the form of the plan is not a ruling
or determination as to whether an employer's plan qualifies under Code
section 401(a). Therefore, an employer adopting the form of the plan
should apply for a determination letter by filing an application with the
Key District Director of Internal Revenue Service on Form 5307, Short Form
Application for Determination for Employee Benefit Plan.
The form of the plan is a nonstandardized safe harbor plan that meets the
requirements of section 3 of Rev. Proc. 93-10, 1993-5 I.R.B. 13.
Because you submitted this plan for approval after March 31, 1991, the
continued, interim and extended reliance provisions of sections 13 and 17.03
of Rev. Proc. 89-9, 1989-1 C.B. 780, are not applicable
Because you submitted this plan after the later of December 31, 1994, or
the date that was 90 days after the date on which a favorable opinion
letter was issued for your mass submitter's plan, it does not meet the
requirements for the extension of the remedial amendment period provided
by Rev. Proc. 95-12, 1995-3 I.R.B. 24.
This letter may not be relied upon with respect to whether the plan
satisfies the qualification requirements as amended by Uruguay Round
Agreements Act, Pub. L. 103-465.
If you, the sponsoring organization, have any questions concerning the IRS
processing of this case, please call the above telephone number. This
number is only for use of the sponsoring organization. Individual
participants and/or adopting employers with questions concerning the plan
should contact the sponsoring organization. The plan's adoption agreement
must include the sponsoring organization's address and telephone number
for inquiries by adopting employers.
If you write to the IRS regarding this plan, please provide your telephone
number and the most convenient time for us to call in case we need more
information. Whether you call or write, please refer to the Letter Serial
Number and File Folder Number shown in the heading of this letter.
You should keep this letter as a permanent record. Please notify us if
you modify or discontinue sponsorship of this plan.
Sincerely Yours,
John Swieca /s/
Chief, Employee Plans Technical Branch 1
<PAGE>
<TABLE>
<CAPTION>
FLEXIBLE STANDARDIZED MONEY PURCHASE PENSION PLAN
ADOPTION AGREEMENT
- --------------------------------------------------------------------------------------------------------------------------
<S><C>
SECTION 1. EMPLOYER INFORMATION
Name of Employer
----------------------------------------------------------------------------------------
Address
-------------------------------------------------------------------------------------------------
City State Zip
---------------------------------------- --------------------- -------------------------------
Telephone Employer's Federal Tax Identification Number
--------------------- ------------------------------------
Type of Business (CHECK ONLY ONE) [ ] Sole Proprietorship [ ] Partnership [ ] C Corporation
[ ] S Corporation [ ] Other (SPECIFY)
--------------------------------
[ ] Check here if Related Employers may participate in this Plan and attach a Related Employer
Participation Agreement for each Related Employer who will participate in this Plan.
Business Code
-------------------------------------
Name of Plan
--------------------------------------------------------------------------------------------
Name of Trust (IF DIFFERENT FROM PLAN NAME)
-------------------------------------------------------------
Plan Sequence Number________(ENTER 001 IF THIS IS THE FIRST QUALIFIED PLAN THE EMPLOYER HAS EVER
MAINTAINED, ENTER 002 IF IT IS THE SECOND, ETC.)
Trust Identification Number (IF APPLICABLE)
---------------------
Account Number (OPTIONAL)
---------------------------------------
SECTION 2. EFFECTIVE DATES (CHECK AND COMPLETE OPTION A OR B):
OPTION A: [ ] This is the initial adoption of a money purchase pension plan by the Employer.
The Effective Date of this Plan is_______________, 19____.
NOTE: THE EFFECTIVE DATE IS USUALLY THE FIRST DAY OF THE
PLAN YEAR IN WHICH THIS ADOPTION AGREEMENT IS SIGNED.
OPTION B: [ ] This is an amendment and restatement of an existing money purchase pension plan
(a Prior Plan). The Prior Plan was initially effective on______________, 19____.
The Effective Date of this amendment and restatement is______________, 19____.
NOTE: THE EFFECTIVE DATE IS USUALLY THE FIRST DAY OF THE PLAN YEAR IN WHICH THIS ADOPTION
AGREEMENT IS SIGNED.
SECTION 3. RELEVANT TIME PERIODS COMPLETE PARTS A THROUGH C
PART A. Employer's Fiscal Year:
The Employer's fiscal year ends (SPECIFY MONTH AND DATE)
------------------------------------------------------
PART B. Plan Year Means:
OPTION 1: [ ] The 12-consecutive month period which coincides with the Employer's fiscal year.
OPTION 2: [ ] The calendar year.
OPTION 3: [ ] Other 12-consecutive month period (SPECIFY)
-------------------------------------------------
NOTE: IF NO OPTION IS SELECTED, OPTION 1 WILL BE DEEMED TO BE SELECTED.
</TABLE>
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<PAGE>
Page 2
If the initial Plan Year is less than 12 months (a short Plan Year)
specify such Plan Year's beginning and ending
dates
---------------------------------------------------------------
PART C. Limitation Year Means:
OPTION 1: [ ] The Plan Year.
OPTION 2: [ ] The calendar year.
OPTION 3: [ ] Other 12-consecutive month period. (SPECIFY)
-------
--------------------------------------------------
NOTE: IF NO OPTION IS SELECTED, OPTION 1 WILL BE DEEMED TO BE
SELECTED.
SECTION 4. ELIGIBILITY REQUIREMENTS COMPLETE PARTS A THROUGH F
PART A. Years of Eligibility Service Requirement:
An Employee will be eligible to become a Participant in the Plan
after completing____(ENTER 0, 1, 2 OR ANY FRACTION LESS THAN 2)
Years of Eligibility Service.
NOTE: IF MORE THAN 1 YEAR IS SELECTED, THE IMMEDIATE 100% VESTING
SCHEDULE OF SECTION 8 WILL AUTOMATICALLY APPLY. IF LEFT BLANK, THE
YEARS OF ELIGIBILITY SERVICE REQUIRED WILL BE DEEMED TO BE 0. IF A
FRACTION IS SELECTED, AN EMPLOYEE WILL NOT BE REQUIRED TO
COMPLETE ANY SPECIFIED NUMBER OF HOURS OF SERVICE TO RECEIVE
CREDIT FOR A FRACTIONAL YEAR. IF A SINGLE ENTRY DATE IS SELECTED
IN SECTION 4, PART F, THE YEARS OF ELIGIBILITY SERVICE REQUIRED
CANNOT EXCEED 1 1/2.
PART B. Age Requirement:
An Employee will be eligible to become a Participant in the Plan
after attaining age (NO MORE THAN 21).
-------------
NOTE: IF LEFT BLANK, IT WILL BE DEEMED THERE IS NO AGE REQUIREMENT
FOR ELIGIBILITY. IF A SINGLE ENTRY DATE IS SELECTED IN SECTION 4,
PART F , THE AGE REQUIRED CANNOT EXCEED 20 1/2.
PART C. Employees Employed As of Effective Date:
Will all Employees employed as of the Effective Date of this Plan
who have not otherwise met the Years of Eligibility Service and age
requirements specified above be considered to have met those
requirements as of the Effective Date? [ ] Yes [ ] No
NOTE: IF A BOX IS NOT CHECKED, "NO" WILL BE DEEMED TO BE SELECTED.
PART D. Exclusion of Certain Classes of Employees:
All Employees shall be eligible to become a Participant in the Plan,
except those checked below:
1. [ ] Those Employees included in a unit of Employees covered
by a collective bargaining agreement between the Employer
and Employee representatives, if retirement benefits were
the subject of good faith bargaining and if two percent or
less of the Employees who are covered pursuant to that
agreement are professionals as defined in Section
1.410(b)-9 of the regulations. For this purpose, the
term "employee representatives" does not include any
organization more than half of whose members are
Employees who are owners, officers, or executives of
the Employer.
2. [ ] Those Employees who are non-resident aliens (within the
meaning of Section 7701(b)(1)(B) of the Code) and who
received no earned income (within the meaning of Section
911(d)(2) of the Code) from the Employer which constitutes
income from sources within the United States (within the
meaning of Section 861(a)(3) of the Code).
PART E. Hours Required For Eligibility Purposes:
1. ________Hours of Service (NO MORE THAN 1,000) shall be required
to constitute a Year of Eligibility Service.
2. ________Hours of Service (NO MORE THAN 500 BUT LESS THAN THE
NUMBER SPECIFIED IN SECTION 4, PART E, ITEM 1, ABOVE) must be
exceeded to avoid a Break in Eligibility Service.
#4002 (6/94) F94 -C-1994 Universal Pensions, Inc., Brainerd, MN 56401
<PAGE>
Page 3
3. For purposes of determining Years of Eligibility Service,
Employees shall be given credit for Hours of Service with the
following predecessor employer(s): (COMPLETE IF
APPLICABLE)
------------------------------------------------------
PART F. Entry Dates:
The Entry Dates for participation shall be (CHOOSE ONE):
OPTION 1: [ ] The first day of the Plan Year and the first day
of the seventh month of the Plan Year.
OPTION 2: [ ] Other (SPECIFY)
------------------------------------
NOTE: IF NO OPTION IS SELECTED, OPTION 1 WILL BE DEEMED TO BE
SELECTED. OPTION 2 CAN BE SELECTED ONLY IF THE ELIGIBILITY
REQUIREMENTS AND ENTRY DATES ARE COORDINATED SUCH THAT EACH EMPLOYEE
WILL BECOME A PARTICIPANT IN THE PLAN NO LATER THAN THE EARLIER OF:
(1) THE FIRST DAY OF THE PLAN YEAR BEGINNING AFTER THE DATE THE
EMPLOYEE SATISFIES THE AGE AND SERVICE REQUIREMENTS OF SECTION
410(A) OF THE CODE; OR (2) 6 MONTHS AFTER THE DATE THE EMPLOYEE
SATISFIES SUCH REQUIREMENTS.
SECTION 5. METHOD OF DETERMINING SERVICE COMPLETE PART A OR B
PART A. Hours of Service Equivalencies:
Service will be determined on the basis of the method selected
below. Only one method may be selected. The method selected will
be applied to all Employees covered under the Plan. (CHOOSE ONE):
OPTION 1. [ ] On the basis of actual hours for which an Employee
is paid or entitled to payment.
OPTION 2. [ ] On the basis of days worked. An Employee will be
credited with 10 Hours of Service if under Section
1.24 of the Plan such Employee would be credited
with at least 1 Hour of Service during the day.
OPTION 3. [ ] On the basis of weeks worked. An Employee will be
credited with 45 Hours of Service if under Section
1.24 of the Plan such Employee would be credited
with at least 1 Hour of Service during the week.
OPTION 4. [ ] On the basis of months worked. An Employee will
be credited with 190 Hours of Service if under
Section 1.24 of the Plan such Employee would be
credited with at least 1 Hour of Service during
the month.
NOTE: IF NO OPTION IS SELECTED, OPTION 1 WILL BE DEEMED TO BE
SELECTED. THIS SECTION 5, PART A WILL NOT APPLY IF THE ELAPSED
TIME METHOD OF SECTION 5, PART B IS SELECTED.
PART B. Elapsed Time Method:
In lieu of tracking Hours of Service of Employees, will the elapsed
time method described in Section 2.07 of the Plan be used? (CHOOSE
ONE)
OPTION 1: [ ] No
OPTION 2: [ ] Yes
NOTE: IF NO OPTION IS SELECTED, OPTION 1 WILL BE DEEMED TO BE
SELECTED.
SECTION 6. EMPLOYER CONTRIBUTION AND ALLOCATION FORMULA COMPLETE PARTS A AND B
PART A. Contribution Formula (CHOOSE ONE):
OPTION 1: [ ] Nonintegrated Formula. For each Plan Year the
Employer will contribute for each Qualifying
Participant an amount equal to ------% (NOT TO
EXCEED 25%) of the Qualifying Participant's
Compensation for the Plan Year.
#4002 (6/94) F94 -C-1994 Universal Pensions, Inc., Brainerd, MN 56401
<PAGE>
Page 4
OPTION 2: [ ] Integrated Formula. For each Plan Year, the
Employer will contribute for each Qualifying
Participant an amount equal to the sum of the
amounts determined in Step 1 and 2:
Step 1. An amount equal to ______% (THE BASE
CONTRIBUTION PERCENTAGE) of the
Participant's Compensation for the Plan
Year up to the integration level; plus
Step 2. An amount equal to ______% (NOT TO EXCEED
THE BASE CONTRIBUTION PERCENTAGE BY MORE
THAN THE LESSER OF: (1) THE BASE
CONTRIBUTION PERCENTAGE, OR (2) THE MONEY
PURCHASE MAXIMUM DISPARITY RATE AS
DESCRIBED IN SECTION 3.01(B)(3) OF THE
PLAN) of such Participant's Compensation
for the Plan Year in excess of the
integration level.
The integration level shall be (CHOOSE ONE):
SUBOPTION (A): [ ] The Taxable Wage Base.
SUBOPTION (B): [ ] $_______ (A DOLLAR AMOUNT
LESS THAN THE TAXABLE WAGE
BASE).
SUBOPTION (C): [ ] _______% (NOT MORE THAN
100%) of the Taxable Wage
Base.
NOTE: IF NO OPTION IS SELECTED, SUBOPTION (A)
WILL BE DEEMED TO BE SELECTED.
OPTION 3: [ ] Hour of Service Formula.
The Employer will contribute $_______ for each
Hour of Service completed during the Plan Year for
each Qualifying Participant as described below.
Notwithstanding any other provision of the Plan,
the Employer Contribution under this option will
only be made for Employees who are in the
following classes of Employees and who also meet
the conditions required to be a Qualifying
Participant:
SUBOPTION (A): [ ] All Qualifying Participants.
SUBOPTION (B): [ ] All Qualifying Participants
who are hourly Employees.
SUBOPTION (C): [ ] Other (SPECIFY)
-------------
NOTE: IF NO OPTION IS SELECTED, SUBOPTION (A)
WILL BE DEEMED TO BE SELECTED.
OPTION 4: [ ] Frozen Plan. This Plan is frozen effective_______
_______________ and the Employer will not make
additional contributions to the Plan after such
date.
NOTE: IF NO OPTION IS SELECTED, OPTION 1 WILL BE DEEMED TO BE
SELECTED.
PART B. Qualifying Participants:
A Participant will be a Qualifying Participant and thus entitled to
share in the Employer Contribution for any Plan Year only if the
Participant is a Participant on at least one day of such Plan Year
and satisfies the following additional conditions (CHECK ONE OR MORE
OPTIONS):
OPTION 1: [ ] No Additional Conditions.
OPTION 2: [ ] Hours of Service Requirement. The Participant
completes at least ------ (NOT MORE THAN 500)
Hours of Service during the Plan Year. However,
this condition will be waived for the following
reasons (CHECK AT LEAST ONE):
[ ] The Participant's Death.
[ ] The Participant's Termination of Employment
after having incurred a Disability.
[ ] The Participant's Termination of Employment
after having reached Normal Retirement Age.
[ ] This condition will not be waived.
NOTE: IF NO OPTION IS SELECTED, OPTION 1 WILL BE DEEMED
TO BE SELECTED.
#4002 (6/94) F94 -C-1994 Universal Pensions, Inc., Brainerd, MN 56401
<PAGE>
Page 5
SECTION 7. COMPENSATION COMPLETE PARTS A THROUGH D
PART A. Basic Definition:
Compensation will mean all of each Participant's (CHOOSE ONE):
OPTION 1: [ ] W-2 wages.
OPTION 2: [ ] Section 3401(a) wages.
OPTION 3: [ ] 415 safe-harbor compensation.
NOTE: IF NO OPTION IS SELECTED, OPTION 1 WILL BE DEEMED TO BE
SELECTED.
PART B. Measuring Period for Compensation:
Compensation shall be determined over the following applicable
period (CHOOSE ONE):
OPTION 1: [ ] The Plan Year.
OPTION 2: [ ] The calendar year ending with or within the Plan
Year.
NOTE: IF NO OPTION IS SELECTED, OPTION 1 WILL BE DEEMED TO BE
SELECTED.
PART C. Inclusion of Elective Deferrals:
Does Compensation include Employer Contributions made pursuant to a
salary reduction agreement which are not includible in the gross
income of the Employee under Sections 125, 402(e)(3), 402(h)(1)(B),
and 403(b) of the Code? [ ] Yes [ ] No
NOTE: IF NEITHER BOX IS CHECKED, "YES" WILL BE DEEMED TO BE
SELECTED.
PART D. Pre-Entry Date Compensation:
For the Plan Year in which an Employee enters the Plan, the
Employee's Compensation which shall be taken into account for
purposes of the Plan shall be (CHOOSE ONE):
OPTION 1: [ ] The Employee's Compensation only from the time the
Employee became a Participant in the Plan.
OPTION 2: [ ] The Employee's Compensation for the whole of
such Plan Year.
NOTE: IF NO OPTION IS SELECTED, OPTION 1 WILL BE DEEMED TO BE
SELECTED.
SECTION 8. VESTING AND FORFEITURES COMPLETE PARTS A THROUGH D
PART A. Vesting Schedule. A Participant shall become Vested in his or
her Individual Account as follows (CHOOSE ONE):
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
YEARS OF VESTED PERCENTAGE
VESTING SERVICE Option 1 [ ] Option 2 [ ] Option 3 [ ] Option 4 [ ] Option 5 [ ] (COMPLETE IF CHOSEN)
<S> <C> <C> <C> <C> <C>
- --------------------------------------------------------------------------------------------------------------------------
1 0% 0% 100% 0% ----%
2 0% 20% 100% 0% ----%
3 0% 40% 100% 20% ----% (not less than 20%)
4 0% 60% 100% 40% ----% (not less than 40%)
5 100% 80% 100% 60% ----% (not less than 60%)
6 100% 100% 100% 80% ----% (not less than 80%)
7 100% 100% 100% 100% ----% (not less than 100%)
</TABLE>
<PAGE>
NOTE: IF NO OPTION IS SELECTED, OPTION 3 WILL BE DEEMED TO BE SELECTED.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
#4002 (6/94) F94 -C-1994 Universal Pensions, Inc., Brainerd, MN 56401
<PAGE>
Page 6
PART B. Hours Required For Vesting Purposes:
1. _______Hours of Service (NO MORE THAN 1,000) shall be required
to constitute a Year of Vesting Service.
2. -------- Hours of Service (NO MORE THAN 500 BUT LESS THAN THE
NUMBER SPECIFIED IN SECTION 8, PART B, ITEM 1, ABOVE) must be
exceeded to avoid a Break in Vesting Service.
3. For purposes of determining Years of Vesting Service, Employees
shall be given credit for Hours of Service with the following
predecessor employer(s) (COMPLETE IF
APPLICABLE)-------------------
- --------------------------------------------------------------------------------
PART C. Exclusion of Certain Years of Vesting Service:
All of an Employee's Years of Vesting Service with the Employer are
counted to determine the vesting percentage in the Participant's
Individual Account except (CHECK ANY THAT APPLY):
[ ] Years of Vesting Service before the Employee reaches age 18.
[ ] Years of Vesting Service before the Employer maintained this
Plan or a predecessor plan.
PART D. Allocation of Forfeitures:
Forfeitures shall be (CHOOSE ONE):
OPTION 1: [ ] Allocated to the Individual Accounts of the
Participants specified below in the manner as
described in Section 6, Part A (for Employer
Contributions)
The Participants entitled to receive allocations of
Forfeitures shall be (CHOOSE ONE):
SUBOPTION (a): [ ] Only Qualified
Participants.
SUBOPTION (b): [ ] All Participants.
NOTE: IF NO OPTION IS SELECTED, SUBOPTION (a) WILL BE
DEEMED TO BE SELECTED.
OPTION 2: [ ] Applied to reduce Employer Contributions (CHOOSE
ONE):
SUBOPTION (a): [ ] For the Plan Year
for which the
Forfeiture arises.
SUBOPTION (b): [ ] For any Plan Year
subsequent to the
Plan Year for which
the Forfeiture
arises.
OPTION 3: [ ] Applied first to the payment of the Plan's
administrative expenses and any excess applied to
reduce Employer Contributions (CHOOSE ONE):
SUBOPTION (a): [ ] For the Plan Year
for which the
Forfeiture arises.
SUBOPTION (b): [ ] For any Plan Year
subsequent to the
Plan Year for which
the Forfeiture
arises.
NOTE: IF NO OPTION IS SELECTED, OPTION 1 AND SUBOPTION (a) WILL BE
DEEMED TO BE SELECTED.
SECTION 9. NORMAL RETIREMENT AGE AND EARLY RETIREMENT AGE
PART A. The Normal Retirement Age under the Plan shall be (CHECK AND
COMPLETE ONE OPTION):
OPTION 1: [ ] Age 65.
OPTION 2: [ ] Age -------- (NOT TO EXCEED 65).
OPTION 3: [ ] The later of age -------- (NOT TO EXCEED 65) or
the -------- (NOT TO EXCEED 5TH) anniversary of
the first day of the first Plan Year in which the
Participant commenced participation in the Plan.
NOTE: IF NO OPTION IS SELECTED, OPTION 1 WILL BE DEEMED TO BE
SELECTED.
#4002 (6/94) F94 -C-1994 Universal Pensions, Inc., Brainerd, MN 56401
<PAGE>
Page 7
PART B. Early Retirement Age (CHOOSE ONE OPTION):
OPTION 1: [ ] An Early Retirement Age is not applicable under
the Plan.
OPTION 2: [ ] Age ------ (NOT LESS THAN 55 NOR MORE THAN 65).
OPTION 3: [ ] A Participant satisfies the Plan's Early
Retirement Age conditions by attaining age
-------- (NOT LESS THAN 55) and completing
-------- Years of Vesting Service.
NOTE: IF NO OPTION IS SELECTED, OPTION 1 WILL BE DEEMED TO BE
SELECTED.
SECTION 10. DISTRIBUTIONS
Distributable Events. Answer each of the following items.
A. Termination of Employment Before Normal Retirement Age. May a
Participant who has not reached Normal Retirement Age request a
distribution from the Plan upon Termination of Employment?
[ ] Yes [ ] No
B. Disability. May a Participant who has incurred a Disability
request a distribution from the Plan?
[ ] Yes [ ] No
C. Attainment of Normal Retirement Age. May a Participant who has
attained Normal Retirement Age but has not incurred a Termination
of Employment request a distribution from the Plan?
[ ] Yes [ ] No
D. Withdrawals of Rollover or Transfer Contributions. Will Employees
be permitted to withdraw their Rollover or Transfer Contributions
at any time?
[ ] Yes [ ] No
NOTE: IF A BOX IS NOT CHECKED FOR AN ITEM, "YES" WILL BE DEEMED TO BE
SELECTED FOR THAT ITEM. SECTION 411(d)(6) OF THE CODE PROHIBITS THE
ELIMINATION OF PROTECTED BENEFITS. IN GENERAL, PROTECTED BENEFITS
INCLUDE THE FORMS AND TIMING OF PAYOUT OPTIONS. IF THE PLAN IS BEING
ADOPTED TO AMEND AND REPLACE A PRIOR PLAN THAT PERMITTED A
DISTRIBUTION OPTION DESCRIBED ABOVE, YOU MUST ANSWER "YES" TO THAT
ITEM.
SECTION 11. JOINT AND SURVIVOR ANNUITY
The survivor annuity portion of the Joint and Survivor Annuity shall
be a percentage equal to ----% (AT LEAST 50% BUT NO MORE THAN 100%) of
the amount paid to the Participant prior to his or her death.
SECTION 12. OTHER OPTIONS ANSWER "YES" OR "NO" TO EACH OF THE FOLLOWING
QUESTIONS BY CHECKING THE APPROPRIATE BOX. IF A BOX IS NOT
CHECKED FOR A QUESTION, THE ANSWER WILL BE DEEMED TO BE "NO."
A. Loans: Will loans to Participants pursuant to Section 6.08 of the
Plan be permitted? [ ] Yes [ ] No
B. Insurance: Will the Plan allow for the investment in insurance
policies pursuant to Section 5.13 of the Plan?
[ ] Yes [ ]No
C. Employer Securities: Will the Plan allow for the investment in
qualifying Employer securities or qualifying Employer real
property?
[ ] Yes [ ] No
D. Rollover Contributions: Will Employees be permitted to make
rollover contributions to the Plan pursuant to Section 3.03 of the
Plan?
[ ] Yes [ ] No
[ ] Yes, but only
after becoming a
Participant.
E. Transfer Contributions: Will Employees be permitted to make
transfer contributions to the Plan pursuant to Section 3.04 of the
Plan?
[ ] Yes [ ] No
[ ] Yes, but only
after becoming a
Participant.
#4002 (6/94) F94 -C-1994 Universal Pensions, Inc., Brainerd, MN 56401
<PAGE>
Page 8
F. Will Participants be permitted to direct the investment of their
Plan assets pursuant to Section 5.14 of the Plan?
[ ] Yes [ ] No
SECTION 13. LIMITATION ON ALLOCATIONS - More Than One Plan
If you maintain or ever maintained another qualified plan (other than
a paired standardized profit sharing plan using the same Basic Plan
Document as this Plan) in which any Participant in this Plan is (or
was) a Participant or could become a Participant, you must complete
this section. You must also complete this section if you maintain a
welfare benefit fund, as defined in Section 419(e) of the Code, or an
individual medical account, as defined in Section 415(l)(2) of the
Code, under which amounts are treated as annual additions with respect
to any Participant in this Plan.
PART A.Individually Designed Defined Contribution Plan:
If the Participant is covered under another qualified defined
contribution plan maintained by the Employer, other than a master or
prototype plan:
1. [ ] The provisions of Section 3.05(B)(1) through
3.05(B)(6) of the Plan will apply as if the other
plan were a master or prototype plan.
2. [ ] Other method. (PROVIDE THE METHOD UNDER WHICH THE
PLANS WILL LIMIT TOTAL ANNUAL ADDITIONS TO THE
MAXIMUM PERMISSIBLE AMOUNT, AND WILL PROPERLY
REDUCE ANY EXCESS AMOUNTS, IN A MANNER THAT
PRECLUDES EMPLOYER
DISCRETION.)--------------------------------------
PART B.Defined Benefit Plan:
If the Participant is or has ever been a participant in a defined
benefit plan maintained by the Employer, the Employer will provide
below the language which will satisfy the 1.0 limitation of Section
415(e) of the Code.
1. [ ] If the projected annual addition to this Plan to the
account of a Participant for any limitation year would
cause the 1.0 limitation of Section 415(e) of the Code to
be exceeded, the annual benefit of the defined benefit
plan for such limitation year shall be reduced so that the
1.0 limitation shall be satisfied.
If it is not possible to reduce the annual benefit of the
defined benefit plan and the projected annual addition to
this Plan to the account of a Participant for a limitation
year would cause the 1.0 limitation to be exceeded, the
Employer shall reduce the Employer Contribution which is to
be allocated to this Plan on behalf of such Participant so
that the 1.0 limitation will be satisfied. (The provisions
of Section 415(e) of the Code are incorporated herein by
reference under the authority of Section 1106(h) of the Tax
Reform Act of 1986.)
2. [ ] Other method. (PROVIDE LANGUAGE DESCRIBING ANOTHER
METHOD. SUCH LANGUAGE MUST PRECLUDE EMPLOYER
DISCRETION.)_____________________________________________
SECTION 14. TOP-HEAVY MINIMUM COMPLETE PARTS A AND B
PART A.Minimum Allocation or Benefit:
For any Plan Year with respect to which this Plan is a Top-Heavy Plan,
any minimum allocation required pursuant to Section 3.01(E) of the
Plan shall be made (CHOOSE ONE):
OPTION 1: [ ] To this Plan.
OPTION 2: [ ] To the following other plan maintained by the
Employer (SPECIFY NAME AND PLAN NUMBER OF
PLAN) ___________________________________________
OPTION 3: [ ] In accordance with the method described on an
attachment to this Adoption Agreement.
(ATTACH LANGUAGE DESCRIBING THE METHOD THAT
WILL BE USED TO SATISFY SECTION 416 OF THE
CODE. SUCH METHOD MUST PRECLUDE EMPLOYER
DISCRETION.)
NOTE: IF NO OPTION IS SELECTED, OPTION 1 WILL BE DEEMED TO BE
SELECTED.
#4002 (6/94) F94 -C-1994 Universal Pensions, Inc., Brainerd, MN 56401
<PAGE>
Page 9
PART B.Top-Heavy Vesting Schedule:
Pursuant to Section 6.01(C) of the Plan, the vesting schedule that
will apply when this Plan is a Top-Heavy Plan (unless the Plan's
regular vesting schedule provides for more rapid vesting) shall be
(CHOOSE ONE):
OPTION 1: [ ] 6 Year Graded.
OPTION 2: [ ] 3 Year Cliff.
NOTE: IF NO OPTION IS SELECTED, OPTION 1 WILL BE DEEMED TO BE
SELECTED.
SECTION 15.PROTOTYPE SPONSOR
Name of Prototype Sponsor___________________________________________
Address_____________________________________________________________
Telephone Number____________________________________________________
PERMISSIBLE INVESTMENTS
The assets of the Plan shall be invested only in those investments
described below (TO BE COMPLETED BY THE PROTOTYPE SPONSOR):
____________________________________________________________________
____________________________________________________________________
____________________________________________________________________
____________________________________________________________________
SECTION 16.TRUSTEE OR CUSTODIAN
OPTION A. [ ] Financial Organization as Trustee or Custodian
CHECK ONE: [ ] Custodian, [ ] Trustee without full trust
powers, or [ ] Trustee with full trust powers
Financial Organization______________________________________________
Signature___________________________________________________________
Type Name___________________________________________________________
COLLECTIVE OR COMMINGLED FUNDS
List any collective or commingled funds maintained by the financial
organization Trustee in which assets of the Plan may be invested
(COMPLETE IF APPLICABLE).
____________________________________________________________________
____________________________________________________________________
____________________________________________________________________
#4002 (6/94) F94 -C-1994 Universal Pensions, Inc., Brainerd, MN 56401
<PAGE>
Page 10
OPTION B. [ ] Individual Trustee(s)
Signature __________________________________
Type Name __________________________________
Signature __________________________________
Type Name __________________________________
Signature __________________________________
Type Name __________________________________
Signature __________________________________
Type Name __________________________________
SECTION 17. RELIANCE
An Employer who has ever maintained or who later adopts any plan
(including a welfare benefit fund, as defined in Section 419(e) of the
Code, which provides post-retirement medical benefits allocated to
separate accounts for key employees, as defined in Section 419A(d)(3)
of the Code, or an individual medical account, as defined in Section
415(l)(2) of the Code) in addition to this Plan (other than a paired
standardized profit sharing plan using the same Basic Plan Document as
this Plan) may not rely on the opinion letter issued by the National
Office of the Internal Revenue Service as evidence that this Plan is
qualified under Section 401 of the Internal Revenue Code. If the
Employer who adopts or maintains multiple plans wishes to obtain
reliance that his or her plan(s) are qualified, application for a
determination letter should be made to the appropriate Key District
Director of Internal Revenue.
The Employer may not rely on the opinion letter issued by the National
Office of the Internal Revenue Service as evidence that this Plan is
qualified under Section 401 of the Code unless the terms of the Plan,
as herein adopted or amended, that pertain to the requirements of
Sections 401(a)(4), 401(a)(17), 401(l), 401(a)(5), 410(b) and 414(s)
of the Code, as amended by the Tax Reform Act of 1986, or later laws,
(a) are made effective retroactively to the first day of the first
Plan Year beginning after December 31, 1988 (or such later date on
which these requirements first become effective with respect to this
Plan); or (b) are made effective no later than the first day on which
the Employer is no longer entitled, under regulations, to rely on a
reasonable, good faith interpretation of these requirements, and the
prior provisions of the Plan constitute such an interpretation.
This Adoption Agreement may be used only in conjunction with Basic
Plan Document No. 04.
SECTION 18. EMPLOYER SIGNATURE IMPORTANT: PLEASE READ BEFORE SIGNING.
I am an authorized representative of the Employer named above and I
state the following:
1. I acknowledge that I have relied upon my own advisors regarding
the completion of this Adoption Agreement and the legal tax
implications of adopting this Plan.
2. I understand that my failure to properly complete this Adoption
Agreement may result in disqualification of the Plan.
3. I understand that the Prototype Sponsor will inform me of any
amendments made to the Plan and will notify me should it
discontinue or abandon the Plan.
4. I have received a copy of this Adoption Agreement and the
corresponding Basic Plan Document.
Signature for Employer______________________________________________
Date Signed__________________
Type Name___________________________________________________________
Title________________________
#4002 (6/94) F94 -C-1994 Universal Pensions, Inc., Brainerd, MN 56401
<PAGE>
INTERNAL REVENUE SERVICE Department of the
Treasury
Plan Description: Prototype Standardized Profit Sharing Plan
FFN: 50218352702-001 Case: 9500721 EIN: 42-0623913
BPD: 02 Plan: 001 Letter Serial No: D264073a
Washington, DC 20224
Person to Contact: Ms. Arrington
FARM BUREAU LIFE INSURANCE CO.
Telephone Number: (202) 622-8173
5400 UNIVERSITY AVENUE
Refer Reply to: CP:E:EP:Q:ICU
WEST DES MOINES, IA 50265
Date: 06/06/95
Dear Applicant:
In our opinion, the form of the plan identified above is acceptable
under section 401 of the Internal Revenue Code for use by employers
for the benefit of their employees. This opinion relates only to the
acceptability of the form of the plan under the Internal Revenue Code.
It is not an opinion of the effect of other Federal or local statutes.
You must furnish a copy of this letter to each employer who adopts
this plan. You are also required to send a copy of the approved form
of the plan, any approved amendments and related documents to each Key
District Director of Internal Revenue Service in whose jurisdiction
there are adopting employers.
Our opinion on the acceptability of the form of the plan is not a
ruling or determination as to whether an employer's plan qualifies
under Code section 401(a). An employer who adopts this plan will be
considered to have a plan qualified under Code section 401(a) provided
all the terms of the plan are followed, and the eligibility
requirements and contribution or benefit provisions are not more
favorable for highly compensated employees than for other employees.
Except as stated below, the Key District Director will not issue a
determination letter with regard to this plan.
Our opinion does not apply to the form of the plan for purposes of
Code section 401(a)(16) if: (1) an employer ever maintained another
qualified plan for one or more employees who are covered by this plan,
other than a specified paired plan within the meaning of section 7 of
Rev. Proc. 89-9, 1989-1 C.B. 780; or (2) after December 31, 1985, the
employer maintains a welfare benefit fund defined in Code section
419(e), which provides postretirement medical benefits allocated to
separate accounts for key employees as defined in Code section
419A(d)(3).
An employer that has adopted a standardized plan may not rely on this
opinion letter with respect to: (1) whether any amendment or series of
amendments to the plan satisfies the nondiscrimination requirements of
section 1.401(a)(4)-5(a) of the regulations, except with respect to
plan amendments granting past service that meet the safe harbor
described in section 1.401(a)(4)-5(a)(5) and are not part of a pattern
of amendments that significantly discriminates in favor of highly
compensated employees; or (2) whether the plan satisfies the effective
availability requirement of section 1.401(a)(4)-4(c) of the
regulations with respect to any benefit, right or feature.
An employer that has adopted a standardized plan as an amendment to a
plan other than a standardized plan may not rely on this opinion
letter with respect to whether a benefit, right or other feature that
is prospectively eliminated satisfies the current availability
requirements of section 1.401(a)-4 of the regulations.
The employer may request a determination (1) as to whether the plan,
considered with all related qualified plans and, if appropriate,
welfare benefit funds, satisfies the requirements of Code section
401(a)(16) as to limitations on benefits and contributions in Code
section 415; (2) regarding the nondiscriminatory effect of grants of
past service; and (3) with respect to whether a prospectively
eliminated benefit, right or feature satisfies the current
availability requirements.
Our opinion does not apply to the form of the plan for purposes of
section 401(a) of the Code unless the terms of the plan, as adopted or
amended, that pertain to the requirements of sections 401(a)(4),
401(a)(5), 401(a)(17), 401(l), 410(b) and 414(s) of the Code, as
amended by the Tax Reform Act of 1986 or subsequent legislation, (a)
are made effective retroactively to the first day of the first plan
year beginning after December 31, 1988 (or such other date on which
these requirements first became effective with respect to this plan);
or (b) are made effective no later than the first day on which the
employer is no longer entitled, under regulations, to rely on a
reasonable, good faith interpretation of these requirements, and the
prior provisions of the plan constitute such an interpretation.
Because you submitted this plan for approval after March 31, 1991, the
continued, interim and extended reliance provisions of sections 13 and 17.03 of
Rev. Proc. 89-9, 1989-1 C.B. 780, are not applicable.
<PAGE>
Because you submitted this plan after the later of December 31, 1994,
or the date that was 90 days after the date on which a favorable
opinion letter was issued for your mass submitter's plan, it does not
meet the requirements for the extension of the remedial amendment
period provided by Rev. Proc. 95-12, 1995-3 I.R.B. 24.
This letter may not be relied upon with respect to whether the plan
satisfies the qualification requirements as amended by Uruguay Round
Agreements Act, Pub. L. 103-465.
If you, the sponsoring organization, have any questions concerning the
IRS processing of this case, please call the above telephone number.
This number is only for use of the sponsoring organization.
Individual participants and/or adopting employers with questions
concerning the plan should contact the sponsoring organization. The
plan's adoption agreement must include the sponsoring organization's
address and telephone number for inquiries by adopting employers.
If you write to the IRS regarding this plan, please provide your
telephone number and the most convenient time for us to call in case
we need more information. Whether you call or write, please refer to
the Letter Serial Number and File Folder Number shown in the heading
of this letter.
You should keep this letter as a permanent record. Please notify us
if you modify or discontinue sponsorship of this plan.
Sincerely Yours,
John Swieca /s/
Chief, Employee Plans Technical Branch 1
<PAGE>
INTERNAL REVENUE SERVICE Department of the Treasury
Plan Description: Prototype Non-standardized Safe Harbor Profit Sharing Plan
FFN: 50318352702-003 Case: 9500723 EIN: 42-0623913
BPD: 02 Plan: 003 Letter Serial No: D364075a
Washington, DC 20224
Person to Contact: Ms. Arrington
FARM BUREAU LIFE INSURANCE CO.
Telephone Number: (202) 622-8173
5400 UNIVERSITY AVENUE
Refer Reply to: CP:E:EP:Q:ICU
WEST DES MOINES, IA 50265
Date: 06/06/95
Dear Applicant:
In our opinion, the form of the plan identified above is acceptable under
section 401 of the Internal Revenue Code for use by employers for the benefit of
their employees. This opinion relates only to the acceptability of the form of
the plan under the Internal Revenue Code. It is not an opinion of the effect of
other Federal or local statutes.
You must furnish a copy of this letter to each employer who adopts this plan.
You are also required to send a copy of the approved form of the plan, any
approved amendments and related documents to each Key District Director of
Internal Revenue Service in whose jurisdiction there are adopting employers.
Our opinion on the acceptability of the form of the plan is not a ruling or
determination as to whether an employer's plan qualifies under Code section
401(a). Therefore, an employer adopting the form of the plan should apply for a
determination letter by filing an application with the Key District Director of
Internal Revenue Service on Form 5307, Short Form Application for Determination
for Employee Benefit Plan.
The form of the plan is a nonstandardized safe harbor plan that meets the
requirements of section 3 of Rev. Proc. 93-10, 1993-5 I.R.B. 13.
Because you submitted this plan for approval after March 31, 1991, the
continued, interim and extended reliance provisions of sections 13 and 17.03 of
Rev. Proc. 89-9, 1989-1 C.B. 780, are not applicable.
Because you submitted this plan after the later of December 31, 1994, or the
date that was 90 days after the date on which a favorable opinion letter was
issued for your mass submitter's plan, it does not meet the requirements for the
extension of the remedial amendment period provided by Rev. Proc. 95-12, 1995-3
I.R.B. 24.
This letter may not be relied upon with respect to whether the plan satisfies
the qualification requirements as amended by Uruguay Round Agreements Act, Pub.
L. 103-465.
If you, the sponsoring organization, have any questions concerning the IRS
processing of this case, please call the above telephone number. This number is
only for use of the sponsoring organization. Individual participants and/or
adopting employers with questions concerning the plan should contact the
sponsoring organization. The plan's adoption agreement must include the
sponsoring organization's address and telephone number for inquiries by adopting
employers.
If you write to the IRS regarding this plan, please provide your telephone
number and the most convenient time for us to call in case we need more
information. Whether you call or write, please refer to the Letter Serial
Number and File Folder Number shown in the heading of this letter.
You should keep this letter as a permanent record. Please notify us if you
modify or discontinue sponsorship of this plan.
Sincerely Yours,
John Swieca /s/
Chief, Employee Plans Technical Branch 1
<PAGE>
FLEXIBLE STANDARDIZED PROFIT SHARING PLAN
ADOPTION AGREEMENT
________________________________________________________________________________
SECTION 1. EMPLOYER INFORMATION
Name of Employer_________________________________________________
Address__________________________________________________________
City____________________________________State_________Zip________
Telephone ___-______
Employer's Federal Tax Identification Number___________
Type of Business (CHECK ONLY ONE) [ ] Sole Proprietorship
[ ] Partnership
[ ] C Corporation
[ ] S Corporation
[ ] Other (SPECIFY)_________
[ ] Check here if Related Employers may participate in this
Plan and attach a Related Employer Participation
Agreement for each Related Employer who will
participate in this Plan.
Business Code_______________________________
Name of Plan_____________________________________________________
Name of Trust (IF DIFFERENT FROM PLAN NAME)______________________
Plan Sequence Number_____________(ENTER 001 IF THIS IS THE FIRST
QUALIFIED PLAN THE EMPLOYER HAS EVER MAINTAINED, ENTER 002 IF IT
IS THE SECOND, ETC.)
Trust Identification Number (IF APPLICABLE)__________________
Account Number (OPTIONAL)______________________________
SECTION 2. EFFECTIVE DATES
General Effective Dates (CHECK AND COMPLETE OPTION 1 OR 2):
Option 1: [ ] This is the initial adoption of a profit
sharing plan by the Employer.
The Effective Date of this Plan is
___________________, 19__.
NOTE: THE EFFECTIVE DATE IS USUALLY THE FIRST DAY OF
THE PLAN YEAR IN WHICH THIS ADOPTION AGREEMENT IS
SIGNED.
Option 2: [ ] This is an amendment and restatement of an
existing profit sharing plan (a Prior Plan).
The Prior Plan was initially effective on
______________________, 19________.
The Effective Date of this amendment and
restatement is _________________, 19_______.
NOTE: THE EFFECTIVE DATE IS USUALLY THE FIRST
DAY OF THE PLAN YEAR IN WHICH THIS ADOPTION
AGREEMENT IS SIGNED.
SECTION 3. RELEVANT TIME PERIODS COMPLETE PARTS A THROUGH C
PART A. Employer's Fiscal Year:
The Employer's fiscal year ends (SPECIFY MONTH AND
DATE)_________________________________________
PART B. Plan Year Means:
OPTION 1: [ ] The 12-consecutive month period which
coincides with the Employer's fiscal year.
OPTION 2: [ ] The calendar year.
<PAGE>
Page 2
OPTION 3: [ ] Other 12-consecutive month period.
(SPECIFY)____________________________________
NOTE: IF NO OPTION IS SELECTED, OPTION 1 WILL BE DEEMED TO BE
SELECTED.
If the initial Plan Year is less than 12 months (a short Plan
Year) specify such Plan Year's beginning and ending
dates____________________________________________________________
PART C. Limitation Year Means:
OPTION 1: [ ] The Plan Year.
OPTION 2: [ ] The calendar year.
OPTION 3: [ ] Other 12-consecutive month period.
(SPECIFY)_______________________________________
NOTE: IF NO OPTION IS SELECTED, OPTION 1 WILL BE DEEMED TO BE
SELECTED.
SECTION 4. ELIGIBILITY REQUIREMENTS COMPLETE PARTS A THROUGH F
PART A. Years of Eligibility Service Requirement:
An Employee will be eligible to become a Participant in the Plan
after completing ___________ (ENTER 0, 1, 2 OR ANY FRACTION
LESS THAN 2) Years of Eligibility Service.
NOTE: IF MORE THAN 1 YEAR IS SELECTED, THE IMMEDIATE 100%
VESTING SCHEDULE OF SECTION 8 WILL AUTOMATICALLY APPLY. IF LEFT
BLANK, THE YEARS OF ELIGIBILITY SERVICE REQUIRED WILL BE DEEMED
TO BE 0. IF A FRACTION IS SELECTED, AN EMPLOYEE WILL NOT BE
REQUIRED TO COMPLETE ANY SPECIFIED NUMBER OF HOURS OF SERVICE TO
RECEIVE CREDIT FOR A FRACTIONAL YEAR. IF A SINGLE ENTRY DATE IS
SELECTED IN SECTION 4, PART F, THE YEARS OF ELIGIBILITY SERVICE
REQUIRED CANNOT EXCEED 1 1/2.
PART B. Age Requirement:
An Employee will be eligible to become a Participant in the Plan
after attaining age ___________ (NO MORE THAN 21).
NOTE: IF LEFT BLANK, IT WILL BE DEEMED THERE IS NO AGE
REQUIREMENT FOR ELIGIBILITY. IF A SINGLE ENTRY DATE IS
SELECTED IN SECTION 4, PART F, THE AGE REQUIRED CANNOT EXCEED 20
1/2.
PART C. Employees Employed As of Effective Date:
Will all Employees employed as of the Effective Date of this Plan
who have not otherwise met the Years of Eligibility Service and
age requirements specified above be considered to have met those
requirements as of the Effective Date? [ ] Yes [ ] No
NOTE: IF A BOX IS NOT CHECKED, "NO" WILL BE DEEMED TO BE
SELECTED.
Part D. Exclusion of Certain Classes of Employees:
All Employees shall be eligible to become a Participant in the
Plan, except those checked below:
1. [ ] Those Employees included in a unit of Employees covered
by a collective bargaining agreement between the
Employer and Employee representatives, if retirement
benefits were the subject of good faith bargaining and
if two percent or less of the Employees who are covered
pursuant to that agreement are professionals as defined
in Section 1.410(b)-9 of the regulations. For this
purpose, the term "employee representatives" does not
include any organization more than half of whose
members are Employees who are owners, officers, or
executives of the Employer.
2. [ ] Those Employees who are non-resident aliens (within the
meaning of Section 7701(b)(1)(B) of the Code) and who
received no earned income (within the meaning of
Section 911(d)(2) of the Code) from the Employer which
constitutes income from sources within the United
States (within the meaning of Section 861(a)(3) of the
Code).
#4001 (6/94) F94 -C-1994 Universal Pensions, Inc., Brainerd, MN 56401
<PAGE>
Page 3
PART E. Hours Required For Eligibility Purposes:
1. ________ Hours of Service (NO MORE THAN 1,000) shall be required
to constitute a Year of Eligibility Service.
2. ________ Hours of Service (NO MORE THAN 500 BUT LESS THAN THE
NUMBER SPECIFIED IN SECTION 4, PART E, ITEM 1, ABOVE) must be
exceeded to avoid a Break in Eligibility Service.
3. For purposes of determining Years of Eligibility Service,
Employees shall be given credit for Hours of Service with the
following predecessor employer(s) (COMPLETE IF
APPLICABLE)____________________
_________________________________________________________________
PART F. Entry Dates:
The Entry Dates for participation shall be (CHOOSE ONE):
OPTION 1: [ ] The first day of the Plan Year and the first day
of the seventh month of the Plan Year.
OPTION 2: [ ] Other (SPECIFY)___________________________________
NOTE: IF NO OPTION IS SELECTED, OPTION 1 WILL BE DEEMED TO BE
SELECTED. OPTION 2 CAN BE SELECTED ONLY IF THE ELIGIBILITY
REQUIREMENTS AND ENTRY DATES ARE COORDINATED SUCH THAT EACH
EMPLOYEE WILL BECOME A PARTICIPANT IN THE PLAN NO LATER THAN THE
EARLIER OF: (1) THE FIRST DAY OF THE PLAN YEAR BEGINNING AFTER
THE DATE THE EMPLOYEE SATISFIES THE AGE AND SERVICE REQUIREMENTS
OF SECTION 410(A) OF THE CODE; OR (2) 6 MONTHS AFTER THE DATE THE
EMPLOYEE SATISFIES SUCH REQUIREMENTS.
SECTION 5. METHOD OF DETERMINING SERVICE COMPLETE PART A OR B
PART A. Hours of Service Equivalencies:
Service will be determined on the basis of the method selected
below. Only one method may be selected. The method selected
will be applied to all Employees covered under the Plan.
(CHOOSE ONE):
OPTION 1. [ ] On the basis of actual hours for which an Employee
is paid or entitled to payment.
OPTION 2. [ ] On the basis of days worked. An Employee will be
credited with 10 Hours of Service if under Section
1.24 of the Plan such Employee would be credited
with at least 1 Hour of Service during the day.
OPTION 3. [ ] On the basis of weeks worked. An Employee will be
credited with 45 Hours of Service if under Section
1.24 of the Plan such Employee would be credited
with at least 1 Hour of Service during the week.
OPTION 4. [ ] On the basis of months worked. An Employee will
be credited with 190 Hours of Service if under
Section 1.24 of the Plan such Employee would be
credited with at least 1 Hour of Service during
the month.
NOTE: IF NO OPTION IS SELECTED, OPTION 1 WILL BE DEEMED TO
BE SELECTED. THIS SECTION 5, PART A WILL NOT APPLY IF THE
ELAPSED TIME METHOD OF SECTION 5, PART B IS SELECTED.
PART B. Elapsed Time Method:
In lieu of tracking Hours of Service of Employees, will the
elapsed time method described in Section 2.07 of the Plan be
used? (CHOOSE ONE)
OPTION 1: [ ] No
OPTION 2: [ ] Yes
NOTE: IF NO OPTION IS SELECTED, OPTION 1 WILL BE DEEMED TO
BE SELECTED.
#4001 (6/94) F94 -C-1994 Universal Pensions, Inc., Brainerd, MN 56401
<PAGE>
Page 4
SECTION 6. EMPLOYER CONTRIBUTION AND ALLOCATION FORMULA COMPLETE PARTS A, B
AND C
PART A. Contribution Formula:
For each Plan Year the Employer will contribute an Amount to be
determined from year to year.
PART B. Allocation Formula (CHOOSE ONE):
OPTION 1: [ ] Pro Rata Formula. Employer Profit Sharing
Contributions shall be allocated to the Individual
Accounts of Qualifying Participants in the ratio
that each Qualifying Participant's Compensation
for the Plan Year bears to the total Compensation
of all Qualifying Participants for the Plan Year.
OPTION 2: [ ] Integrated Formula. Employer Profit Sharing
Contributions shall be allocated as follows (START
WITH STEP 3 IF THIS PLAN IS NOT A TOP-HEAVY PLAN):
Step 1. Employer Profit Sharing Contributions shall
first be allocated pro rata to Qualifying
Participants in the manner described in
Section 6, Part B, Option 1. The percent so
allocated shall not exceed 3% of each
Qualifying Participant's Compensation.
Step 2. Any Employer Profit Sharing Contributions
remaining after the allocation in Step 1
shall be allocated to each Qualifying
Participant's Individual Account in the ratio
that each Qualifying Participant's
Compensation for the Plan Year in excess of
the integration level bears to all Qualifying
Participants' Compensation in excess of the
integration level, but not in excess of 3%.
Step 3. Any Employer Profit Sharing Contributions
remaining after the allocation in Step 2
shall be allocated to each Qualifying
Participant's Individual Account in the ratio
that the sum of each Qualifying Participant's
total Compensation and Compensation in excess
of the integration level bears to the sum of
all Qualifying Participants' total
Compensation and Compensation in excess of
the integration level, but not in excess of
the profit sharing maximum disparity rate as
described in Section 3.01(B)(3) of the Plan.
Step 4. Any Employer Profit Sharing Contributions
remaining after the allocation in Step 3
shall be allocated pro rata to Qualifying
Participants in the manner described in
Section 6, Part B, Option 1.
The integration level shall be (CHOOSE ONE):
SUBOPTION (A): [ ] The Taxable Wage Base.
SUBOPTION (B): [ ] $________ (A DOLLAR AMOUNT
LESS THAN THE TAXABLE WAGE
BASE).
SUBOPTION (C): [ ] ______% (NOT MORE THAN 100%)
of the Taxable Wage Base.
NOTE: IF NO OPTION IS SELECTED, SUBOPTION (A)
WILL BE DEEMED TO BE SELECTED.
NOTE: IF NO OPTION IS SELECTED, OPTION 1 WILL BE
DEEMED TO BE SELECTED.
PART C. Qualifying Participants:
A Participant will be a Qualifying Participant and thus entitled
to share in the Employer Profit Sharing Contribution for any Plan
Year only if the Participant is a Participant on at least one day
of such Plan Year and satisfies the following additional
conditions (CHECK ONE OR MORE OPTIONS):
OPTION 1: [ ] No Additional Conditions.
#4001 (6/94) F94 -C-1994 Universal Pensions, Inc., Brainerd, MN 56401
<PAGE>
Page 5
OPTION 2: [ ] Hours of Service Requirement. The Participant
completes at least ______ (NOT MORE THAN 500)
Hours of Service during the Plan Year. However,
this condition will be waived for the following
reasons (CHECK AT LEAST ONE):
[ ] The Participant's Death.
[ ] The Participant's Termination of Employment
after having incurred a Disability.
[ ] The Participant's Termination of Employment
after having reached Normal Retirement Age.
[ ] This condition will not be waived.
NOTE: IF NO OPTION IS SELECTED, OPTION 1
WILL BE DEEMED TO BE SELECTED.
SECTION 7. COMPENSATION COMPLETE PARTS A THROUGH D
PART A. Basic Definition:
Compensation will mean all of each Participant's (CHOOSE ONE):
OPTION 1: [ ] W-2 wages.
OPTION 2: [ ] Section 3401(a) wages.
OPTION 3: [ ] 415 safe-harbor compensation.
NOTE: IF NO OPTION IS SELECTED, OPTION 1 WILL BE DEEMED TO BE
SELECTED.
PART B. Measuring Period for Compensation:
Compensation shall be determined over the following applicable
period (CHOOSE ONE):
OPTION 1: [ ] The Plan Year.
OPTION 2: [ ] The calendar year ending with or within the
Plan Year.
NOTE: IF NO OPTION IS SELECTED, OPTION 1 WILL BE DEEMED TO BE
SELECTED.
PART C. Inclusion of Elective Deferrals:
Does Compensation include Employer Contributions made pursuant
to a salary reduction agreement which are not includible in the
gross income of the Employee under Sections 125, 402(e)(3),
402(h)(1)(B), and 403(b) of the Code? [ ] Yes [ ] No
NOTE: IF NEITHER BOX IS CHECKED, "YES" WILL BE DEEMED TO BE
SELECTED.
PART D. Pre-Entry Date Compensation:
For the Plan Year in which an Employee enters the Plan, the
Employee's Compensation which shall be taken into account for
purposes of the Plan shall be (CHOOSE ONE):
OPTION 1: [ ] The Employee's Compensation only from the time the
Employee became a Participant in the Plan.
OPTION 2: [ ] The Employee's Compensation for the whole of such
Plan Year.
NOTE: IF NO OPTION IS SELECTED, OPTION 1 WILL BE DEEMED TO BE
SELECTED.
#4001 (6/94) F94 -C-1994 Universal Pensions, Inc., Brainerd, MN 56401
<PAGE>
Page 6
SECTION 8. VESTING AND FORFEITURES COMPLETE PARTS A THROUGH D
PART A. Vesting Schedule. A Participant shall become Vested in his or
her Individual Account as follows (CHOOSE ONE):
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------------
YEARS OF VESTED PERCENTAGE
VESTING SERVICE Option 1 [ ] Option 2 [ ] Option 3 [ ] Option 4 [ ] Option 5 [ ] (COMPLETE IF CHOSEN)
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
1 0% 0% 100% 0% ____%
2 0% 20% 100% 0% ____%
3 0% 40% 100% 20% ____% (not less than 20%)
4 0% 60% 100% 40% ____% (not less than 40%)
5 100% 80% 100% 60% ____% (not less than 60%)
6 100% 100% 100% 80% ____% (not less than 80%)
7 100% 100% 100% 100% ____% (not less than 100%)
</TABLE>
NOTE: IF NO OPTION IS SELECTED, OPTION 3 WILL BE DEEMED TO BE SELECTED.
- -------------------------------------------------------------------------------
PART B. Hours Required For Vesting Purposes:
1. ________ Hours of Service (NO MORE THAN 1,000) shall be
required to constitute a Year of Vesting Service.
2. ________ Hours of Service (NO MORE THAN 500 BUT LESS THAN
THE NUMBER SPECIFIED IN SECTION 8, PART B, ITEM 1, ABOVE) must
be exceeded to avoid a Break in Vesting Service.
3. For purposes of determining Years of Vesting Service,
Employees shall be given credit for Hours of Service with the
following predecessor employer(s): (COMPLETE IF APPLICABLE)
______________________________________________________________
PART C. Exclusion of Certain Years of Vesting Service:
All of an Employee's Years of Vesting Service with the Employer
are counted to determine the vesting percentage in the
Participant's Individual Account except (CHECK ANY THAT APPLY):
[ ] Years of Vesting Service before the Employee reaches
age 18.
[ ] Years of Vesting Service before the Employer maintained
this Plan or a predecessor plan.
PART D. Allocation of Forfeitures:
Forfeitures shall be (CHOOSE ONE):
OPTION 1: [ ] Allocated to the Individual Accounts of the
Participants specified below in the manner
as described in Section 6, Part B (for
Employer Profit Sharing Contributions).
The Participants entitled to receive
allocations of Forfeitures shall be (CHOOSE
ONE):
SUBOPTION (a): [ ] Only Qualifying
Participants.
SUBOPTION (b): [ ] All Participants.
NOTE: IF NO OPTION IS SELECTED, SUBOPTION (a) WILL BE
DEEMED TO BE SELECTED.
OPTION 2: [ ] Applied to reduce Employer Profit Sharing
Contributions (CHOOSE ONE):
SUBOPTION (a): [ ] For the Plan Year for
which the Forfeiture
arises.
SUBOPTION (b): [ ] For any Plan Year
subsequent to the Plan
Year for which the
Forfeiture arises.
#4001 (6/94) F94 -C-1994 Universal Pensions, Inc., Brainerd, MN 56401
<PAGE>
Page 7
OPTION 3: [ ] Applied first to the payment of the Plan's
administrative expenses and any excess
applied to reduce Employer Profit Sharing
Contributions (CHOOSE ONE):
SUBOPTION (A): [ ] For the Plan Year for
which the Forfeiture
arises.
SUBOPTION (B): [ ] For any Plan Year
subsequent to the Plan
Year for which the
Forfeiture arises.
NOTE: IF NO OPTION IS SELECTED, OPTION 1 AND SUBOPTION (A) WILL
BE DEEMED TO BE SELECTED.
SECTION 9. NORMAL RETIREMENT AGE AND EARLY RETIREMENT AGE
PART A. The Normal Retirement Age under the Plan shall be (CHECK AND
COMPLETE ONE OPTION):
OPTION 1: [ ] Age 65.
OPTION 2: [ ] Age ________ (NOT TO EXCEED 65).
OPTION 3: [ ] The later of age ________ (NOT TO EXCEED 65) or
the ________ (NOT TO EXCEED 5TH) anniversary of
the first day of the first Plan Year in which the
Participant commenced participation in the Plan.
NOTE: IF NO OPTION IS SELECTED, OPTION 1 WILL BE DEEMED TO BE
SELECTED.
PART B. Early Retirement Age (CHOOSE ONE OPTION):
OPTION 1: [ ] An Early Retirement Age is not applicable under
the Plan.
OPTION 2: [ ] Age ______ (NOT LESS THAN 55 NOR MORE THAN 65).
OPTION 3: [ ] A Participant satisfies the Plan's Early
Retirement Age conditions by attaining age
________ (NOT LESS THAN 55) and completing
________ Years of Vesting Service.
NOTE: IF NO OPTION IS SELECTED, OPTION 1 WILL BE DEEMED TO BE
SELECTED.
SECTION 10. DISTRIBUTIONS
Distributable Events. Answer each of the following items.
A. Termination of Employment Before Normal Retirement Age. May a
Participant who has not reached Normal Retirement Age request a
distribution from the Plan upon Termination of
Employment? [ ] Yes [ ] No
B. Disability. May a Participant who has incurred a Disability
request a distribution from the Plan?
[ ] Yes [ ] No
C. Attainment of Normal Retirement Age. May a Participant who has
attained Normal Retirement Age but has not incurred a
Termination of Employment request a distribution from the Plan?
[ ] Yes [ ] No
D. In-Service Withdrawals. Will Participants be permitted to
request a distribution during service pursuant to Section
6.01(A)(3) of the Plan? [ ] Yes [ ] No
E. Hardship Withdrawals. Will Participants be permitted to make
hardship withdrawals pursuant to Section 6.01(A)(4) of the Plan?
[ ] Yes [ ] No
F. Withdrawals of Rollover or Transfer Contributions. Will
Employees be permitted to withdraw their Rollover or Transfer
Contributions at any time? [ ] Yes [ ] No
NOTE: IF A BOX IS NOT CHECKED FOR AN ITEM, "YES" WILL BE DEEMED
TO BE SELECTED FOR THAT ITEM. SECTION 411(D)(6) OF THE CODE
PROHIBITS THE ELIMINATION OF PROTECTED BENEFITS. IN GENERAL,
PROTECTED BENEFITS INCLUDE THE FORMS AND TIMING OF PAYOUT
OPTIONS. IF THE PLAN IS BEING ADOPTED TO AMEND AND REPLACE A
PRIOR PLAN THAT PERMITTED A DISTRIBUTION OPTION DESCRIBED ABOVE,
YOU MUST ANSWER "YES" TO THAT ITEM.
#4001 (6/94) F94 -C-1994 Universal Pensions, Inc., Brainerd, MN 56401
<PAGE>
Page 8
SECTION 11. JOINT AND SURVIVOR ANNUITY
PART A. Retirement Equity Act Safe Harbor:
Will the safe harbor provisions of Section 6.05(F) of the Plan
apply? (CHOOSE ONLY ONE OPTION)
OPTION 1: [ ] Yes.
OPTION 2: [ ] No.
NOTE: YOU MUST SELECT "NO" IF YOU ARE ADOPTING THIS PLAN AS AN
AMENDMENT AND RESTATEMENT OF A PRIOR PLAN THAT WAS SUBJECT TO THE
JOINT AND SURVIVOR ANNUITY REQUIREMENTS.
PART B. Survivor Annuity Percentage: (COMPLETE ONLY IF YOUR ANSWER IN
SECTION 11, PART A IS "NO.")
The survivor annuity portion of the Joint and Survivor Annuity
shall be a percentage equal to ____% (AT LEAST 50% BUT NO MORE
THAN 100%) of the amount paid to the Participant prior to his or
her death.
SECTION 12. OTHER OPTIONS ANSWER "YES" OR "NO" TO EACH OF THE FOLLOWING
QUESTIONS BY CHECKING THE APPROPRIATE BOX. IF A BOX IS NOT
CHECKED FOR A QUESTION, THE ANSWER WILL BE DEEMED TO BE "NO."
A. Loans: Will loans to Participants pursuant to Section 6.08 of
the Plan be permitted? [ ] Yes [ ] No
B. Insurance: Will the Plan allow for the investment in insurance
policies pursuant to Section 5.13 of the Plan?
[ ] Yes [ ] No
C. Employer Securities: Will the Plan allow for the investment in
qualifying Employer securities or qualifying Employer real
property? [ ] Yes [ ] No
D. Rollover Contributions: Will Employees be permitted to make
rollover contributions to the Plan pursuant to Section 3.03 of
the Plan? [ ] Yes [ ] No
[ ] Yes, but only after becoming a Participant.
E. Transfer Contributions: Will Employees be permitted to make
transfer contributions to the Plan pursuant to Section 3.04 of
the Plan? [ ] Yes [ ] No
[ ] Yes, but only after becoming a Participant.
F. Will Participants be permitted to direct the investment of their
Plan assets pursuant to Section 5.14 of the Plan?
[ ] Yes [ ] No
SECTION 13. LIMITATION ON ALLOCATIONS - More Than One Plan
If you maintain or ever maintained another qualified plan (other
than a paired standardized money purchase pension plan using the
same Basic Plan Document as this Plan) in which any Participant
in this Plan is (or was) a Participant or could become a
Participant, you must complete this section. You must also
complete this section if you maintain a welfare benefit fund, as
defined in Section 419(e) of the Code, or an individual medical
account, as defined in Section 415(l)(2) of the Code, under which
amounts are treated as annual additions with respect to any
Participant in this Plan.
PART A. Individually Designed Defined Contribution Plan:
If the Participant is covered under another qualified defined
contribution plan maintained by the Employer, other than a master
or prototype plan:
1. [ ] The provisions of Section 3.05(B)(1) through 3.05(B)(6)
of the Plan will apply as if the other plan were a
master or prototype plan.
2. [ ] Other method. (PROVIDE THE METHOD UNDER WHICH THE PLANS
WILL LIMIT TOTAL ANNUAL ADDITIONS TO THE MAXIMUM
PERMISSIBLE AMOUNT, AND WILL PROPERLY REDUCE ANY EXCESS
AMOUNTS, IN A MANNER THAT PRECLUDES EMPLOYER
DISCRETION.)___________________________________________
#4001 (6/94) F94 -C-1994 Universal Pensions, Inc., Brainerd, MN 56401
<PAGE>
Page 9
PART B. Defined Benefit Plan:
If the Participant is or has ever been a participant in a defined
benefit plan maintained by the Employer, the Employer will
provide below the language which will satisfy the 1.0 limitation
of Section 415(e) of the Code.
1. [ ] If the projected annual addition to this Plan to the
account of a Participant for any limitation year would
cause the 1.0 limitation of Section 415(e) of the Code
to be exceeded, the annual benefit of the defined
benefit plan for such limitation year shall be reduced
so that the 1.0 limitation shall be satisfied.
If it is not possible to reduce the annual benefit of
the defined benefit plan and the projected annual
addition to this Plan to the account of a Participant
for a limitation year would cause the 1.0 limitation to
be exceeded, the Employer shall reduce the Employer
Contribution which is to be allocated to this Plan on
behalf of such Participant so that the 1.0 limitation
will be satisfied. (The provisions of Section 415(e)
of the Code are incorporated herein by reference under
the authority of Section 1106(h) of the Tax Reform Act
of 1986.)
2. [ ] Other method. (PROVIDE LANGUAGE DESCRIBING ANOTHER
METHOD. SUCH LANGUAGE MUST PRECLUDE EMPLOYER
DISCRETION.)___________________________________________
SECTION 14. TOP-HEAVY MINIMUM COMPLETE PARTS A AND B
PART A. Minimum Allocation or Benefit:
For any Plan Year with respect to which this Plan is a Top-Heavy
Plan, any minimum allocation required pursuant to Section 3.01(E)
of the Plan shall be made (CHOOSE ONE):
OPTION 1: [ ] To this Plan.
OPTION 2: [ ] To the following other plan maintained by the
Employer (SPECIFY NAME AND PLAN NUMBER OF PLAN)
__________________________________________________
OPTION 3: [ ] In accordance with the method described on an
attachment to this Adoption Agreement. (ATTACH
LANGUAGE DESCRIBING THE METHOD THAT WILL BE USED
TO SATISFY SECTION 416 OF THE CODE. SUCH METHOD
MUST PRECLUDE EMPLOYER DISCRETION.)
NOTE: IF NO OPTION IS SELECTED, OPTION 1 WILL BE
DEEMED TO BE SELECTED.
PART B. Top-Heavy Vesting Schedule:
Pursuant to Section 6.01(C) of the Plan, the vesting schedule
that will apply when this Plan is a Top-Heavy Plan (unless the
Plan's regular vesting schedule provides for more rapid vesting)
shall be (CHOOSE ONE):
OPTION 1: [ ] 6 Year Graded.
OPTION 2: [ ] 3 Year Cliff.
NOTE: IF NO OPTION IS SELECTED, OPTION 1 WILL BE DEEMED TO
BE SELECTED.
SECTION 15. PROTOTYPE SPONSOR
Name of Prototype Sponsor___________________________________________
Address_____________________________________________________________
Telephone Number____________________________________________________
PERMISSIBLE INVESTMENTS
The assets of the Plan shall be invested only in those investments
described below (TO BE COMPLETED BY THE PROTOTYPE SPONSOR):
_____________________________________________________________________
_____________________________________________________________________
_____________________________________________________________________
#4001 (6/94) F94 -C-1994 Universal Pensions, Inc., Brainerd, MN 56401
<PAGE>
Page 10
SECTION 16. TRUSTEE OR CUSTODIAN
OPTION A. [ ] Financial Organization as Trustee or
Custodian
CHECK ONE: [ ] Custodian, [ ] Trustee without full trust
powers, or [ ] Trustee with full trust powers
Financial Organization_______________________________________________
Signature____________________________________________________________
Type Name____________________________________________________________
COLLECTIVE OR COMMINGLED FUNDS
List any collective or commingled funds maintained by the financial
organization Trustee in which assets of the Plan may be invested
(COMPLETE IF APPLICABLE).
____________________________________________________________________
____________________________________________________________________
OPTION B. [ ] Individual Trustee(s)
Signature ____________________ Type Name_____________________
Signature_____________________ Type Name_____________________
Signature ____________________ Type Name_____________________
Signature_____________________ Type Name_____________________
SECTION 17. RELIANCE
An Employer who has ever maintained or who later adopts any plan
(including a welfare benefit fund, as defined in Section 419(e) of the
Code, which provides post-retirement medical benefits allocated to
separate accounts for key employees, as defined in Section 419A(d)(3)
of the Code, or an individual medical account, as defined in Section
415(l)(2) of the Code) in addition to this Plan (other than a paired
standardized money purchase pension plan using the same Basic Plan
Document as this Plan) may not rely on the opinion letter issued by
the National Office of the Internal Revenue Service as evidence that
this Plan is qualified under Section 401 of the Internal Revenue
Code. If the Employer who adopts or maintains multiple plans wishes
to obtain reliance that his or her plan(s) are qualified, application
for a determination letter should be made to the appropriate Key
District Director of Internal Revenue.
The Employer may not rely on the opinion letter issued by the National
Office of the Internal Revenue Service as evidence that this Plan is
qualified under Section 401 of the Code unless the terms of the Plan,
as herein adopted or amended, that pertain to the requirements of
Sections 401(a)(4), 401(a)(17), 401(l), 401(a)(5), 410(b) and 414(s)
of the Code, as amended by the Tax Reform Act of 1986, or later laws,
(a) are made effective retroactively to the first day of the first
Plan Year beginning after December 31, 1988 (or such later date on
which these requirements first become effective with respect to this
Plan); or (b) are made effective no later than the first day on which
the Employer is no longer entitled, under regulations, to rely on a
reasonable, good faith interpretation of these requirements, and the
prior provisions of the Plan constitute such an interpretation.
This Adoption Agreement may be used only in conjunction with Basic
Plan Document No. 04.
SECTION 18. EMPLOYER SIGNATURE IMPORTANT: PLEASE READ BEFORE SIGNING.
I am an authorized representative of the Employer named above and I
state the following:
1. I acknowledge that I have relied upon my own advisors regarding
the completion of this Adoption Agreement and the legal tax
implications of adopting this Plan.
2. I understand that my failure to properly complete this Adoption
Agreement may result in disqualification of the Plan.
3. I understand that the Prototype Sponsor will inform me of any
amendments made to the Plan and will notify me should it
discontinue or abandon the Plan.
4. I have received a copy of this Adoption Agreement and the
corresponding Basic Plan Document.
Signature for Employer___________________________________
Date Signed______________________
Type Name______________________________________
Title____________________________
<PAGE>
APPLICATION FORM FOR KEOGH PLAN
PLEASE COMPLETE AND MAIL TO:
[Logo] FARM BUREAU MUTUAL FUNDS
FARM BUREAU MUTUAL FUNDS BOX 9194
DES MOINES, IOWA 50306-9194
- --------------------------------------------------------------------------------
FUND SELECTION / / FBL MONEY MARKET FUND $
----------------------
- --------------------------------------------------------------------------------
FBL SERIES FUND*
/ / MONEY MARKET $ / / HIGH GRADE BOND $
-------- --------
/ / GROWTH COMMON STOCK $ / / BLUE CHIP $
-------- --------
/ / HIGH YIELD BOND $ / / MANAGED $
-------- --------
TOTAL INVESTMENT $
-----------
*If no Portfolio is designated, the Money Market Portfolio will be selected.
- --------------------------------------------------------------------------------
ACCOUNT INFORMATION
- --------------------------------------------------------------------------------
EMPLOYER NAME
-------------------------------------------------------------------
(firm name, if applicable)
ADDRESS
-------------------------------------------------------------------------
STREET CITY-TOWN STATE ZIP CODE
EMPLOYER TAX I.D.# DATE OF BIRTH
--------------------- -----------------------
OR SOCIAL SECURITY # MONTH DAY YEAR
- --------------------------------------------------------------------------------
BENEFICIARY INFORMATION
- --------------------------------------------------------------------------------
DESIGNATED BENEFICIARY SOCIAL SECURITY # DATE OF BIRTH
PRIMARY: ---------------------- --------------- -----------------
CONTINGENT: ---------------------- --------------- -----------------
- --------------------------------------------------------------------------------
CUSTODIAN & CUSTODY FEES
- --------------------------------------------------------------------------------
In accordance with the terms of the Custodial Agreement, the custodial fee is
stated in the current Designated Fund Statement of Additional Information, the
fee for each year (or any part of a Plan Year) will be deducted from all
Participant's accounts, including those Participants receiving periodic
distributions under the Plan and including any Owner-Employee whose account is
being held by the Custodian after termination of the Plan and before
distribution.
ACCEPTED BY: INVESTORS FIDUCIARY TRUST COMPANY ("IFTC"), OF KANSAS CITY, MO.
BY: DATE:
------------------------------------------- ---------------------
(FBL INVESTMENT ADVISORY SERVICES, INC.
AS AGENT FOR IFTC)
- --------------------------------------------------------------------------------
APPOINTMENT OF CUSTODIAN & PLAN ACCEPTANCE BY EMPLOYER
- --------------------------------------------------------------------------------
The Employer hereby establishes a plan and trust upon the respective terms
and conditions contained in the Farm Bureau Prototype Paired Defined
Contribution Plan (the "Plan") and Trust Agreement. The Employer hereby
acknowledges receipt of the Plan, appropriate Adoption Agreement and annexed
Trust Agreement, Custodial Agreement and current prospectus(es). The Employer
further acknowledges that the appropriate Adoption Agreement has been
executed and appoints Investors Fiduciary Trust Company of Kansas City, MO as
Custodian. The Employer shall be deemed "Named Fiduciary", "Trustee" and
"Plan Administrator".
SIGNATURES:
- -------------------------------- ---------------------
Employer or Partner Date
- -------------------------------- --------------------- ---------------
Registered Representative Date Reg. Rep. #
Retain the attached Custodial EXCHANGE BETWEEN PORTFOLIOS*
Agreement for your records. / / Yes / / No
I authorize exchanges between Portfolios upon
instruction from any person by telephone. If
neither box is checked, the telephone exchange
privilege will be provided. Shares held in
certificated form may not be exchanged.
*Subject to $5.00 service charge per exchange.
737-924 (11-91)
<PAGE>
CUSTODIAL AGREEMENT
THIS AGREEMENT shall become effective upon its acceptance in writing by the bank
or its agent designated in the Application Form attached hereto of its
appointment to serve as Custodian in accordance with the terms of this
agreement.
SECTION 1 - ESTABLISHMENT OF ACCOUNT
C1.1 Establishment of Custodial and Participant's Account. The Custodian
shall open and maintain a Custodial Account and, as a part
thereof, Participant's Accounts, for such individuals as the
Employer has set forth in the Application Form and as the
Employer shall from time to time certify to it as
Participants in the Plan.
The Employer shall promptly notify the custodian in writing
of any change in the name or address or change in employment
status, where pertinent, of any Participant. The
Participants' Accounts shall be kept in a manner which will
permit an accurate determination of the contributions
hereafter made by the Employer and of the voluntary
contributions, if any, hereafter made by the Participants.
SECTION 2 - RECEIPT OF CONTRIBUTIONS
C2.1 The Custodian shall accept and hold in the Custodial Account such
contributions of money on behalf of the Participants as it
may receive from time to time from the Employer. All such
contributions shall be accompanied by written instructions
from the Employer specifying the Participant's Account to
which they are to be credited and shall be so credited upon
receipt. Such instructions shall also specify the portion
of the amount to be so credited which is derived from Employer
Contributions and Participant's voluntary contributions. The
Custodian shall be fully protected in acting on such instructions.
The minimum initial contribution for this Custodial Account
which the Custodian shall be required to accept shall be as
established in the Designated Fund's prospectus.
SECTION 3 - INVESTMENT OF ACCOUNT ASSETS
C3.1 The amount of each contribution credited to a Participant's Account
shall be applied to the purchase of full and fractional
shares of the Designated Fund (Fund Shares) as heretofore
directed by the Employer in the application form attached
hereto from FBL Investment Advisory Services, Inc.
(Management Company), the exclusive distributor for such
Fund Shares, and the shares so purchased shall be credited to
such account. Such purchases shall be made daily on the date
such contributions are received provided shares of the Designated
Fund are offered for sale on that day; otherwise, on the
next following business day on which such shares are offered
for sale.
C3.2 All dividends and capital gain distributions received on the Fund
Shares held in each Participant's Account shall be reinvested in
full and fractional shares of the Designated Fund.
C3.3 All Fund shares acquired by the Custodian shall be registered
in the name of the Custodian or of its registered nominee
as defined in the Internal Revenue Code and any Regulations
of the Treasury Department issued thereunder exempting such
transactions from liability for stock transfer taxes, but the
beneficial ownership thereof shall be deemed vested in the
Participant for whose account the shares are credited.
SECTION 4 - DISTRIBUTIONS FROM THE CUSTODIAL ACCOUNT
C4.1 When a Participant's benefit becomes payable pursuant to the Plan the
Employer shall certify that such benefit is payable and the
Custodian or its Agent shall as soon as practicable
thereafter distribute such amount in accordance with the
terms and conditions of such instructions which shall contain
all information necessary for the Custodian or its Agent to
make such distribution; such Employer represents and warrants
that such instructions shall at all times be in accordance with
the provisions of the Plan. In the event of the death of a
Participant before full distribution of his account, the amount
credited to his account shall be distributed in kind or in cash
in the sole discretion of the Custodian in accordance with the
terms and in the manner provided in the Plan. The Employer may
furnish written instructions to the Custodian or its Agent
specifying a method of payment as provided in the Plan prior
to the date a benefit becomes distributable, and the last
such instructions received by the Custodian or its Agent
shall control unless superseded by written instructions
accompanying the instructions directing distribution of a
benefit.
C4.2 Anything herein to the contrary notwithstanding, if the Custodian
should at any time receive notice (by certified or registered mail)
from the Internal Revenue Service that any contributions made by or on
behalf of a Participant was an excess contribution, the Custodian
shall, on or before the close of the six-month period beginning with
the date of such notice, distribute to such Participant from his
Account, Fund Shares equal in value to the net amount of such excess
contribution and the net income attributable thereto; except that the
Custodian shall, if the Employer within sixty days of the date of such
notice so directs in writing and if there has been no notice to the
Custodian of a determination by the Internal Revenue Service that the
excess contribution by or on behalf of a Participant was willfully
made, credit such amount or such portion thereof as the Employer shall
direct as a contribution for such Participant for the then current
taxable year.
SECTION 5
C5.1 The Custodian or its Agent shall deliver all notices, prospectus,
financial statements, proxies and proxy solicitation
material relating to the Fund Shares held hereunder and
shall deliver same to the beneficial owners. The beneficial
owner shall vote and sign such proxies which represent his
investment held by the Custodian.
SECTION 6 - REPORTS OF THE CUSTODIAN AND EMPLOYER
C6.1 The Custodian or its Agent shall keep accurate and detailed records of
all receipts, investments, disbursements and all other
transactions required to be performed hereunder. At the
request of the Employer the Custodian or its Agent will,
within sixty days after the close of each Plan year, furnish
to the Employer a statement of the transactions mentioned
herein.
Within sixty days after the Custodian's resignation or removal
pursuant to Section 10 hereof, the Custodian or its Agent will upon
request furnish a statement reflecting the current balance and
transactions which have been transpired since the previous statement
furnished to the Employer.
SECTION 7 - CUSTODIAN'S FEES AND EXPENSES OF THE ACCOUNT
C7.1 Any income, gift, estate and inheritance taxes or other tax of any
kind whatsoever that may be levied or assessed upon or in respect of
the Custodial Account (other than transfer taxes) shall be paid from
the assets of the Custodial Account and shall, unless allocable to the
Accounts of specific Participants, be charged proportionately to the
Participant's respective accounts. The Custodian may, at its option,
collect any amounts so charged from the amount of any contribution or
earnings to be credited to the Custodial Account or by sale or
liquidation of the assets credited to such account and if the assets
of such accounts are insufficient to satisfy such charges, the
Employer shall pay any deficit therein to the Custodian. Any transfer
taxes incurred by the Custodian in connection with the investment and
reinvestment or transfer of the assets of the Custodial Account and
all other administrative expenses incurred by the Custodian in the
performance of its duties, including fees for legal services rendered
to the Custodian and compensation to the Custodian, shall be charged
to and paid by the Employer or may, at the Custodian's option, be
collected by the Custodian from the amount of any contribution or
earnings to be credited to the Custodial Account or by sale or
liquidation of the assets credited to such account in which event such
amounts shall, unless allocable to the accounts of specific
Participants, be charged proportionately to the Participants'
respective accounts. Until otherwise changed in accordance with the
terms of the Custodial Agreement, the Custodian shall receive fees for
its services in respect to each Participant's account as provided in
the current Designated Fund prospectus.
SECTION 8 - CONCERNING THE CUSTODIAN
C8.1 The Custodian shall not be responsible in any way for the collection
of contributions provided for under the Plan, the purpose or propriety
of any distribution made pursuant to Section 4 hereof, or any other
action or nonaction taken pursuant to the Employer's direction nor
shall the Custodian have any duty or responsibility to determine
whether information furnished to it by the Employer is correct. The
Employer (and his or their legal representatives, heirs, successors,
or assigns) shall at all times fully indemnify and save harmless the
Custodian, its successors and assigns, from any liability arising
from any and all personal liability arising from distributions made or
actions taken at the Employer's discretion, and from any and all other
liability whatsoever which may arise in connection with this agreement
except the obligation of the Custodian to perform the things to be
done by it under this Agreement. The
<PAGE>
Custodian shall be under no duty to take any action other than as
herein specified with respect to the Custodial Account unless the
Employer shall furnish the Custodian with instructions in proper form
and such instructions shall have been specifically agreed to by the
Custodian in writing to do so and shall have been fully indemnified to
the satisfaction of the Custodian. The Custodian shall be under no
duty to defend or engage in any suit with respect to the Custodial
Account unless the Custodian shall have first agreed in writing to
do so and shall have been fully indemnified to the satisfaction of the
Custodian. The Custodian shall be protected in acting upon any
written order or direction from the Employer or any other notice,
request, consent, certificate or other instrument or paper believed by
it to be genuine and to have been properly executed (including
designation of beneficiary received from Participants), and so long as
it acts in good faith in taking or omitting to take any other action.
Before making any distribution in the case of the death of a
Participant, the Custodian or its Agent shall be furnished with such
certified death certificates, inheritance tax releases and other
documents as may be required by the Custodian, and with such indemnity
agreement as the Custodian may then request. No amendment of the Plan
shall place any greater burden on the Custodian without his written
consent. The Custodian shall not be liable for interest on any cash
or cash balances maintained in the Custodial Account. The Employer
shall have the sole authority to enforce this agreement on behalf of
any and all persons having or claiming any interest in the Custodial
Agreement by virtue of this agreement or the Plan. To protect the
Custodial Account from the expenses which might otherwise be incurred,
it is imposed as a condition to the acquisition of any interest in the
Custodial Account, and it is hereby agreed, that no person other than
the Employer may institute or maintain any action or proceeding
against the Custodian in the absence of written authority from the
Employer or a determination of a court of competent jurisdiction that
in refusing authority the Employer has acted fraudulently or in bad
faith.
SECTION 9 - AMENDMENT
C9.1 The Custodian reserves the right to amend this agreement including the
fee schedule set forth in the Designated Fund prospectus in any
respect, provided, however, except pursuant to Section 15 hereof,
under no circumstances shall any part of the assets of the Custodial
Account revert to the Employer (other than in his capacity as
Owner-Employee under the Plan) or be used for or diverted to purposes
other than for the exclusive benefit of Participants. The Employer
will be notified of any change within 60 days after the adoption of
any amendment.
SECTION 10 - RESIGNATION OR REMOVAL OF CUSTODIAN
C10.1 The Custodian may resign at any time upon 30 days' notice in writing
to the Employer, and may be removed by the Employer at any time upon
30 days' notice in writing to the Custodian. Upon such resignation or
removal, the Employer shall appoint a successor custodian, which
successor shall be a "bank" as defined in Section 401(d)(1) of the
Internal Revenue Code. Upon receipt by the Custodian of written
acceptance of such appointment by the successor custodian, the
Custodian shall transfer and pay over to such successor the assets of
the Custodial Account and all records pertaining thereto. The
Custodian is authorized, however, to reserve such sum of money as it
may deem advisable for payment of all its fees, compensation, costs
and expenses, or for payment of any other liabilities constituting a
charge on or against the assets of the Custodial Account 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. If within 30 days after the Custodian's resignation or
removal the Employer has not appointed a successor custodian which has
accepted such appointment the Custodian shall, unless it elects to
terminate the Custodial Account pursuant to Section 11, appoint such
successor itself. The Custodian shall not be liable for the acts or
omissions of any successor custodian, whether or not the Custodian
makes such appointment itself.
SECTION 11 - TERMINATION OF ACCOUNT
C11.1 The Custodian may elect to terminate the Custodial Account if within
30 days after its resignation or removal pursuant to Section 10 the
Employer has not appointed a successor custodian which has accepted
such appointment. The Custodian shall terminate the account upon
receiving written notice of:
(1) termination of the Plan by the Employer;
(2) the Employer's death, if the Employer is a sole proprietor; or
(3) termination of the partnership, if the Employer is a partnership,
unless in either of the latter two events provision is made by a
successor to the business of the Employer for the continuation of
the Plan and this agreement upon terms satisfactory to the
Custodian. Termination of the Custodial Account shall be
effected by distributing all assets thereof to the Participants
pursuant to written direction of the Employer (who represents and
warrants that such directions shall be and are in accordance with
the provisions of the Plan) or, if the Employer was a sole
proprietor who is dead, such distribution shall be effected in
such manner as determined by the Custodian, in each instance in
accordance with and subject to the provisions and limitations of
the Plan. Upon the completion of such distribution the Custodian
shall be relieved from all liability with respect to all amounts
so paid.
SECTION 12 - PROHIBITED TRANSACTIONS
C12.1 The Custodian shall not, directly or indirectly (and nothing herein
shall be construed to so require the Custodian):
(a) lend any part of the custodial account or the income of such
account to; or
(b) pay any compensation for personal services to; or
(c) make any part of its services available on a preferential basis
to; or
(d) acquire for the custodial account any property (other than cash
contributions permitted by the Plan) from, or sell any property
to:
any Employer or any Owner-Employee who controls the trade or
business of any Employer, a member of the family of any such
Owner-Employee or a corporation controlled by any such Employer
or Owner-Employee through the ownership, directly or indirectly,
of 50% or more of the total combined voting power of all classes
of stock entitled to vote or 50% or more of the total value of
shares of all classes of stock of the corporation.
SECTION 13 - PROHIBITION OF DIVERSION
C13.1 At no time shall it be possible for any part of the assets of the
Custodial Account to be used for or diverted to purposes other than
for the exclusive benefit of Participants and their beneficiaries.
SECTION 14 - NOTICES TO EMPLOYER AND PARTICIPANTS
C14.1 Any notice from the Custodian or its Agent to the Employer or to any
Participant provided for in this agreement shall be effective if sent
by regular mail to the Employer or such Participant, as the case may
be, at his address as shown on the records of the Custodian.
SECTION 15 - INTERNAL REVENUE SERVICE APPROVAL
C15.1 The Custodial Account is established with the intent that it shall be
part of a qualified plan under Section 401 of the Internal Revenue
Code. All terms and provisions contained herein shall therefore be
interpreted, whenever possible, so as to be in compliance with the
requirements for qualification under such Code. The Custodian is
authorized, however, to reserve such sum of money as it may deem
advisable for payment of all its fees, compensation, costs and
expenses, or for payment of any other liabilities constituting a
charge on or against the assets of the Custodial Account or on or
against the Custodian.
SECTION 16 - INALIENABILITY OF BENEFITS
C16.1 The Benefits provided in the Plan shall not be subject to alienation,
assignment, garnishment, attachment, execution or levy of any kind and
any attempt to cause such benefits to be so subjected shall not be
recognized, except by the Custodian for its fees and expenses under
this Custodial Agreement and except to such extent as may be required
by law.
SECTION 17 - GOVERNING LAWS
C17.1 This agreement and Designations of Beneficiary, and all property
rights, including rights to distributions after the death of a
Participant, under the Plan, shall be construed in accordance with the
laws of the State of Iowa.
<PAGE>
Form 5305-A INDIVIDUAL RETIREMENT CUSTODIAL ACCOUNT DO NOT File
(Rev. October 1992) with the
(UNDER SECTION 408(A) OF THE INTERNAL REVENUE CODE) Internal
Department of the Treasury Revenue Service
Internal Revenue Service
- --------------------------------------------------------------------------------
Name of depositor Date of birth of depositor Identifying number
(see instructions)
- --------------------------------------------------------------------------------
Address of depositor
Check if Amendment / /
- --------------------------------------------------------------------------------
Name of custodian Address or principal place of business of custodian
Investors Fiduciary Kansas City, Missouri
Trust Company
- --------------------------------------------------------------------------------
The Depositor whose name appears above is establishing an individual
retirement account under section 408(a) to provide for his or her retirement
and for the support of his or her beneficiaries after death.
The Custodian named above has given the Depositor the disclosure
statement required under Regulations section 1.408-6.
The Depositor assigned the custodial account
______________________________ dollars ($_____________________) in cash.
The Depositor and the Custodian make the following agreement:
- --------------------------------------------------------------------------------
ARTICLE I
The Custodian may accept additional cash contributions on behalf of the
Depositor for a tax year of the Depositor. The total cash contributions are
limited to $2,000 for the tax year unless the contribution is a rollover
contribution described in section 402(c) (but only after December 31, 1992),
403(a)(4), 403(b)(8), 408(d)(3), or an employer contribution to a simplified
employee pension plan as described in section 408(k). Rollover contributions
before January 1, 1993, include rollovers described in section 402(a)(5),
402(a)(6), 402(a)(7), 403(a)(4), 403(b)(8), 403(d)(3), or an employer
contribution to a simplified employee pension plan as described in
section 408(k).
ARTICLE II
The Depositor's interest in the balance in the custodial account is
nonforfeitable.
ARTICLE III
1. No part of the custodial funds may be invested in life insurance
contracts, nor may the assets of the custodial account be commingled with other
property except in a common trust fund or common investment fund (within the
meaning of section 408(a)(5)).
2. No part of the custodial funds may be invested in collectibles (within
the meaning of section 408(m)) except as otherwise permitted by section
408(m)(3) which provides an exception for certain gold and silver coins and
coins issued under the laws of any state.
ARTICLE IV
1. Notwithstanding any provision of this agreement to the contrary, the
distribution of the Depositor's interest in the custodial account shall be made
in accordance with the following requirements and shall otherwise comply with
section 408(a)(6) and Proposed Regulations section 1.408-8, including the
incidental death benefit provisions of Proposed Regulations section
1.401(a)(9)-2, the provisions of which are incorporated by reference.
2. Unless otherwise elected by the time distributions are required to begin
to the Depositor under paragraph 3, or to the surviving spouse under paragraph
4, other than in the case of a life annuity, life expectancies shall be
recalculated annually. Such election shall be irrevocable as to the Depositor
and the surviving spouse and shall apply to all subsequent years. The life
expectancy of a nonspouse beneficiary may not be recalculated.
3. The Depositor's entire interest in the custodial account must be, or
begin to be, distributed by the Depositor's required beginning date. (April 1
following the calendar year end in which the Depositor reaches age 70 1/2).
By that date, the Depositor may elect, in a manner acceptable to the Custodian,
to have the balance in the custodial account distributed in:
(a) A single sum payment.
(b) An annuity contract that provides equal or substantially equal monthly,
quarterly, or annual payments over the life of the Depositor.
(c) An annuity contract that provides equal or substantially equal monthly,
quarterly, or annual payments over the joint and last survivor lives of the
Depositor and his or her designated beneficiary.
(d) Equal or substantially equal annual payments over a specified period
that may not be longer than the Depositor's life expectancy.
(e) Equal or substantially equal annual payments over a specified period
that may not be longer than the joint life and last survivor expectancy of the
Depositor and his or her designated beneficiary.
4. If the Depositor dies before his or her entire interest is distributed
to him or her, the entire remaining interest will be distributed as follows:
(a) If the Depositor dies on or after distribution of his or her interest
has begun, distribution must continue to be made in accordance with paragraph 3.
(b) If the Depositor dies before distribution of his or her interest has
begun, the entire remaining interest will, at the election of the Depositor or,
if the Depositor has not so elected, at the election of the beneficiary or
beneficiaries, either
(i) Be distributed by the December 31 of the year containing the fifth
anniversary of the Depositor's death, or
(ii) Be distributed in equal or substantially equal payments over the life
or life expectancy of the designated beneficiary or beneficiaries starting by
December 31 of the year following the year of the Depositor's death. If,
however, the beneficiary is the Depositor's surviving spouse, then this
distribution is not required to begin before December 31 of the year in which
the Depositor would have turned age 70 1/2.
(c) Except where distribution in the form of an annuity meeting the
requirements of section 408(b)(3) and its related regulations has irrevocably
commenced, distributions are treated as having begun on the Depositor's required
beginning date, even though payments may actually have been made before that
date.
(d) If the Depositor dies before his or her entire interest has been
distributed and if the beneficiary is other than the surviving spouse, no
additional cash contributions or rollover contributions may be accepted in the
account.
- --------------------------------------------------------------------------------
Cat. No. 11820G Form 5305-A (Rev. 10-92)
737-952 (10/92) 11/18/92 2.963
<PAGE>
Form 5305-A (Rev. 10-92) Page 2
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5. In the case of a distribution over life expectancy in equal or
substantially equal annual payments, to determine the minimum annual payment for
each year, divide the Depositor's entire interest in the Custodial account as of
the close of business on December 31 of the preceding year by the life
expectancy of the Depositor (or the joint life and last survivor expectancy of
the Depositor and the Depositor's designated beneficiary, or the life expectancy
of the designated beneficiary, whichever applies). In the case of distributions
under paragraph 3, determine the initial life expectancy (or joint life and last
survivor expectancy) using the attained ages of the Depositor and designated
beneficiary as of their birthdays in the year the Depositor reaches age 70 1/2.
In the case of a distribution in accordance with paragraph 4(b)(ii), determine
life expectancy using the attained age of the designated beneficiary as of the
beneficiary's birthday in the year distributions are required to commence.
6. The owner of two or more individual retirement accounts may use the
"alternative method" described in Notice 88-38, 1988-1 C.B. 524, to satisfy the
minimum distribution requirements described above. This method permits an
individual to satisfy these requirements by taking from one individual
retirement account the amount required to satisfy the requirement for another.
ARTICLE V
1. The Depositor agrees to provide the Custodian with information necessary
for the Custodian to prepare any reports required under section 408(i) and
Regulations sections 1.408-5 and 1.408-6.
2. The Custodian agrees to submit reports to the Internal Revenue Service
and the Depositor prescribed by the Internal Revenue Service.
ARTICLE VI
Notwithstanding any other articles which may be added or incorporated, the
provisions of Articles I through III and this sentence will be controlling. Any
additional articles that are not consistent with section 408(a) and the related
regulations will be invalid.
ARTICLE VII
This agreement will be amended from time to time to comply with the
provisions of the Code and related regulations. Other amendments may be made
with the consent of the persons whose signatures appear below.
- --------------------------------------------------------------------------------
NOTE: THE FOLLOWING SPACE (ARTICLE VIII) MAY BE USED FOR ANY OTHER
PROVISIONS YOU WANT TO ADD. IF YOU DO NOT WANT TO ADD ANY OTHER
PROVISIONS, DRAW A LINE THROUGH THIS SPACE. IF YOU DO ADD PROVISIONS,
THEY MUST COMPLY WITH APPLICABLE REQUIREMENTS OF STATE LAW AND THE
INTERNAL REVENUE CODE.
- --------------------------------------------------------------------------------
ARTICLE VIII
Contributions to this Custody account shall be applied by the Custodian to the
purchase of shares of the designated Fund and/or Portfolio. Shares so acquired
by the custodian shall be registered in the name of Custodian or its registered
nominee but beneficially owned by the depositor for whom the investments are
made. The depositor hereby acknowledges receipt of a current prospectus of the
appropriate fund. Current Custodial fee: $10.00/Year per account.
- --------------------------------------------------------------------------------
Depositor's signature _______________________________ Date____________________
Custodian's signature _______________________________ Date____________________
Witness _______________________________________________________________________
(Use only if signature of the Depositor or the
Custodian is required to be witnessed.)
- --------------------------------------------------------------------------------
GENERAL INSTRUCTIONS
(SECTION REFERENCES ARE TO THE INTERNAL REVENUE CODE UNLESS OTHERWISE NOTED.)
PURPOSE OF FORM
Form 5305-A is a model custodial account agreement that meets the requirements
of section 408(a) and has been automatically approved by the IRS. An individual
retirement account (IRA) is established after the form is fully executed by both
the individual (Depositor) and the Custodian and must be completed no later than
the due date of the individual's income tax return for the tax year (without
regard to extensions). This account must be created in the United States for the
exclusive benefit of the Depositor or his or her beneficiaries.
Individuals may rely on regulations for the Tax Reform Act of 1986 to the
extent specified in those regulations.
Do not file Form 5305-A with the IRS. Instead, keep it for your records.
For more information on IRAs, including the required disclosure you can get
from your custodian, get Pub. 590, Individual Retirement Arrangements (IRAs).
DEFINITIONS
CUSTODIAN. - The Custodian must be a bank or savings and loan association, as
defined in section 408(n), or any person who has the approval of the IRS to act
as custodian.
DEPOSITOR. - The Depositor is the person who establishes the custodial account.
IDENTIFYING NUMBER
The depositor's social security number will serve as the identification number
of his or her IRA. An employer identification number is only required for each
participant-directed IRA. An employer identification number is required for a
common fund created for IRAs.
IRA FOR NONWORKING SPOUSE
Form 5305-A may be used to establish the IRA custodial account for a nonworking
spouse.
Contributions to an IRA custodial account for a nonworking spouse must be made
to a separate IRA custodial account established by the nonworking spouse.
SPECIFIC INSTRUCTIONS
ARTICLE IV. - Distributions made under this article may be made in a single sum,
periodic payment, or a combination of both. The distribution option should be
reviewed in the year the Depositor reaches age 70 1/2 to ensure that the
requirements of section 408(a)(6) have been met.
ARTICLE VIII. - Article VIII and any that follow it may incorporate additional
provisions that are agreed to by the depositor and custodian to complete the
agreement. They may include, for example, definitions, investment powers, voting
rights, exculpatory provisions, amendment and termination, removal of the
custodian, custodian's fees, state law requirements, beginning date of
distributions, accepting only cash, treatment of excess contributions,
prohibited transactions with the depositor, etc. Use additional pages if
necessary and attach them to this form.
NOTE: FORM 5305-A MAY BE REPRODUCED AND REDUCED IN SIZE FOR ADOPTION TO PASSBOOK
PURPOSES.
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<PAGE>
[LOGO] Department of the Treasury
INTERNAL REVENUE SERVICE
PUBLICATION 590
Cat. No. 15160x
INDIVIDUAL
RETIREMENT
ARRANGEMENTS
(IRAs)
For use in preparing 1994 Returns
[graphic: We The People]
- -------------------------------------------------------------------------------
CONTENTS
IMPORTANT CHANGES 2
IMPORTANT REMINDERS 2
INTRODUCTION 2
CHAPTER 1 -- OVERVIEW 3
CHAPTER 2 -- WHO CAN SET UP AN IRA? 4
What Is Compensation? 4
CHAPTER 3 -- WHEN AND HOW CAN AN IRA BE SET UP? 5
Kinds of IRAs 5
Required Disclosures 6
CHAPTER 4 -- HOW MUCH CAN I CONTRIBUTE AND DEDUCT? 6
Contribution Limits 7
Deductible Contributions 8
Nondeductible Contributions 13
Tax-Free Withdrawal of Contributions 15
Comprehensive Examples 15
CHAPTER 5 -- CAN I TRANSFER RETIREMENT PLAN ASSETS? 17
Transfer From One Trustee to Another 17
Rollovers 17
Transfers Incident to Divorce 22
CHAPTER 6 -- WHEN CAN I WITHDRAW OR USE ASSETS FROM AN IRA? 22
Age 59 1/2 Rule 22
Required Distributions 23
Tax Treatment of Distributions 27
CHAPTER 7 -- WHAT ACTS RESULT IN PENALTIES? 32
Prohibited Transactions 32
Excess Contributions 33
Premature Distributions 34
Excess Accumulations 35
Excess Distributions 36
Reporting Additional Taxes 36
CHAPTER 8 -- SIMPLIFIED EMPLOYEE PENSION (SEP) 37
Definitions 37
Contributions 37
Salary Reduction Arrangement 40
Distributions 40
APPENDICES 42
Appendix A - Summary Record of IRA(s) for 1994 and Worksheet for
Determining Required Annual Distributions from Your IRA(s) 43
<PAGE>
Appendix B - Worksheets for Social Security Recipients Who
Contribute to an IRA 44
Appendix C - Filled-in Form 5329 56
Appendix D - Filled-in Forms 8606 58
Appendix E - Life Expectancy and Applicable Divisor Tables 60
INDEX 66
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IMPORTANT CHANGES
SEPS -- NEW COMPENSATION LIMIT. The compensation of a participant that can be
taken into account for computing contributions to a SEP-IRA is generally limited
to $150,000 for plan years beginning on or after January 1, 1994. See
CONTRIBUTIONS in Chapter 8 for more information.
IRAS -- REVISED DEDUCTION WORKSHEETS FOR SOCIAL SECURITY RECIPIENTS. The
WORKSHEETS FOR SOCIAL SECURITY RECIPIENTS WHO CONTRIBUTE TO AN IRA in Appendix B
have been revised to take into account the effects of the new law increasing the
portion of social security benefits that are taxable.
- -------------------------------------------------------------------------------
IMPORTANT REMINDERS
INTEREST EARNED. Although interest earned from your IRA is generally not taxed
in the year earned, it is NOT TAX-EXEMPT interest. DO NOT report it on your
return as tax-exempt interest.
PENALTY FOR FAILURE TO FILE FORM 8606. If you make nondeductible IRA
contributions and you do not file Form 8606, NONDEDUCTIBLE IRAS (CONTRIBUTIONS,
DISTRIBUTIONS, AND BASIS), with your tax return, you may have to pay a $50
penalty.
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INTRODUCTION
This publication begins with a general overview of the IRA rules and then
explains them in greater detail. The rules are for setting up an IRA,
contributing to it, transferring money or property to and from it, and making
withdrawals from it. Penalties for breaking the rules are also explained.
Worksheets, sample forms, and tables, listed under APPENDICES in the contents,
are included to help you comply with the rules. These appendices are at the
back of this publication.
RELATED PUBLICATIONS AND FORMS. This publication refers to publications and
forms that you may need. The following list of such USEFUL ITEMS does not
include Forms 1040, 1040A, or 1040EZ.
USEFUL ITEMS
You may want to see:
PUBLICATIONS
/ / 560 Retirement Plans for the Self-Employed
/ / 571 Tax-Sheltered Annuity Programs for Employees of Public Schools and
Certain Tax-Exempt Organizations
/ / 575 Pension and Annuity Income (Including Simplified General Rule)
/ / 939 Pension General Rule (Nonsimplified Method)
FORMS (AND INSTRUCTIONS)
/ / W-4P Withholding Certificate for Pension or Annuity Payments
/ / 1099-R Distributions From Pensions, Annuities, Retirement or
Profit-Sharing Plans, IRAs, Insurance Contracts, etc.
/ / 5305-SEP Simplified Employee Pension - Individual Retirement Accounts
Contribution Agreement
/ / 5305A-SEP Salary Reduction and Other Elective Simplified Employee Pension--
Individual Retirement Accounts Contribution Agreement
/ / 5329 Additional Taxes Attributable to Qualified Retirement Plans (Including
IRAs), Annuities, and Modified Endowment Contracts
/ / 5498 Individual Retirement Arrangement Information
/ / 8606 Nondeductible IRAs (Contributions, Distributions, and Basis)
/ / 8815 Exclusion of Interest From Series EE U.S. Savings Bonds Issued After
1989
- -------------------------------------------------------------------------------
FREE PUBLICATIONS AND FORMS. To order other publications and tax forms, call
our toll-free telephone number 1-800-TAX-FORM (829-3676) or write the IRS Forms
Distribution Center for your area as shown in your tax form's instructions.
TELEPHONE HELP FOR HEARING-IMPAIRED PERSONS. If you have access to TDD
equipment, you can call 1-800-829-4059 with your tax questions or to order forms
and publications. See your tax package for the hours of operation.
Page 2
<PAGE>
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1.
- -------------------------------------------------------------------------------
OVERVIEW
This chapter contains a brief overview of the rules that apply to IRAs. You
will find the detailed coverage of the rules in the chapters that follow.
An individual retirement arrangement (IRA) is a personal savings plan that
offers you tax advantages to set aside money for your retirement. That means
that you may be able to deduct your contributions to your IRA in whole or in
part, depending on your circumstances, and that, generally, amounts in your IRA,
including earnings and gains, are not taxed until distributed to you.
You can set up an IRA with several types of organizations. Most banks and
similar savings institutions, mutual funds, stock brokerage firms, and insurance
companies offer IRAs that meet Internal Revenue Code (IRC) requirements. Not
later than the date one of them sets up an IRA for you, it must give you an IRA
disclosure statement. However, if the statement is given to you less than 7 days
before you set up (or purchase, if earlier) your IRA, you can revoke your IRA
during a period ending not less than 7 days after the day you set it up (or
purchase it, if earlier).
- -------------------------------------------------------------------------------
WHO CAN SET UP AN IRA?
You can set up an IRA if you have taxable compensation during the year and have
not reached age 70 1/2 by the end of the year. Compensation includes wages,
salaries, tips, commissions, fees, bonuses, and taxable alimony and separate
maintenance payments.
You may also be able to set up an IRA for your spouse.
HOW CAN AN IRA BE SET UP?
You can use the following types of IRAs:
INDIVIDUAL RETIREMENT ACCOUNT. You set this up with any financial institution
that satisfies the requirements of the Internal Revenue Code.
INDIVIDUAL RETIREMENT ANNUITY. You set this up by purchasing a special annuity
contract from a life insurance company.
EMPLOYER AND EMPLOYEE ASSOCIATION TRUST ACCOUNT. Your employer, labor union, or
other employee association can set up an individual retirement account for you.
SIMPLIFIED EMPLOYEE PENSION (SEP). Under a SEP plan, your employer can set up
an individual retirement account (called a SEP-IRA) for you that generally lets
your employer contribute to it each year and deduct up to 15% of your
compensation or $30,000, whichever is less. A self-employed person is treated as
an employee for this purpose.
HOW MUCH CAN I CONTRIBUTE TO AN IRA?
You can contribute up to $2000 or 100% of your taxable compensation, whichever
is less, to your IRA each year. Your contributions may or may not be fully
deductible. Whether your contributions are deductible or nondeductible, you must
have received taxable compensation to make contributions to an IRA.
HOW MUCH CAN I DEDUCT?
The amount of your deduction depends on whether or not you or your spouse are
covered by a retirement plan at work. If you are covered (or considered
covered), your deduction amount also depends on your filing status, and how much
income you have. The CAN YOU TAKE AN IRA DEDUCTION? chart, in Chapter 4 of this
publication, shows whether you can take a full deduction, a partial deduction,
or no deduction. To figure a partial deduction, see the worksheets provided in
Chapter 4.
NONDEDUCTIBLE IRA CONTRIBUTIONS. Even if you cannot take a full deduction, you
can still contribute up to $2,000 or 100% of compensation, whichever is less.
The contributions that are not deductible are called "nondeductible
contributions." When you make these, you must attach Form 8606 to your tax
return.
CAN I TRANSFER (ROLL OVER) RETIREMENT PLAN ASSETS?
If you want to move your IRA assets into another IRA, you can. If you receive
an eligible rollover distribution from an employer's qualified retirement plan
that you want to roll over (transfer) into your IRA, you can do that too. You
can also roll over IRA assets into another employer's qualified plan, if all the
assets transferred to the IRA came from an employer's qualified plan. However,
there are special rules that you must follow to avoid paying tax on such
transfers.
WHEN CAN I WITHDRAW OR USE THE ASSETS IN MY IRA?
Generally, you can withdraw money or property from your IRA, without additional
tax, only after you reach age 59 1/2. You must start withdrawing your IRA assets
by April 1 of the year after the year in which you reach age 70 1/2, regardless
of whether you have retired.
Chapter 1 OVERVIEW Page 3
<PAGE>
WHAT ACTS RESULT IN PENALTIES?
You may have to pay additional taxes or penalties if you:
- - Contribute too much to your IRA (excess contribution),
- - Get money or property from your IRA before you reach age 59 1/2 (early
withdrawal),
- - Get too much money or property from your IRA (excess distribution),
- - Do not receive distributions from your IRA soon enough and in the amounts
required (excess accumulation),
- - Use your IRA in a way that is not allowed (prohibited transaction), or
- - Fail to file Form 8606 or overstate nondeductible contributions on it.
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- -------------------------------------------------------------------------------
2.
- -------------------------------------------------------------------------------
WHO CAN SET UP AN IRA?
You can set up and make contributions to an IRA if you received taxable
COMPENSATION (defined later) during the year and have not reached age 70 1/2 by
the end of the year.
YOUR IRA. You can have an IRA whether or not you are an active participant in
(covered by) any other retirement plan. However, you may not be able to deduct
all of your contributions if you or your spouse are covered by an employer
retirement plan. See WHO IS COVERED BY AN EMPLOYER PLAN? in Chapter 4.
IRA FOR YOUR SPOUSE. You may be eligible to set up and contribute to an IRA for
your spouse, whether or not he or she received compensation. This is called a
SPOUSAL IRA and is generally set up for a nonworking spouse. See CONTRIBUTION
LIMITS in Chapter 4.
You can use an individual retirement account or annuity, discussed in
Chapter 3, to set up a spousal IRA.
You CANNOT set up one IRA that you and your spouse own jointly. You and
your spouse must use separate IRAs. If you already have an IRA, you can keep
that IRA and set up another for your spouse.
You CANNOT roll over (see ROLLOVERS in Chapter 5) assets from your account
to your spouse's account. However, each spouse may be named as beneficiary and
receive the other spouse's IRA when that spouse dies.
ELIGIBILITY REQUIREMENTS. To contribute to a spousal IRA:
You must be married at the end of the tax year,
Your spouse must be under age 70 1/2 at the end of the tax year,
You must file a joint return for the tax year,
You must have taxable compensation for the year, and
Your spouse must either have no compensation, or choose to be treated as
having no compensation for the tax year.
The choice to be treated as having no compensation is made by identifying the
spousal IRA contribution on the joint return for the year.
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WHAT IS COMPENSATION?
As stated above, to set up and contribute to an IRA, you must have
received taxable compensation. This rule applies whether your
contributions are deductible or nondeductible. Generally, what you
earn from working is compensation.
WHAT INCOME IS COMPENSATION?
Compensation includes:
WAGES, SALARIES, ETC. Wages, salaries, tips, professional fees, bonuses, and
other amounts you receive for providing personal services are compensation.
Alternatively, the IRS treats as compensation any amount properly shown in box 1
of Form W-2, provided that amount is reduced by any amount properly shown in box
11 (nonqualified plans).
COMMISSIONS. An amount you receive that is a percentage of profits or sales
price is compensation.
SELF-EMPLOYMENT INCOME. If you are self-employed (a sole proprietor or a
partner), compensation is your net earnings from your trade or business
(provided your personal services are a material income-producing factor),
reduced by your deduction for contributions on your behalf to retirement plans
and the deduction allowed for one-half of your self-employment taxes.
If you invest in a partnership and do not provide services that are a
material income-producing factor, your share of partnership income is not
compensation.
Compensation also includes earnings from self-employment that are not
subject to self-employment tax because of your religious beliefs. See
Publication 533, SELF-EMPLOYMENT TAX, for more information.
When you have both self-employment income and salaries and wages, your
compensation is the sum of the amounts.
SELF-EMPLOYMENT LOSS. If you have a net loss from self-employment, do not
subtract the loss from salaries
Page 4 Chapter 2 WHO CAN SET UP AN IRA?
<PAGE>
or wages you receive when figuring your total compensation.
ALIMONY AND SEPARATE MAINTENANCE. All taxable alimony and separate maintenance
payments you receive under a decree of divorce or separate maintenance are
treated as compensation.
WHAT INCOME IS NOT COMPENSATION?
Compensation does NOT include:
- - Earnings and profits from property, such as rental income, interest income,
and dividend income,
- - Pension or annuity income,
- - Any deferred compensation received (compensation payments postponed from a
past year),
- - Foreign earned income and/or housing cost amounts that are excluded from
income, or
- - Any other amounts that are excluded from income.
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- -------------------------------------------------------------------------------
3.
- -------------------------------------------------------------------------------
WHEN AND HOW CAN AN IRA BE SET UP?
You can set up an IRA at any time during a year. However, the time for
making contributions for a year is limited. See WHEN TO CONTRIBUTE in Chapter 4.
You can set up different kinds of IRAs with a variety of organizations. You
can set up an IRA at a bank or other financial institution, or with a mutual
fund or life insurance company. You can also set up an IRA through your
stockbroker. Any IRA must meet Internal Revenue Code requirements. The
requirements for the various arrangements are discussed below.
- -------------------------------------------------------------------------------
KINDS OF IRAS
Your IRA can be an individual retirement account or annuity. It can
be part of either a simplified employee pension (SEP) of your employer
or part of an employer or employee association trust account.
INDIVIDUAL RETIREMENT ACCOUNT
An individual retirement account is a trust or custodial account
set up in the United States for your exclusive benefit or for the
benefit of your beneficiaries. The account is created by a written
document. The document must show that the account meets all of the
following requirements:
1) The trustee or custodian must be a bank, a federally insured credit union,
a savings and loan association, or an entity approved by the IRS to act as
trustee or custodian.
2) The trustee or custodian generally cannot accept contributions of more than
$2,000 a year. However, rollover contributions and employer contributions
to a simplified employee pension (SEP), as explained in Chapter 8, can be
more than $2,000.
3) Your contributions must be in cash, except that rollover contributions can
be property other than cash. See ROLLOVERS in Chapter 5.
4) The amount in your account must be fully vested (you must have a
nonforfeitable right to the amount) at all times.
5) Money in your account cannot be used to buy a life insurance policy.
6) Assets in your account cannot be combined with other property, except in a
common trust fund or common investment fund.
7) You must start receiving distributions from your account by April 1 of the
year following the year in which you reach age 70 1/2. For detailed
information on distributions from your IRA, see the discussion in Chapter 6
under REQUIRED DISTRIBUTIONS.
INDIVIDUAL RETIREMENT ANNUITY
You can set up an individual retirement annuity by purchasing an annuity
contract or an endowment contract from a life insurance company.
An individual retirement annuity must be issued in your name as the owner,
and either you or your beneficiaries who survive you are the only ones who can
receive the benefits or payments.
An individual retirement annuity must meet the following requirements:
1) Your entire interest in the contract must be nonforfeitable.
2) It must provide that you cannot transfer any portion of it to any person
other than the issuer.
3) It must have flexible premiums so that if your compensation changes, your
payment may also change. This provision applies to contracts issued after
November 6, 1978.
4) It must provide that you cannot contribute more than $2,000 in any year,
and that you must use any refunded premiums to pay for future premiums or
to buy more benefits before the end of the calendar year after the year you
receive the refund.
5) It must begin distributions by April 1 of the year following the year in
which you reach age 70 1/2. See REQUIRED DISTRIBUTIONS in Chapter 6.
Chapter 3 WHEN AND HOW CAN AN IRA BE SET UP? Page 5
<PAGE>
INDIVIDUAL RETIREMENT BONDS
The sale of individual retirement bonds issued by the federal government was
suspended after April 30, 1982. The bonds have these features:
1) You are paid interest on them only when you cash them in.
2) You are not paid any further interest after you reach age 70 1/2. If you
die, interest will stop 5 years after your death, or on the date you would
have reached age 70 1/2, whichever is earlier.
3) You may not transfer the bonds.
4) You may not sell, discount, or use the bonds as collateral or security.
If you cash (redeem) the bonds before the year in which you reach age 59 1/2,
you may be subject to a 10% penalty. See PREMATURE DISTRIBUTIONS, in Chapter 7.
You can roll over redemption proceeds into IRAs.
EMPLOYER AND EMPLOYEE ASSOCIATION TRUST ACCOUNTS
Your employer, labor union, or other employee association can set up a trust to
provide individual retirement accounts for its employees or members. The rules
for individual retirement accounts apply to these employer or union-established
IRAs.
SIMPLIFIED EMPLOYEE PENSION (SEP)
A simplified employee pension (SEP) is a written arrangement that allows your
employer to make deductible contributions to an IRA (a SEP-IRA) set up for you
to receive such contributions. See Chapter 8, SIMPLIFIED EMPLOYEE PENSION (SEP)
for more information.
INHERITED IRAS
If you, as beneficiary, inherit an IRA, that IRA becomes subject to special
rules. An IRA you inherit from an owner who died after October 22, 1986, will
be included in the estate of the decedent and, unless you are the decedent's
surviving spouse, you cannot treat it as your own. This means that, unless you
are the surviving spouse, you cannot make contributions (including rollover
contributions) to the IRA and you cannot roll it over. But, like the original
owner, you generally will not owe tax on the assets in the IRA until you receive
distributions from it.
If you are a surviving spouse, you can elect to treat an inherited IRA as
your own. You will be treated as having made this election if you:
- - Make contributions (including rollover contributions) to the inherited IRA,
or
- - Do not make required distributions from it.
For more information, see the discussions of inherited IRAs in Chapters 5
and 6 and the discussion of distributions to beneficiaries in Chapter 6.
- -------------------------------------------------------------------------------
REQUIRED DISCLOSURES
The trustee or issuer (sometimes called the sponsor) of the IRA you choose
generally must give you a disclosure statement about your arrangement at least 7
days before you set up your IRA. However, the sponsor can give you the
statement not later than the date you set up (or purchase, if earlier) your IRA,
if you are given at least 7 days from that date to revoke the IRA. If you
revoke your IRA within the revocation period, the sponsor must return to you the
entire amount you paid. The sponsor must report on the appropriate IRS forms
both your contribution to the IRA (unless by a trustee-to-trustee transfer) and
the distribution to you upon your revocation of the IRA. These requirements
apply to all sponsors.
Generally, the sponsor is the bank that is the trustee of the account or
the insurance company that issued the annuity contract.
DISCLOSURE STATEMENT. The disclosure statement given to you by the plan sponsor
must contain explanations of items required by the income tax regulations in
plain language. For example, the statement should provide information on when
and how you can revoke the IRA, including the name, address, and telephone
number of the person to receive the notice of cancellation. This explanation
must appear at the beginning of the disclosure statement.
- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
4.
- ------------------------------------------------------------------------------
HOW MUCH CAN I CONTRIBUTE AND DEDUCT?
As soon as your IRA is set up, you can make contributions (put money in)
to it through your chosen sponsor (trustee or other administrator).
CONTRIBUTIONS MUST BE IN THE FORM OF MONEY (cash, check or money order). You
cannot contribute property. However, you may be able to transfer or roll over
certain property from one account to another. See the discussion of rollovers
and other transfers in Chapter 5.
You can make contributions to your IRA each year that you qualify. TO
QUALIFY TO MAKE CONTRIBUTIONS you must have compensation (as discussed in
Chapter 2)
Page 6 Chapter 4 HOW MUCH CAN I CONTRIBUTE AND DEDUCT?
<PAGE>
and have not reached age 70 1/2 during the year. Thus, for any year in which
you do not work, you CANNOT make IRA contributions unless you receive
alimony. EVEN IF YOU DO NOT QUALIFY to make contributions for the current
year, the amounts you contributed for years in which you did qualify can
remain in your IRA. You can resume making contributions for any years that
you qualify.
You can make contributions to a SPOUSAL IRA each year that the spousal
IRA requirements are met. See IRA FOR YOUR SPOUSE in Chapter 2.
There are limits and other rules that affect the amount you can
contribute and the amount you can deduct. This chapter discusses those rules.
CONTRIBUTION LIMITS
The most that you can contribute for any year to your IRA is THE SMALLER OF the
following amounts:
- - Your compensation (defined in Chapter 2) that you must include in income
for the year, or
- - $2,000.
NOTE. This limit is reduced by any contributions to a 501(c)(18) plan
(generally, a plan created before June 25, 1959, funded entirely by employer
contributions).
This is the most you can contribute regardless of whether your
contributions are to one or more IRAs or whether all or part of your
contributions are nondeductible (see NONDEDUCTIBLE CONTRIBUTIONS, later).
EXAMPLES. Betty, who is single, earns $24,000 in 1994. Her IRA
contributions for 1994 are limited to $2,000.
John, a college student working part time, earns $1,500 in 1994. His IRA
contributions for 1994 are limited to $1,500, the amount of his compensation.
SPOUSAL IRA. The total combined contributions you can make each year to your
IRA and a spousal IRA (discussed earlier) is THE SMALLER OF:
- - $2,250 or
- - Your taxable compensation for the year.
NOTE. This limit is reduced by any contributions to a 501(c)(18) plan
(generally, a plan created before June 25, 1959, funded entirely by employer
contributions)
You can divide your IRA contributions between your IRA and the spousal IRA
in any way you choose, as long as you do not contribute more than $2,000 to
either IRA (see examples in next discussion).
SPOUSE HAS COMPENSATION DURING THE YEAR. If your spouse also has taxable
compensation during the year and each of you is under age 70 1/2 at the end of
the year, you and your spouse can each have regular IRAs. You each may
contribute up to the $2,000 limit, unless your taxable compensation (or your
spouse's) is less than $2,000.
However, either you or your spouse can choose to be treated as having no
compensation and use the rules for spousal IRAs. Generally, if one spouse has
compensation of less than $250 for the year, a spousal IRA is more advantageous
than a regular IRA.
EXAMPLE 1. Bill and Linda file a joint return for 1994. Bill earned
$27,000 and Linda earned $190 that year. Linda chose to be treated as having no
compensation; therefore, Bill set up a spousal IRA for her. Since he contributed
$1,800 to his IRA, the most he can contribute to the spousal IRA is $450 ($2,250
minus $1,800).
EXAMPLE 2. Assume the same facts as in Example 1 except Bill's
contribution to the spousal IRA is $2,000 (the limit for either IRA). The most
he can contribute to his own IRA is $250 ($2,250 minus $2,000).
SPOUSE UNDER AGE 70 1/2. You cannot make contributions to your IRA for the
year you reach age 70 1/2 or any later year. However, for any year you have
compensation, you can continue to make contributions of up to $2,000 to a
spousal IRA until the year your spouse reaches age 70 1/2.
CONTRIBUTIONS NOT REQUIRED. You do not have to make contributions to your IRA
or a spousal IRA for every tax year, even if you can.
LESS THAN MAXIMUM CONTRIBUTIONS. If your contributions to your IRA for a year
were less than the smaller of 100% of your compensation or $2,000, YOU CANNOT
CONTRIBUTE MORE IN A LATER YEAR to make up the difference. However, you can
apply an excess contribution in one year to a later year if the contributions
for that later year are less than the maximum allowed for that year. See EXCESS
CONTRIBUTIONS in Chapter 7.
EXAMPLE. Paul earns $30,000 in 1994. Although he can contribute up to
$2,000 for 1994, he contributes only $1,000. Paul cannot make up the $1,000
($2,000 minus $1,000) difference between his actual contributions for 1994 and
his 1994 limit by contributing an additional $1,000 (in excess of the limit for
the later year) in 1995 or any later year.
MORE THAN ONE IRA. If you have more than one IRA, the limit applies to the
total contributions made to your IRAs for the year.
BOTH SPOUSES HAVE COMPENSATION. If both you and your spouse have compensation,
each of you can set up an IRA. Both of you cannot participate in the same IRA.
The maximum contribution for each of you is figured separately and depends on
how much each of you earns.
FILING STATUS has no effect on the amount of the permitted contribution to
an IRA. However, if you or your spouse is covered by a retirement plan at work,
your DEDUCTION may be reduced or eliminated, depending on your filing status and
income. See DEDUCTIBLE CONTRIBUTIONS, later.
Chapter 4 HOW MUCH CAN I CONTRIBUTE AND DEDUCT? Page 7
<PAGE>
EXAMPLE. Sam and Helen are married. They both work and each has an IRA.
Sam earned $1,800 and Helen earned $28,000 in 1994. Sam can contribute to his
IRA up to $1,800 for the year. Helen can contribute up to $2,000 to her IRA.
Whether they file a joint return or separate returns, the amount they can
contribute is the same.
IRA CONTRIBUTIONS UNDER COMMUNITY PROPERTY LAWS. Contributions cannot be made
to your IRA based on the earnings of your spouse, unless you have a spousal IRA.
The contributions must be based on your own compensation, even in community
property states.
INHERITED IRAS. If you inherit an IRA from your spouse, you can choose to treat
it as your own by making contributions to that IRA. See INHERITED IRAS in
Chapter 3.
If, however, you inherit an IRA from someone who died after December 31,
1983, and you are not the decedent's spouse, you CANNOT CONTRIBUTE to that IRA,
because you cannot treat it as your own. See also INHERITED IRA(S) in Chapter
3, under ROLLOVERS in Chapter 5, and in Chapter 6.
ANNUITY OR ENDOWMENT CONTRACTS. If you invest in an annuity or endowment
contract under an individual retirement annuity, YOU CANNOT CONTRIBUTE MORE THAN
$2,000 toward its cost for the tax year, INCLUDING THE COST OF LIFE INSURANCE
COVERAGE. If you contribute more than $2,000, the annuity or endowment contract
is disqualified.
BROKER'S COMMISSIONS. Broker's commissions that you paid in connection with
your IRA ARE SUBJECT TO the contribution limit and ARE NOT DEDUCTIBLE as a
miscellaneous deduction on Schedule A (Form 1040).
TRUSTEE'S FEES. Trustee's administrative fees that are billed separately and
paid by you in connection with your IRA are deductible. They ARE DEDUCTIBLE (to
the extent they are ordinary and necessary) as a miscellaneous deduction on
Schedule A (Form 1040). The deduction is subject to the 2% of adjusted gross
income limit. These fees ARE NOT SUBJECT TO the contribution limit.
WHEN TO CONTRIBUTE
You can make contributions to your IRA (or to a spousal IRA) for a year at any
time during the year or by the due date for filing your return for that year,
NOT including extensions. For most people, this means that contributions for
1994 must be made by April 17, 1995.
DESIGNATING YEAR FOR WHICH CONTRIBUTION IS MADE. If you contribute an amount to
your IRA between January 1, 1995, and April 17, 1995, you should tell the
sponsor which year (1994 or 1995) the contribution is for. If you do not tell
the sponsor which year it is for, the sponsor can assume, for reporting to the
IRS, that the contribution is for 1995, the year the sponsor received it.
FILING BEFORE MAKING YOUR CONTRIBUTION. You can file your return claiming an
IRA contribution before you actually make the contribution. You must, however,
make the contribution by the due date of your return, NOT including extensions.
- -------------------------------------------------------------------------------
DEDUCTIBLE CONTRIBUTIONS
Generally, you can take a deduction for the contributions that you are allowed
to make to your IRA. However, IF YOU OR YOUR SPOUSE ARE COVERED BY AN EMPLOYER
RETIREMENT PLAN at any time during the year, your allowable IRA deduction may be
less than your allowable contributions. Your allowable deduction may be reduced
or eliminated, depending on the amount of your income and your filing status, as
discussed later under DEDUCTION LIMITS. These limits do not affect your
allowable contributions (see NONDEDUCTIBLE CONTRIBUTIONS, later).
WHO IS COVERED BY AN EMPLOYER PLAN?
The Form W-2, WAGE AND TAX STATEMENT, you receive from your employer includes a
box to indicate whether or not you are covered for the year. The form should
have a mark in the "Pension Plan" box if you are covered.
If you are not certain whether you are covered by your employer's
retirement plan, you should ask your employer.
EMPLOYER PLANS
An employer retirement plan is one that an employer sets up for the benefit of
its employees. For purposes of the IRA deduction rules, an employer retirement
plan is any of the following:
- - A qualified (meets Internal Revenue Code requirements) pension,
profit-sharing, stock bonus, money purchase pension, etc., plan (including
Keogh plans),
- - A 401(k) plan (generally an arrangement included in a profit-sharing or
stock bonus plan that allows you to choose to take part of your
compensation from your employer in cash or have your employer pay it into
the plan),
- - A union plan (a qualified stock bonus, pension, or profit-sharing plan
created by a collective bargaining agreement between employee
representatives and one or more employers),
- - A qualified annuity plan,
- - A plan established for its employees by the United States, a state or
political subdivision thereof, or by an agency or instrumentality of any of
the foregoing (other than an eligible state deferred compensation plan
(section 457 plan)),
- - A tax-sheltered annuity plan for employees of public schools and certain
tax-exempt organizations (403(b) plan),
Page 8 Chapter 4 HOW MUCH CAN I CONTRIBUTE AND DEDUCT?
<PAGE>
Table 4.1 CAN YOU TAKE AN IRA DEDUCTION? This chart sums up whether you can
take a full deduction, a partial deduction, or no deduction as
discussed in Chapter 4.
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------
IF YOUR IF YOU ARE
MODIFIED AGI* COVERED BY A RETIREMENT PLAN AT WORK
IS: AND YOUR FILING STATUS IS:
- ---------------------------------------------------------------------------------------
<S> <C> <C> <C>
*SINGLE *MARRIED FILING MARRIED FILING
*HEAD OF JOINTLY (EVEN SEPARATELY**
HOUSEHOLD IF YOUR SPOUSE
IS NOT COVERED
BY A PLAN AT
WORK)
*QUALIFYING
WIDOW(ER)
At Least But Less
Than You Can Take You Can Take You Can Take
- ---------------------------------------------------------------------------------------
$0.01 $10,000.00 Full deduction Full deduction Partial deduction
$10,000.00 $25,000.01 Full deduction Full deduction No deduction
$25,000.01 $35,000.00 Partial deduction Full deduction No deduction
$35,000.00 $40,000.01 No deduction Full deduction No deduction
$40,000.01 $50,000.00 No deduction Partial deduction No deduction
$50,000.00 or over No deduction No deduction No deduction
- ---------------------------------------------------------------------------------------
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
IF YOUR IF YOU ARE NOT
MODIFIED AGI* COVERED BY A RETIREMENT PLAN AT WORK
IS: AND YOUR FILING STATUS IS:
- -----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
MARRIED FILING *SINGLE *MARRIED FILING MARRIED FILING
JOINTLY (AND *HEAD OF JOINTLY OR SEPARATELY
YOUR SPOUSE IS HOUSEHOLD SEPARATELY (EVEN IF
COVERED BY A (AND YOUR YOUR SPOUSE
PLAN AT WORK) SPOUSE IS NOT IS COVERED BY
COVERED BY A A PLAN AT
PLAN AT WORK) WORK)***
*QUALIFYING
WIDOW(ER)
At Least But Less
Than You Can Take You Can Take You Can Take You Can Take
- -----------------------------------------------------------------------------------------------------------
$0.01 $10,000.00 Full deduction
$10,000.00 $25,000.01 Full deduction
$25,000.01 $35,000.00 Full deduction Full Full Full
Deduction Deduction Deduction
$35,000.00 $40,000.01 Full deduction
$40,000.01 $50,000.00 Partial deduction
$50,000.00 or over No deduction
- -----------------------------------------------------------------------------------------------------------
</TABLE>
*MODIFIED AGI (adjusted gross income) is: (1) for Form 1040A--the amount on line
14 increased by any excluded series EE bond interest shown on Form 8815,
EXCLUSION OF INTEREST FROM SERIES EE U.S. SAVINGS BONDS ISSUED AFTER 1989, or
(2) for Form 1040--the amount on line 31, figured without taking into account
any IRA deduction or any foreign earned income exclusion and foreign housing
exclusion (deduction), or any series EE bond interest exclusion from Form 8815.
**If you DID NOT live with your spouse AT ANY TIME during the year, your filing
status is considered, for this purpose, as Single (therefore your IRA deduction
is determined under the "Single" column). ***You are entitled to the full
deduction ONLY IF you DID NOT live with your spouse AT ANY TIME during the year.
If you DID live with your spouse during the year, you are, for this purpose,
treated as though you are covered by a retirement plan at work (therefore, your
IRA deduction is determined under the "Married Filing Separately" column in the
"If You Are Covered by a Retirement Plan..." section of the chart).
- --------------------------------------------------------------------------------
- - A simplified employee pension (SEP) plan, or
- - A 501(c)(18) trust (a certain type of tax-exempt trust created before June
25, 1959, that is funded only by employee contributions), if you made
deductible contributions during the year.
WHEN ARE YOU COVERED?
Special rules apply to determine whether you are considered to be covered by (an
active participant in) a plan for a tax year. These rules differ depending on
whether the plan is a defined contribution or defined benefit plan. They also
differ because of your marital status.
DEFINED CONTRIBUTION PLAN. Generally, you are considered covered by a defined
contribution plan if amounts are contributed or allocated to your account for
the plan year that ends within your tax year.
A defined contribution plan is a plan that provides for a separate
account for each person covered by the plan. Benefits are based only
on amounts contributed to or allocated to each account. Types of
defined contribution plans include profit-sharing plans, stock bonus
plans, and money purchase pension plans.
EXAMPLE. Company A has a money purchase pension plan. Its plan year is from
July 1 to June 30. The plan provides that contributions must be allocated as of
June 30. Bob, an employee, leaves Company A on December 30, 1993. The
contribution for the plan year ending on June 30, 1994, is not made until
February 15, 1995 (when Company A files its corporate income tax return). In
this case, Bob is considered covered by the plan for his 1994 tax year.
DEFINED BENEFIT PLAN. If you are eligible (meet minimum age and years of
service requirements) to participate in your employer's defined benefit plan for
the plan year that ends within your tax year, you are considered covered by the
plan. This rule applies even if you declined to be covered by the plan, you did
not make a required contribution, or you did not perform the minimum service
required to accrue a benefit for the year.
A defined benefit plan is any plan that is not a defined contribution plan.
Contributions to a defined benefit plan are based on a computation of what
contributions are necessary to provide definite benefits to plan participants.
Defined benefit plans include pension plans and annuity plans.
Chapter 4 HOW MUCH CAN I CONTRIBUTE AND DEDUCT? Page 9
<PAGE>
EXAMPLE. John, an employee of B, is eligible for coverage under B's
defined benefit plan with a July 1 to June 30 plan year. John leaves B on
December 30, 1993. Since John is eligible for coverage under the plan for its
year ending June 30, 1994, he is considered covered by the plan for his 1994
tax year.
NONVESTED EMPLOYEES. If, for a plan year, an amount is allocated to your plan
account in a defined contribution plan, or you accrue a benefit in a defined
benefit plan, but you have NO VESTED INTEREST (legal right) in such account or
accrual, you are still covered by such plan as an active participant.
MARITAL STATUS. Generally you are considered covered by an employer retirement
plan because your spouse is covered by one. To determine whether you are
considered covered by an employer retirement plan for the tax year
because of your spouse's coverage, you must wait until the last day of
the year. This is because your filing status (whether you are considered
married or single) for the year depends on your marital status on the last day
of the tax year.
IF YOU WERE MARRIED TO TWO DIFFERENT SPOUSES DURING THE SAME YEAR, you are
considered married for the year, for this purpose, to the spouse to whom you
were married at the end of the year.
IF YOUR SPOUSE DIED DURING THE YEAR, and you file a joint return as the
surviving spouse, coverage by an employer retirement plan for that year is
determined as if your spouse were still alive.
IF YOU ARE MARRIED FILING A JOINT RETURN. Both you and your spouse are
considered covered by a plan if either of you is covered by a plan and you file
a joint return.
IF YOU ARE MARRIED FILING A SEPARATE RETURN and you are not covered by an
employer retirement plan, but your spouse is, you are considered covered if you
and your spouse lived together at any time during the year.
FEDERAL JUDGES are considered covered by an employer retirement plan in figuring
the IRA deduction.
WHEN ARE YOU NOT COVERED?
You are not covered by an employer plan if neither you nor your spouse is
covered for any part of the year. You are also not covered for this purpose in
the following situations.
IF YOU ARE MARRIED FILING A SEPARATE RETURN and you are not covered by an
employer retirement plan, you can be considered not covered, even if your spouse
is covered by a plan. This rule applies only if you and your spouse did not live
together at any time during the year.
COVERAGE UNDER SOCIAL SECURITY OR RAILROAD RETIREMENT (TIER I AND TIER II) does
not count as coverage under an employer retirement plan in figuring the IRA
deduction.
IF YOU RECEIVE RETIREMENT BENEFITS FROM A PREVIOUS EMPLOYER'S PLAN and you are
not covered (or considered covered because of your spouse) under another
employer plan, you are not considered covered by a plan.
RESERVISTS AND VOLUNTEER FIRE FIGHTERS. Certain members of the reserve units of
the Armed Forces (in general, those members who did not serve more than 90 days
during the year) and certain volunteer fire fighters (in general, those members
whose accrued retirement benefits at the beginning of the year will not exceed
$1800 per year at retirement) are not considered covered by U.S. or local
government retirement plans.
SOCIAL SECURITY RECIPIENTS
If you receive social security benefits, have taxable compensation, contribute
to your IRA, and are covered (or considered covered) by an employer retirement
plan, complete the worksheets in Appendix B of this publication. Use these
worksheets to figure your IRA deduction and the taxable portion, if any, of your
social security benefits.
DEDUCTION LIMITS
As discussed under DEDUCTIBLE CONTRIBUTIONS, earlier, the deduction you can take
for contributions made to your IRA depends on whether you or your spouse is
covered for any part of the year by an employer retirement plan. But your
deduction is also affected by how much income you have and your filing status,
as discussed below under ADJUSTED GROSS INCOME LIMITATION.
FULL DEDUCTION. If neither you nor your spouse is covered for any part of the
year by an employer retirement plan, you can take a deduction for your total
contributions to one or more IRAs of up to $2,000, or 100% of compensation,
whichever is less. This limit is reduced by any contributions to a 501(c)(18)
plan.
REDUCED OR NO DEDUCTION. If either you or your spouse is covered by an
employer retirement plan, you may be entitled to only a partial (reduced)
deduction or no deduction at all, depending on your income and your filing
status. Your deduction begins to decrease (phase out) when your income rises
above a certain amount and is eliminated altogether when it reaches a higher
amount. The amounts vary depending on your filing status.
ADJUSTED GROSS INCOME LIMITATION
The effect of income on your deduction, as just described, is sometimes
called the adjusted gross income limitation (AGI limit). To compute your
REDUCED IRA DEDUCTION, you must first determine your modified adjusted gross
income and your filing status.
Page 10 Chapter 4 HOW MUCH CAN I CONTRIBUTE AND DEDUCT?
<PAGE>
MODIFIED ADJUSTED GROSS INCOME (MODIFIED AGI) IS:
- - If you file FORM 1040 -- the amount on the page 1 "adjusted gross income"
line, but modified (changed) by figuring it without taking any:
a) IRA deduction,
b) Foreign earned income exclusion,
c) Foreign housing exclusion or deduction, or
d) Exclusion of series EE bond interest shown on Form 8815.
- - If you file FORM 1040A -- the amount on the page 1 "adjusted gross income"
line, but modified by figuring it without any IRA deduction, or any
exclusion of series EE bond interest shown on Form 8815.
NOTE: Do not assume that modified AGI is the same as your compensation.
You will find that your modified AGI may include income in addition to your
taxable compensation such as interest, dividends, and INCOME FROM IRA
DISTRIBUTIONS, discussed next.
INCOME FROM IRA DISTRIBUTIONS. If you received IRA distributions in 1994
and your IRA(s) include(s) only deductible contributions, the distributions are
fully taxable.
If you made contributions for 1994 that may be nondeductible contributions
(discussed later), depending on whether your IRA deduction for that year is
reduced (see DEDUCTION PHASEOUT, later), the distributions may be partly
tax-free and partly taxable. IN THAT CASE, YOU MUST FIGURE THE TAXABLE PART OF
THE IRA DISTRIBUTION BEFORE YOU CAN FIGURE YOUR MODIFIED AGI. To do this, you
can use the WORKSHEET TO FIGURE TAXABLE PART OF DISTRIBUTION, under TAX
TREATMENT OF DISTRIBUTIONS in Chapter 6.
FILING STATUS. Your filing status depends primarily on your marital status. For
this purpose you need to know if your filing status is single (or head of
household), married filing jointly (or qualifying widow(er)), or married filing
separately. If you need more information on filing status, see Publication 501,
EXEMPTIONS, STANDARD DEDUCTION, AND FILING INFORMATION.
MARRIED FILING SEPARATE EXCEPTION. If you did not live with your spouse at
any time during the year and you file a separate return, your filing status is
considered, for this purpose, as single.
DEDUCTION PHASEOUT. Your IRA deduction is reduced or eliminated entirely
depending on your filing status and modified AGI as follows:
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------
Your IRA deduction Your
is reduced if your deduction
MODIFIED AGI is eliminated
is within the if your
If your FILING PHASEOUT RANGE MODIFIED AGI
STATUS is: of: is:
- -------------------------------------------------------------------------------
<S> <C> <C>
Single, or
Head of
household $25,000.01 - $35,000 $35,000 or more
Married--
joint
return, or
Qualifying
widow(er) $40,000.01 - $50,000 $50,000 or more
Married--
separate
return $ 0.01 - $10,000 $10,000 or more
</TABLE>
- -------------------------------------------------------------------------------
HOW TO FIGURE YOUR REDUCED IRA DEDUCTION
If you are covered or considered covered by an employer retirement plan and your
modified AGI is within the phaseout range for your filing status (see above
table), your IRA deduction must be reduced. You can figure your reduced IRA
deduction FOR EITHER Form 1040 or Form 1040A by using the following worksheet.
Also, the instructions for these tax forms include similar worksheets.
NOTE: If you were married and both you and your spouse worked and you both
contributed to IRAs, figure the deduction for each of you separately.
If you were divorced or legally separated (and did not remarry) before the
end of the year, you cannot deduct any contributions you made to your spouse's
IRA. After a divorce or legal separation, you can deduct only the contributions
you made to your own IRA and your deductions are subject to the adjusted gross
income limitation under the rules for single individuals.
DEDUCTIBLE (AND NONDEDUCTIBLE) IRA CONTRIBUTIONS FOR AN IRA OTHER
THAN A SPOUSAL IRA. Complete lines 1 through 8 to figure your deductible and
nondeductible IRA contributions for the year.
Chapter 4 HOW MUCH CAN I CONTRIBUTE AND DEDUCT? Page 11
<PAGE>
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------
WORKSHEET FOR REDUCED IRA DEDUCTION
(USE ONLY IF YOU ARE COVERED, OR CONSIDERED COVERED, BY AN EMPLOYER PLAN AND
YOUR MODIFIED AGI IS WITHIN THE APPLICABLE PHASEOUT RANGE)
- -------------------------------------------------------------------------------
And your ENTER on
MODIFIED AGI line 1
If your FILING STATUS is: is over: below:
- -------------------------------------------------------------------------------
<S> <C> <C>
Single, or Head
of household $25,000 $35,000
Married-joint return,
or Qualifying widow(er) $40,000 $50,000
Married-separate return $ -0- $10,000
</TABLE>
- -------------------------------------------------------------------------------
1. Enter applicable amount from above. . . . . . . . . . .
---------------
2. Enter your MODIFIED AGI (combined, if married
filing jointly) . . . . . . . . . . . . . . . . . . . .
---------------
NOTE: If line 2 is equal to or more than the amount on line 1, STOP HERE;
your IRA contributions are not deductible; see NONDEDUCTIBLE CONTRIBUTIONS,
later.
3. Subtract line 2 from 1. (IF LINE 3 IS $10,000 OR
MORE, STOP HERE; you can take a full IRA deduction
for contributions of up to $2,000 or 100% of your
compensation, whichever is less.)
---------------
4. Multiply line 3 by 20% (.20). If the result is not a
multiple of $10, round it to the next highest
multiple of $10. (For example, $611.40 is rounded to
$620.) However, if the result is less than $200,
enter $200. . . . . . . . . . . . . . . . . . . . . .
---------------
5. Enter your compensation. (DO NOT include your
spouse's compensation, and, if you file Form 1040, do
not reduce your compensation by any losses from
self-employment.). . . . . . . . . . . . . . . . . . .
---------------
6. Enter contributions you made, or plan to make, to
your IRA for 1994, but DO NOT enter more than $2,000.
(If contributions are more than $2,000, see EXCESS
CONTRIBUTIONS in Chapter 7.) . . . . . . . . . . . . .
---------------
7. IRA DEDUCTION. Compare lines 4, 5, and 6. Enter the
smallest amount (or a smaller amount if you choose)
here and on the Form 1040 or 1040A line for your IRA,
whichever applies. (If line 6 is more than line 7 and
you want to make a nondeductible contribution, go
to line 8.). . . . . . . . . . . . . . . . . . . . . .
---------------
8. NONDEDUCTIBLE CONTRIBUTION. Subtract line 7 from line
5 or 6, whichever is smaller. Enter the result here
and on line 1 of your Form 8606. (See NONDEDUCTIBLE
CONTRIBUTIONS, later.) . . . . . . . . . . . . . . . .
---------------
DEDUCTIBLE (AND NONDEDUCTIBLE) IRA CONTRIBUTIONS FOR A SPOUSAL
IRA. The deduction phaseout rules that reduce or eliminate your IRA deduction
also apply to a spousal IRA. If you have a spousal IRA, are covered by an
employer retirement plan, and your modified AGI is within the phaseout range,
you can take only a reduced spousal IRA deduction.
Complete lines 9 through 17 to figure deductible and nondeductible
contributions (discussed later) for the year to a spousal IRA.
9. Enter the smaller of (a) $2,250 or (b) the
amount from line 5 . . . . . . . . . . . . . . . . . .
---------------
10. Add lines 7 and 8. Enter the total. (IF THIS AMOUNT IS
EQUAL TO OR MORE THAN LINE 9, STOP HERE; you cannot
make contributions to a spousal IRA. Also, see EXCESS
CONTRIBUTIONS in Chapter 7, later.) . . . . . . . . .
---------------
11. Subtract line 10 from line 9 . . . . . . . . . . . . .
---------------
12. Enter the smallest of (a) IRA contributions for 1994
to your spouse's IRA; (b) $2,000; or (c) the amount
on line 11. (If contributions are more than $2,000,
see EXCESS CONTRIBUTIONS, later.). . . . . . . . . . .
---------------
13. Multiply line 3 by 22.5% (.225). If the result is not
a multiple of $10, round it to the next highest multiple
of $10. However, if the result is less than $200,
enter $200 . . . . . . . . . . . . . . . . . . . . . .
---------------
14. Enter the amount from line 7 . . . . . . . . . . . . .
---------------
15. Subtract line 14 from line 13. Enter the result but
do not enter more than the amount on line 12 . . . . .
---------------
16. SPOUSAL IRA DEDUCTION. Compare lines 4, 5, and 15.
Enter the smallest amount (or a smaller amount if you
choose) here and on your Form 1040 or 1040A. (If line
12 is more than line 16 and you want to make a
nondeductible contribution for your spouse,
go to line 17.). . . . . . . . . . . . . . . . . . . .
---------------
17. SPOUSAL IRA NONDEDUCTIBLE CONTRIBUTIONS. Subtract
line 16 from line 12. Enter the result here and on line
1 of your spouse's Form 8606 . . . . . . . . . . . . .
---------------
REPORTING DEDUCTIBLE CONTRIBUTIONS
You do not have to itemize deductions to claim your deduction for IRA
contributions. For FORM 1040, deduct your IRA contributions for 1994 on line
23a and, if you file a joint return, deduct your spouse's IRA contributions on
line 23b. For FORM 1040A, deduct your contributions on line 15a and, if you file
a joint return, deduct your spouse's IRA contributions on line 15b. You
can use either form in most cases.
YOU MUST USE FORM 1040 instead of Form 1040A if you owe tax on any early
distributions from your IRA, any excess contributions made to your IRA, or any
excess accumulations in your IRA account (see Chapter 7, WHAT ACTS RESULT IN
PENALTIES?).
FORM 1040EZ does not provide for IRA deductions.
IF YOU ARE SELF-EMPLOYED (a sole proprietor or partner) and have a SEP-IRA, take
your deduction for allowable contributions on line 27, Form 1040.
Page 12 Chapter 4 HOW MUCH CAN I CONTRIBUTE AND DEDUCT?
<PAGE>
FORM 1040
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
23A Your IRA deduction (see page 19) . . . . . . . . . . 23A
---------------
ADJUSTMENTS B Spouse's IRA deduction (see page 19) . . . . . . . . 23B
---------------
TO INCOME 24 Moving expenses. Attach Form 3903 or 3903-F . . . . 24
---------------
25 One-half of self-employment tax. . . . . . . . . . . 25
---------------
CAUTION: See 26 Self-employed health insurance deduction (see page 21) 26
---------------
instructions.. 27 Keogh retirement plan and self-employed SEP deduction 27
---------------
28 Penalty on early withdrawal of savings . . . . . . . 28
---------------
29 Alimony paid. Recipient's SSN 29
---------------------- ---------------
30 Add lines 23a through 29. These are your TOTAL ADJUSTMENTS . . . . . . . . 30
- ------------------------------------------------------------------------------------------------------------------------
ADJUSTED 31 Subtract line 30 from line 22. This is your ADJUSTED GROSS INCOME If less
GROSS than $25,296 and a child lived with you (less than $9,000 if a child didn't live
INCOME with you), see "Earned Income Credit" on page 27 31
- ------------------------------------------------------------------------------------------------------------------------
Cat. No. 11320B Form 1040 (1994)
FORM 1040A
14 Add lines 7 through 13b (far right column). This is your TOTAL INCOME. 14 ,
- ------------------------------------------------------------------------------------------------------------------------
15A Your IRA deduction (see page 34). 15a
------------------------------------------------------------------------------
FIGURE
YOUR B Spouse's IRA deduction (see page 34). 15b
------------------------------------------------------------------------------
ADJUSTED C Add lines 15a and 15b. These are your TOTAL ADJUSTMENTS. 15c
----------------------------------------------------------------------------------------------------
GROSS 16 Subtract line 15c from line 14. This is your ADJUSTED GROSS INCOME.
INCOME If less than $25,296 and a child lived with you (less than $9,000 if a child
didn't live with you), see "Earned income credit" on page 44. 16
- ------------------------------------------------------------------------------------------------------------------------
</TABLE>
Cat. No. 112327A 1994 FORM 1040A PAGE 1
WITHHOLDING ALLOWANCES. To figure the number of additional withholding
allowances on your Form W-4, EMPLOYEE'S WITHHOLDING ALLOWANCE CERTIFICATE, you
can take into account your estimated deductible IRA contributions. For this
purpose, however, do not take into account any of your employer's regular
contributions to your SEP-IRA, discussed later (they generally are not
included in your income and you cannot deduct them). For more information on
withholding, see Publication 505, TAX WITHHOLDING AND ESTIMATED TAX.
FORM 5498. You should receive by May 31, 1995, Form 5498 or a similar statement
from plan sponsors, showing all the contributions made to your IRA for 1994.
- -------------------------------------------------------------------------------
NONDEDUCTIBLE CONTRIBUTIONS
Although your DEDUCTION for IRA contributions may be reduced or eliminated
because of the adjusted gross income limitation (see DEDUCTIBLE CONTRIBUTIONS,
earlier), you can still make CONTRIBUTIONS to your IRA of up to $2,000 ($2,250
for a regular and a spousal IRA combined) or 100% of compensation, whichever is
less. The difference between your total permitted contributions and your total
deductible contributions, if any, is your NONDEDUCTIBLE CONTRIBUTION.
EXAMPLE. Sonny Jones is single. In 1994, he is covered by a retirement
plan at work. His salary is $52,312. His modified adjusted gross income (MAGI)
is $55,000. Sonny makes a $2,000 IRA contribution that year. Because he is
covered by a retirement plan and his MAGI is above $35,000, he cannot deduct his
$2,000 IRA contribution. However, he may choose to either:
1) Designate this contribution as a NONDEDUCTIBLE contribution by
reporting it on his tax return, as explained later under REPORTING
NONDEDUCTIBLE CONTRIBUTIONS, or
2) Withdraw the contribution as explained later under TAX-FREE WITHDRAWAL
OF CONTRIBUTIONS.
As long as your contributions are within the contribution limits just
discussed, none of the earnings on any contributions (deductible or
nondeductible) will be taxed until they are distributed. See Chapter 6, WHEN CAN
I WITHDRAW OR USE ASSETS FROM AN IRA?
COST BASIS. You will have a cost basis in your IRA if you make nondeductible
contributions. Your BASIS is the sum of the nondeductible amounts you have
contributed to your IRA less any distributions of those amounts. When you
withdraw (or receive distributions of) these amounts, as discussed later in
Chapter 6, you can do so tax-free.
Chapter 4 HOW MUCH CAN I CONTRIBUTE AND DEDUCT? Page 13
<PAGE>
NOTE. Generally, you cannot withdraw only the amounts representing your
basis. If you have basis, your withdrawals will generally include both taxable
and nontaxable amounts. See Chapter 6 for more information.
REPORTING NONDEDUCTIBLE CONTRIBUTIONS
You must report nondeductible contributions, but you do not have to designate a
contribution as nondeductible until you file your tax return. When you file, you
can even designate OTHERWISE DEDUCTIBLE CONTRIBUTIONS as nondeductible.
TO DESIGNATE CONTRIBUTIONS AS NONDEDUCTIBLE, you must file Form 8606,
NONDEDUCTIBLE IRAs (CONTRIBUTIONS, DISTRIBUTIONS, AND BASIS). (See the filled-in
Forms 8606, in Appendix D.) You must file Form 8606 to report nondeductible
contributions even if you do not have to file a tax return for the year.
FILE FORM 8606 IF:
- - You made nondeductible contributions to your IRA for 1994, or
- - You received IRA distributions in 1994 and you have ever made nondeductible
contributions to any of your IRAs.
IF YOU DO NOT REPORT NONDEDUCTIBLE CONTRIBUTIONS, all of your IRA contributions
will be treated as deductible. Thus, when you make withdrawals from your IRA,
the amounts you withdraw will be taxed unless you can show, with satisfactory
evidence, that nondeductible contributions were made.
There is a recordkeeping worksheet, Appendix A, SUMMARY RECORD OF IRA(s)
FOR 1994, that you can use to keep records of your deductible and nondeductible
IRA contributions.
PENALTY FOR OVERSTATEMENT. If you overstate the amount of your nondeductible
contributions on your Form 8606 for any tax year, you must pay a penalty of $100
for each overstatement, unless it was due to reasonable cause.
PENALTY FOR FAILURE TO FILE FORM 8606. You will have to pay a $50 penalty if
you do not file a required Form 8606, unless you can prove that the failure was
due to reasonable cause.
<TABLE>
<CAPTION>
<S> <C>
FORM 8606 NONDEDUCTIBLE IRAs OMB No. 1545-1007
-----------------
(CONTRIBUTIONS, DISTRIBUTIONS, AND BASIS) 1994
Department of the Treasury PLEASE SEE WHAT RECORDS MUST I KEEP? ON PAGE 2 Attachment
Internal Revenue Service ATTACH TO FORM 1040, FORM 1040A, OR FORM 1040NR. Sequence No. 47
- --------------------------------------------------------------------------------------------------------------------------------
Name. If married, file a separate Form 8606 for each spouse. See instructions. Your social security number
- --------------------------------------------------------------------------------------------------------------------------------
Fill in Your Address Only Home address (number and street, or P.O. box if Apt. no.
If You Are Filing This mail is not delivered to your home
Form by Itself and Not
------------------------------------------------------------------------------------------------
With Your Tax Return City, town or post office, state, and ZIP code
- --------------------------------------------------------------------------------------------------------------------------------
CONTRIBUTIONS, NONTAXABLE DISTRIBUTIONS, AND BASIS
1 Enter your IRA contributions for 1994 that you choose to be nondeductible.
Include those made during 1/1/95-4/17/95 that were for 1994. See instructions . . . . . . . . . 1
--------------------------
2 Enter your total IRA basis for 1993 and earlier years. See instructions . . . . . . . . . . . . 2
--------------------------
3 Add lines 1 and 2. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
--------------------------
---------------
DID YOU RECEIVE-------------------------NO-----------------Enter the amount from line 3 on
ANY IRA line 12. Then, stop and read WHEN
DISTRIBUTIONS AND WHERE TO FILE on page 2.
(WITHDRAWLS)
IN 1994? -------------------------YES----------------Go to line 4.
---------------
4 Enter only those contributions included on line 1 that were made during 1/1/95-4/17/95. This
amount will be the same as line 1 if all of your nondeductible contributions for 1994 were
made in 1995 by 4/17/95. See instructions . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
--------------------------
5 Subtract line 4 from line 3 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
--------------------------
6 Enter the total value of ALL your IRAs as of 12/31/94 plus any outstanding
rollovers. See instructions . . . . . . . . . . . . . . . . . . . . . . . . 6
--------------------------
7 Enter the total IRA distributions received during 1994. Do not include
amounts rolled over before 1/1/95. See instructions . . . . . . . . . . . . 7
--------------------------
8 Add lines 6 and 7. . . . . . . . . . . . . . 8
--------------------------
9 Divide line 5 by line 8 and enter the result as a decimal (to at least two
places). Do not enter more than "1.00". . . . . . . . . . . . . . . . . . . 9 X .
--------------------------
10 Multiply line 7 by line 9. This is the amount of your nontaxable
distributions for 1994 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
--------------------------
11 Subtract line 10 from line 5. This is the basis in your IRA(s) as of 12/31/94 . . . . . . . . . 11
--------------------------
12 Add lines 4 and 11. This is your total IRA basis for 1994 and earlier years . . . . . . . . . . 12
--------------------------
TAXABLE DISTRIBUTIONS FOR 1994
13 Subtract line 10 from 7. Enter the result here and on Form 1040, line 15b; Form 1040A, line 10b;
or Form 1040NR, line 16b, whichever applies. . . . . . . . . . . . . . . . . . . . . . . . . . . 13
- --------------------------------------------------------------------------------------------------------------------------------
SIGN HERE ONLY IF YOU Under penalties of perjury, I declare that I have examined this form, including accompanying
ARE FILING THIS FORM statements, and to the best of my knowledge and belief, it is true, correct, and complete.
BY ITSELF AND NOT WITH
----------------------------------------------------------- ----------------------
YOUR TAX RETURN Your signature Date
- --------------------------------------------------------------------------------------------------------------------------------
</TABLE>
Page 14 Chapter 4 HOW MUCH CAN I CONTRIBUTE AND DEDUCT?
<PAGE>
- -------------------------------------------------------------------------------
TAX-FREE WITHDRAWAL OF CONTRIBUTIONS
If you made IRA contributions for 1994, you can withdraw them tax
free (except for any earnings on them) by April 17, 1995 (or a later
date, if you have an extension to file your return). YOU CAN DO THIS IF:
- - You did not take a deduction for the contributions you withdraw, AND
- - You also withdraw any interest or other income earned on the contributions.
You must report this income on your 1994 return.
IRA trustees must include these amounts in box 1 and, if applicable, in box 2a
of Form 1099-R. You must report these amounts on line 15a, Form 1040. If there
is an amount in box 2a of Form 1099-R, include it on line 15b of Form 1040.
PREMATURE WITHDRAWALS TAX. The 10 percent additional tax on withdrawals
made before you reach age 59 1/2 does not apply to these withdrawals of your
contributions. (See EXCEPTIONS in Chapter 6.) However, your withdrawal of the
interest or other income may be subject to this tax. (See EXCESS CONTRIBUTIONS
and PREMATURE DISTRIBUTIONS (EARLY WITHDRAWALS) in Chapter 7.)
EXCESS CONTRIBUTIONS TAX. If any part of these contributions is an excess
contribution, it will be subject to a 6% excise tax. You will not have to pay
the 6% tax if any 1993 excess contribution is withdrawn by April 15, 1994 (plus
extensions), and if any 1994 excess contribution is withdrawn by April 17, 1995
(plus extensions). See EXCESS CONTRIBUTIONS in Chapter 7.
- -------------------------------------------------------------------------------
COMPREHENSIVE EXAMPLES -- DEDUCTIBLE AND NONDEDUCTIBLE CONTRIBUTIONS
The following examples illustrate the use of the IRA deduction worksheet shown
earlier under HOW TO FIGURE YOUR REDUCED IRA DEDUCTION.
EXAMPLE 1. For 1994, Tom and Betty Smith file a joint return on Form 1040.
They both work and Tom is covered by his employer's retirement plan. Tom's
salary is $40,000 and Betty's is $6,555. They each have an IRA and their
combined modified AGI is $46,555. Since their modified AGI is between $40,000
and $50,000 and Tom is covered by an employer plan, each of them is subject to
the deduction limits (see DEDUCTION LIMITS, earlier).
For 1994, Tom contributed $2,000 to his IRA and Betty contributed $500 to
hers. Even though they file a joint return, they must use separate worksheets to
figure the reduced IRA deduction for each of them.
Tom can take a deduction of only $690 (see the worksheet below). Even
though he contributed the maximum ($2,000), $1,310 ($2,000 minus $690) of his
contributions must be treated as nondeductible.
He can choose to treat the $690 as either deductible or nondeductible
contributions. He can either leave the $1,310 of nondeductible contributions
in his IRA or withdraw them by April 17, 1995. He decides to treat the $690
as deductible contributions and leave the $1,310 of nondeductible
contributions in his IRA.
Betty can treat all or part of her contributions as either deductible or
nondeductible. This is because her $500 contribution for 1994 is less than the
$690 deduction limit for her IRA contributions that year (see line 4 of her
worksheet, later). She decides to treat her $500 IRA contributions as
deductible.
Using the WORKSHEET FOR REDUCED IRA DEDUCTION, Tom figures his deductible
and nondeductible amounts as follows:
<TABLE>
<CAPTION>
WORKSHEET FOR REDUCED IRA DEDUCTION
(USE ONLY IF YOU ARE COVERED, OR CONSIDERED COVERED, BY AN EMPLOYER PLAN AND
YOUR MODIFIED AGI IS WITHIN THE APPLICABLE PHASEOUT RANGE)
- -------------------------------------------------------------------------------
And your ENTER on
MODIFIED AGI line 1
If your FILING STATUS is: is over: below:
- -------------------------------------------------------------------------------
<S> <C> <C>
Single, or Head
of household $25,000 $35,000
Married-joint return,
or Qualifying widow(er) $40,000 $50,000
Married-separate return $ -0- $10,000
- -------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
<S> <C>
1. Enter applicable amount from above . . . . . . . . . . . . . . $50,000
-------
2. Enter your MODIFIED AGI (combined, if married filing
jointly) . . . . . . . . . . . . . . . . . . . . . . . . . . . 46,555
-------
NOTE: If line 2 is equal to or more than the amount on line 1, STOP HERE;
your IRA contributions are not deductible; see NONDEDUCTIBLE CONTRIBUTIONS,
earlier.
3. Subtract line 2 from 1. (If line 3 is $10,000 or more,
STOP HERE; you can take a full IRA deduction for contributions of
up to $2,000 or 100% of your compensation, whichever is less.) . . . $ 3,445
-------
4. Multiply line 3 by 20% (.20). If the result is not a
multiple of $10, round it to the next highest
multiple of $10. (For example, $611.40 is
rounded to $620.) However, if the result
is less than $200, enter $200 . . . . . . . . . . . . . . . . 690
-------
Chapter 4 HOW MUCH CAN I CONTRIBUTE AND DEDUCT? Page 15
<PAGE>
5. Enter your compensation. (DO NOT include your spouse's compensation,
and, if you file Form 1040, do not reduce your compensation by any losses
from self-employment.) . . . . . . . . . . . . . . . . . . . . . . . 40,000
-------
6. Enter contributions you made, or plan to make,
to your IRA for 1994, but DO NOT enter more than
$2,000. (If contributions are more than $2,000,
see EXCESS CONTRIBUTIONS in Chapter 7.). . . . . . . . . . . . 2,000
-------
7. IRA DEDUCTION. Compare lines 4, 5, and 6. Enter
the smallest amount (or a smaller amount if you
choose) here and on the Form 1040 or 1040A
line for your IRA, whichever applies. (If line 6 is
more than line 7 and you want to make
a nondeductible contribution, go to line 8.) . . . . . . . . . 690
-------
8. Nondeductible contribution. Subtract line 7
from line 5 or 6, whichever is smaller. Enter
the result here and on line 1 of your Form 8606. . . . . . . . 1,310
-------
</TABLE>
Betty figures her IRA deduction as follows:
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
WORKSHEET FOR REDUCED IRA DEDUCTION
(USE ONLY IF YOU ARE COVERED, OR CONSIDERED COVERED, BY AN
EMPLOYER PLAN AND YOUR MODIFIED AGI IS WITHIN THE APPLICABLE
PHASEOUT RANGE)
- -------------------------------------------------------------------------------
And your ENTER on
MODIFIED AGI line 1
If your FILING STATUS is: is over: below:
- -------------------------------------------------------------------------------
<S> <C> <C>
Single, or Head
of household $25,000 $35,000
Married-joint return, or
Qualifying widow(er) $40,000 $50,000
Married-separate return $ -0- $10,000
- -------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
<S> <C>
1. Enter applicable amount from above. . . . . . . . . . . . . . . . $50,000
-------
2. Enter your MODIFIED AGI (combined, if married filing jointly) . . 46,555
-------
</TABLE>
NOTE: If line 2 is equal to or more than the amount on line 1, STOP HERE;
your IRA contributions are not deductible; see NONDEDUCTIBLE CONTRIBUTIONS,
earlier.
<TABLE>
<CAPTION>
<S> <C>
3. Subtract line 2 from 1. (IF LINE 3 IS $10,000 OR MORE, STOP HERE;
you can take a full IRA deduction for contributions of up to
$2,000 or 100% of your compensation, whichever is less.) . . . . . 3,445
-------
4. Multiply line 3 by 20% (.20). If the result is not a multiple
of $10, round it to the next highest multiple of $10. (For
example, $611.40 is rounded to $620.) However, if the result
is less than $200, enter $200. . . . . . . . . . . . . . . . . . . 690
-------
5. Enter your compensation. (DO NOT include your spouse's
compensation, and, if you file Form 1040, do not reduce your
compensation by any losses from self-employment.). . . . . . . . . 6,555
-------
6. Enter contributions you made, or plan to make, to your IRA for
1994, but DO NOT enter more than $2,000. (If contributions are
more than $2,000, see EXCESS CONTRIBUTIONS in Chapter 7.). . . . . 500
-------
7. IRA DEDUCTION. Compare lines 4, 5, and 6. Enter the smallest
amount (or a smaller amount if you choose) here and on the Form
1040 or 1040A line for your IRA, whichever applies. (If line 6
is more than line 7 and you want to make a nondeductible
contribution, go to line 8.) . . . . . . . . . . . . . . . . . . . 500
-------
8. NONDEDUCTIBLE CONTRIBUTION. Subtract line 7 from line 5 or 6,
whichever is smaller. Enter the result here and on line 1 of
your Form 8606. 0
-------
</TABLE>
The IRA deductions of $690 and $500 on the joint return for Tom and Betty
total $1,190. Betty's unused IRA deduction limit of $190 ($690 minus $500)
cannot be transferred to Tom to increase his deduction.
EXAMPLE 2. Assume the same facts as in Example 1, except that Tom
contributed $250 to a spousal IRA because Betty had no compensation for the year
and did not contribute to an IRA. Their modified AGI remains at $46,555. Tom
uses lines 1 through 8 of his worksheet to complete the spousal IRA portion of
the WORKSHEET FOR REDUCED IRA DEDUCTION as follows:
<TABLE>
<CAPTION>
<S> <C>
9. Enter the smaller of (a) $2,250 or (b) the amount from line 5. . . $2,250
-------
10. Add lines 7 and 8. Enter the total. (IF THIS AMOUNT IS EQUAL TO
OR MORE THAN LINE 9, STOP HERE; you cannot make contributions to
a spousal IRA. Also, see EXCESS CONTRIBUTIONS in Chapter 7,
later.) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,000
-------
11. Subtract line 10 from line 9 . . . . . . . . . . . . . . . . . . . 250
-------
12. Enter the smallest of (a) IRA contributions for 1994 to your
spouse's IRA; (b) $2,000; or (c) the amount on line 11. (If
contributions are more than $2,000, see EXCESS CONTRIBUTIONS,
later.). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 250
-------
13. Multiply line 3 by 22.5% (.225). If the result is not a multiple
of $10, round it to the next highest multiple of $10. However, if
the result is less than $200, enter $200 . . . . . . . . . . . . . 780
-------
14. Enter the amount from line 7 . . . . . . . . . . . . . . . . . . . 690
-------
15. Subtract line 14 from line 13. Enter the result but do not
enter more than the amount on line 12. . . . . . . . . . . . . . . 90
-------
16. SPOUSAL IRA DEDUCTION. Compare lines 4, 5, and 15. Enter the
smallest amount (or a smaller amount if you choose) here and on
your Form 1040 or 1040A. (If line 12 is more than line 16 and
you want to make a nondeductible contribution for your spouse, go
to line 17.) . . . . . . . . . . . . . . . . . . . . . . . . . . . 90
-------
17. SPOUSAL IRA NONDEDUCTIBLE CONTRIBUTIONS. Subtract line 16
from line 12. Enter the result here and on line 1 of your
spouse's Form 8606. 160
-------
</TABLE>
The IRA deductions of $690 and $90 on the joint return for Tom and Betty
total $780. In this case, the full
Page 16 Chapter 4 HOW MUCH CAN I CONTRIBUTE AND DEDUCT?
<PAGE>
spousal IRA deduction of $2,250 (limited to $2,000 for either spouse's IRA) has
been reduced by the IRA deduction phaseout rules to $780.
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5.
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CAN I TRANSFER RETIREMENT PLAN ASSETS?
IRA rules permit you to transfer, tax-free, assets (money or property) from
other retirement programs (including IRAs) to an IRA. The rules permit the
following kinds of transfers:
-Transfers from one trustee to another,
-Rollovers, and
-Transfers incident to a divorce.
This chapter discusses all three kinds of transfers.
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TRANSFER FROM ONE TRUSTEE TO ANOTHER
A transfer of funds in your IRA from one trustee DIRECTLY to another,
either at your request or at the trustee's request, is NOT A ROLLOVER. Because
there is no distribution to you, the transfer is tax-free. Since it is not a
rollover, it is not affected by the one-year waiting period that is required
between rollovers, discussed later, under ROLLOVER FROM ONE IRA INTO
ANOTHER.
For information about direct transfers from retirement programs
other than IRAs, see DIRECT ROLLOVER OPTION, later.
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ROLLOVERS
Generally, a rollover is a tax-free distribution to you of cash or other assets
from one retirement program that you contribute to another program. The amount
you roll over tax-free, however, is generally taxable later when the new program
pays that amount to you or your beneficiary.
KINDS OF ROLLOVERS TO AN IRA. There are two kinds of rollover contributions to
an IRA. In one, you put amounts you receive from one IRA into another. In the
other, you put amounts you receive from an employer's qualified retirement plan
for its employees (see EMPLOYER PLANS under WHO IS COVERED BY AN EMPLOYER
PLAN? in Chapter 4) into an IRA.
TREATMENT OF ROLLOVERS. You cannot deduct a rollover contribution, but you must
report the rollover distribution on your tax return as discussed later under
REPORTING ROLLOVERS FROM IRAs, and REPORTING ROLLOVERS FROM EMPLOYER PLANS.
ROLLOVER NOTICE. A written explanation of rollover treatment must be given to
you by the plan making the distribution.
TIME LIMIT FOR MAKING A ROLLOVER CONTRIBUTION
You must make the rollover contribution by the 60th day after the day you
receive the distribution from your IRA or your employer's plan. However, see
EXTENSION OF ROLLOVER PERIOD, later.
ROLLOVERS COMPLETED AFTER THE 60-DAY PERIOD.
Amounts not rolled over within the 60-day period do not qualify for tax-free
rollover treatment and must be treated as a taxable distribution from either
your IRA or your employer's plan. The amount not rolled over is taxable in the
year distributed, not in the year the 60-day period expires. You may also have
to pay a 10% tax on premature distributions and a 15% tax on excess
distributions as discussed in Chapter 7.
Treat a contribution after the 60-day period as a regular contribution to
your IRA. Any part of the contribution that is more than the maximum amount you
could contribute may be an excess contribution, as discussed in Chapter 7.
EXTENSION OF ROLLOVER PERIOD
If an amount distributed to you from an IRA or a qualified employer retirement
plan becomes a FROZEN DEPOSIT in a financial institution during the 60-day
period allowed for a rollover, a special rule extends the period. The period
during which the amount is a frozen deposit is not counted in the 60-day period,
nor can the 60-day period end earlier than 10 days after the deposit is no
longer frozen. To qualify under this rule, the deposit must be frozen on at
least one day during the 60-day rollover period.
A FROZEN DEPOSIT is any deposit that cannot be withdrawn
because:
1) The financial institution is bankrupt or insolvent, or
2) The state where the institution is located restricts withdrawals
because one or more financial institutions in the state are (or are
about to be) bankrupt or insolvent.
Chapter 5 CAN I TRANSFER RETIREMENT PLAN ASSETS? Page 17
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ROLLOVER FROM ONE IRA INTO ANOTHER
You may withdraw, tax free, all or part of the assets from one IRA, if you
reinvest them within 60 days in another IRA. Because this is a rollover, you
cannot deduct the amount that you reinvest in the new IRA.
WAITING PERIOD BETWEEN ROLLOVERS. You can take (receive) a distribution from an
IRA and make a rollover contribution (of all or part of the amount received) to
another IRA only once in any one-year period. The one-year period begins on the
date you receive the IRA distribution, not on the date you roll it over into
another IRA.
This rule applies separately to each IRA you own. For example, if you have
two IRAs, IRA-1 and IRA-2, and you roll over assets of IRA-1 into a new IRA-3,
you may also make a rollover from IRA-2 into IRA-3, or into any other IRA within
one year after the rollover distribution from IRA-1. These are both rollovers
because you have not received more than one distribution from either IRA within
one year. However, you cannot, within the one-year period, again roll over the
assets you rolled over into IRA-3 into any other IRA.
Later distributions from an IRA within a one-year period will not qualify
as rollovers. They are taxable and may be subject to the 10% tax on premature
distributions and the 15% tax on excess distributions.
EXCEPTION. An exception to the one-year waiting period rule has been
granted by the IRS for distributions made from a failed financial institution by
the Federal Deposit Insurance Corporation (FDIC) or the Resolution Trust
Corporation (RTC) as receiver for the institution. To qualify for the
exception, the distribution must satisfy the following requirements:
(1) It must NOT be initiated by either the custodial institution or the
depositor;
(2) It must be made because:
a) The custodial institution is insolvent, and
b) The receiver is unable to find a buyer for the institution.
THE SAME PROPERTY MUST BE ROLLED OVER. You must roll over into a new IRA the
same property you received from your old IRA.
PARTIAL ROLLOVERS. If you withdraw assets from an IRA, you may roll over part
of the withdrawal tax free into another IRA and keep the rest of it. The amount
you keep will generally be taxable (except to the extent it is a return of
nondeductible contributions) and may be subject to the 10% tax on premature
distributions and the 15% tax on excess distributions discussed in Chapter 7.
REQUIRED DISTRIBUTIONS. Amounts that must be distributed during a particular
year under the required distribution rules (discussed in Chapter 6) ARE NOT
ELIGIBLE FOR ROLLOVER treatment.
INHERITED IRAs
If you inherit an IRA FROM YOUR SPOUSE, you generally
can roll it over into an IRA established for you, or you can choose to
make it your own as discussed in Chapter 3 under INHERITED IRAs.
Also see DISTRIBUTIONS RECEIVED BY A SURVIVING SPOUSE
later in this chapter.
IF YOU INHERITED AN IRA FROM SOMEONE OTHER THAN YOUR SPOUSE, you cannot roll
it over, or allow it to receive a rollover contribution.
REPORTING ROLLOVERS FROM IRAS
Report any rollover from one IRA to another IRA on lines 15a and 15b, Form 1040
or lines 10a and 10b, Form 1040A. Enter the total amount of the distribution on
line 15a, Form 1040 or line 10a, Form 1040A. If the total amount on line 15a,
Form 1040 or line 10a, Form 1040A was rolled over, enter zero on line 15b, Form
1040 or line 10b, Form 1040A. Otherwise, enter the taxable portion of the part
that was not rolled over on line 15b, Form 1040 or line 10b, Form 1040A. See
DISTRIBUTIONS FULLY OR PARTLY TAXABLE in Chapter 6.
ROLLOVER FROM EMPLOYER'S PLAN INTO AN IRA
If you receive an ELIGIBLE ROLLOVER DISTRIBUTION, from your (or your deceased
spouse's) employer's qualified (meets Internal Revenue Code requirements)
pension, profit-sharing or stock bonus plan, annuity plan, or tax-sheltered
annuity plan (403(b) plan), you can roll over all or part of it into an IRA.
ELIGIBLE ROLLOVER DISTRIBUTION. Generally, an eligible rollover distribution is
any distribution from a qualified retirement plan EXCEPT:
1) A required minimum distribution, or
2) Any of a series of substantially equal periodic distributions paid at least
once a year over:
a) Your lifetime or life expectancy
b) The lifetimes or life expectancies of you and your beneficiary, or
c) A period of 10 years or more.
The taxable parts of most other distributions are eligible rollover
distributions. See MAXIMUM ROLLOVER, later.
WITHHOLDING REQUIREMENT
If an eligible rollover distribution is paid directly to you, the payer must
withhold 20% of it. This applies even if you plan to roll over the distribution
to an IRA (or another qualified plan as discussed in Publication 575). However,
you can avoid withholding by choosing the DIRECT ROLLOVER OPTION, discussed
later.
EXCEPTIONS. Withholding from an eligible rollover distribution paid to you is
not required if:
Page 18 Chapter 5 CAN I TRANSFER RETIREMENT PLAN ASSETS?
<PAGE>
1) The distribution and all previous eligible rollover distributions you
received during your tax year from the same plan (or, at the payor's option,
from all your employer's plans) total less than $200, or
2) The distribution consists solely of employer securities, plus cash of
$200 or less in lieu of fractional shares.
OTHER WITHHOLDING RULES. If you receive a distribution that is not an eligible
rollover distribution, the 20% withholding requirement does not apply. However,
other withholding rules apply to these distributions. The rules that apply
depend on whether the distribution is a PERIODIC DISTRIBUTION or a NONPERIODIC
DISTRIBUTION that is not an eligible rollover distribution. For either of these
distributions, you can still choose not to have tax withheld.
PERIODIC DISTRIBUTIONS. Unless you choose no withholding, your annuity or
periodic payments will be treated like wages for withholding purposes. Periodic
payments are amounts paid at regular intervals, such as weekly, monthly, or
yearly, over a certain period of time, such as for 15 years or for life.
NONPERIODIC DISTRIBUTIONS. For a nonperiodic distribution (a payment other
than a periodic payment) that is not an eligible rollover distribution, the
withholding is 10% of the distribution, unless you choose not to have tax
withheld. The part of any loan treated as a distribution (except an offset
amount to repay a loan), as explained in Publication 575, is subject to
withholding under this rule.
DIRECT ROLLOVER OPTION
Your employer's qualified plan must give you the option to have any part of an
eligible rollover distribution paid directly to an IRA (or to an eligible
retirement plan as discussed in Publication 575). Under this option, all or
part of the distribution can be paid directly to an IRA (or another eligible
retirement plan that accepts rollovers). This option is not required for
distributions that are expected to total less than $200 for the year.
NO TAX WITHHELD. If you choose the direct rollover option, no tax is withheld
from any part of the designated distribution that is directly paid to the
trustee of the IRA (or other plan). If any part is paid to you, the payer must
withhold 20% of that part's taxable amount. Since most distributions are fully
taxable, payers will generally withhold 20% of the entire amount designated for
distribution to you.
OTHER ROLLOVER LIMITS AND SPECIAL RULES
MAXIMUM ROLLOVER. The most you can roll over is the taxable part of any
eligible rollover distribution from your employer's qualified plan (see ELIGIBLE
ROLLOVER DISTRIBUTION, earlier). The distribution you receive generally will be
all taxable unless you have made nondeductible employee contributions to the
plan.
CONTRIBUTIONS YOU MADE TO YOUR EMPLOYER'S PLAN. You cannot roll over a
distribution of contributions you made to your employer's plan, except voluntary
deductible employee contributions (DECs as defined below), which are treated
like employer contributions. If you do, you must treat them as regular
contributions and you may have to pay an excess contributions tax (discussed in
Chapter 7) on all or part of them.
DECs. If you receive a distribution from your employer's qualified plan of
any part of the balance of your DECs and the earnings from them, you can roll
over any part of the distribution. DEC is the short name for voluntary
deductible employee contributions. Prior to January 1, 1987, employees could
make and deduct these contributions to certain qualified employers' plans and
government plans. These are not the same as an employee's elective contributions
to a 401(k) plan, which are not deductible by the employee.
TIME LIMIT. You must complete the rollover within 60 days after the day you
receive the eligible rollover distribution. However, see EXTENSION OF ROLLOVER
PERIOD, earlier.
NO WAITING PERIOD BETWEEN ROLLOVERS. You can make more than one rollover of
employer plan distributions within a year. The once-a-year limit on IRA-to-IRA
rollovers does not apply to these distributions.
IRA AS A HOLDING ACCOUNT (CONDUIT IRA) FOR ROLLOVERS TO OTHER
ELIGIBLE PLANS. If you receive an eligible rollover distribution from your
employer's plan and roll over part or all of it into one or more conduit IRAs,
you can later roll over those assets into a new employer's plan. Your IRA
qualifies as a conduit IRA if it serves as a holding account or conduit for
those assets. The conduit IRA must be made up of only those assets received from
the first employer's plan and gains and earnings on those assets. You must not
have mixed regular contributions or funds from other sources with them.
PROPERTY AND CASH RECEIVED IN A DISTRIBUTION. If you receive property and
cash in an eligible rollover distribution from your employer's plan, you can
roll over either the property or the cash, or any combination of the two that
you choose.
TREATMENT IF THE SAME PROPERTY IS NOT ROLLED OVER. Your contribution to an
IRA of cash representing the fair market value of property received in a
distribution from a qualified retirement plan DOES NOT QUALIFY as a rollover
IF YOU KEEP THE PROPERTY. You must either roll over the property or sell it
and roll over the proceeds, as explained next.
SALE OF PROPERTY RECEIVED IN A DISTRIBUTION FROM A QUALIFIED PLAN. Instead of
rolling over a distribution of
Chapter 5 CAN I TRANSFER RETIREMENT PLAN ASSETS? Page 19
<PAGE>
property other than cash from a qualified employer retirement plan, YOU CAN sell
all or part of the property and roll over the amount you receive into an IRA.
YOU CANNOT substitute your own funds for property you receive from your
employer's retirement plan.
EXAMPLE. You receive a total distribution from your employer's plan
consisting of $10,000 cash and $15,000 worth of property. You decided to keep
the property. You can roll over to an IRA the $10,000 cash received, but you
cannot roll over an additional $15,000 representing the value of the property
you choose not to sell.
TREATMENT OF GAIN OR LOSS. If you sell the distributed property and roll
over all the proceeds into an IRA, no gain or loss is recognized. The sale
proceeds (including any increase in value) are treated as part of the
distribution and are not included in your gross income.
EXAMPLE. On September 4, 1994, John received a lump-sum distribution
from his employer's retirement plan of $50,000 in cash and $50,000 in stock.
The stock was not stock of his employer. On September 26, 1994, he sold the
stock for $60,000. On October 3, 1994, he rolled over $110,000 in cash
($50,000 from the original distribution and $60,000 from the sale of stock).
John does not include the $10,000 gain from the sale of stock as part of his
income because he rolled over the entire amount into an IRA.
NOTE: Special rules may apply to distributions of employer securities. For
more information, get Publication 575.
IF YOU ROLL OVER PART OF THE AMOUNT RECEIVED FROM THE SALE OF PROPERTY, see
Publication 575.
LIFE INSURANCE CONTRACT
You cannot roll over a life insurance contract from a qualified
plan into an IRA.
DISTRIBUTIONS RECEIVED BY A SURVIVING SPOUSE
Your surviving spouse can roll over into an IRA part or all of any eligible
rollover distribution (defined earlier) received from your employer's
qualified plan because of your death. For information about estate tax
consequences of certain rollovers, see Publication 448, FEDERAL ESTATE AND
GIFT TAXES.
DEATH BENEFIT EXCLUSION. In certain situations, your spouse can exclude from
income up to $5,000 of the distribution from a qualified plan or
tax-sheltered annuity. Your spouse cannot roll over into an IRA any part of
the distribution that qualifies for the $5,000 death benefit exclusion. For
more information on the death benefit exclusion, see Publication 575.
NO ROLLOVER INTO ANOTHER EMPLOYER QUALIFIED PLAN. Your surviving spouse who
receives an eligible rollover distribution from your employer's qualified
plan or tax-sheltered annuity can roll over all or any part of it (or all or
any part of a distribution of deductible employee contributions) into an IRA.
He or she cannot roll over a distribution into another qualified employer
plan or annuity.
DISTRIBUTIONS UNDER DIVORCE OR SIMILAR PROCEEDINGS
(ALTERNATE PAYEES)
If you (as a spouse or former spouse of the employee) receive FROM A
QUALIFIED EMPLOYER PLAN a distribution that results from divorce or similar
proceedings, you may be able to roll over all or part of it into an IRA. To
qualify, the distribution must be:
One that would have been an ELIGIBLE ROLLOVER DISTRIBUTION
(defined earlier) if it had been made to an employee, and
Made under a QUALIFIED DOMESTIC RELATIONS ORDER.
QUALIFIED DOMESTIC RELATIONS ORDER. A domestic relations order is a judgment,
decree, or order (including approval of a property settlement agreement) that
is issued under the domestic relations law of a state. A "qualified domestic
relations order" gives to an alternate payee (a spouse, former spouse, child,
or dependent of a participant in a retirement plan) the right to receive all
or part of the benefits that would be payable to a participant under the
plan. The order requires certain specific information, and it may not alter
the amount or form of the benefits of the plan.
TAX TREATMENT IF ALL OF AN ELIGIBLE DISTRIBUTION IS NOT ROLLED OVER. If you
roll over only part of an eligible rollover distribution, the amount you keep
is taxable in the year you receive it. If you roll over none of it, the
special rules for lump-sum distributions (5- or 10-year tax option or 20%
capital gain treatment) may apply (see Publication 575). The 10% additional
tax on premature distributions, discussed in Chapter 7, does not apply.
KEOGH PLANS AND ROLLOVERS
If you are self-employed, you are generally treated as an employee for
rollover purposes. Consequently, if you receive an eligible rollover
distribution from a Keogh plan, you CAN roll over all or part of the
distribution (INCLUDING A LUMP-SUM DISTRIBUTION) into an IRA (or another
eligible retirement plan as discussed in Publication 575).
LUMP-SUM DISTRIBUTIONS. A distribution to you of your complete share from
your Keogh plan IS NOT a lump-sum distribution if you are self-employed,
under age 59 1/2 and are not disabled. Consequently, such distributions do
not qualify for the special tax treatment available to lump-sum
distributions. For information on lump-sum distributions, get Publication 575.
FOR MORE INFORMATION ABOUT KEOGH PLANS, get Publication 560.
Page 20 Chapter 5 CAN I TRANSFER RETIREMENT PLAN ASSETS?
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DISTRIBUTION FROM A TAX-SHELTERED ANNUITY
If you receive an eligible rollover distribution from a tax-sheltered annuity
plan it can be rolled over into an IRA. It cannot be rolled over into
another eligible retirement plan unless that plan is a tax-sheltered annuity
plan.
IF YOU RECEIVE PROPERTY OTHER THAN MONEY, you can sell the property and roll
over the proceeds as discussed earlier.
CONDUIT IRA. If your IRA contains only assets (including earnings and gains)
that were rolled over from a tax-sheltered annuity, you may roll over these
assets into another tax-sheltered annuity. If you plan another rollover into
another tax-sheltered annuity, DO NOT COMBINE the assets in your IRA from the
rollover with assets from another source. DO NOT ROLL OVER an amount from a
tax-sheltered annuity into a qualified pension plan.
FOR MORE INFORMATION ABOUT TAX-SHELTERED ANNUITIES, get Publication 571.
ROLLOVER FROM BOND PURCHASE PLAN
If you redeem retirement bonds that were distributed to you under a QUALIFIED
BOND PURCHASE PLAN, you can roll over tax free part of the amount you receive
from the redemption into an IRA.
You can redeem these bonds even if you have not reached age 59 1/2. In
addition, you can roll over the proceeds, tax free, into a qualified employer
plan. However, when you receive a distribution at a later time, it will not
be eligible for special 5- or 10-year averaging or 20% capital gain treatment.
REPORTING ROLLOVERS FROM EMPLOYER PLANS
Do not use lines 15a or 15b, Form 1040, or lines 10a or 10b, Form 1040A, to
report a rollover from an employer retirement plan to an IRA; use lines 16a
and 16b, Form 1040, or lines 11a and 11b, Form 1040A, instead.
WRITTEN EXPLANATION TO RECIPIENTS
The administrator of a qualified employer plan must, within a reasonable
period of time before making an eligible rollover distribution, provide a
written explanation to you. It must tell you about:
- -Your right to have the distribution paid tax free directly to an
IRA or another eligible retirement plan,
- -The requirement to withhold tax from the distribution if it is not
paid directly to an IRA or another eligible retirement plan,
- -The nontaxability of any part of the distribution that you roll
over to an IRA or another eligible retirement plan within 60 days
after you receive the distribution, and
- -Other qualified employer plan rules, if they apply, including
those for lump-sum distributions, alternate payees, and cash or
deferred arrangements.
REASONABLE PERIOD OF TIME. The plan administrator must provide you with a
written explanation no earlier than 90 days and no later than 30 days before the
distribution is made.
However, you can choose to have a distribution made less than 30 days after
the explanation is provided as long as the following two requirements are met:
1) You must have the opportunity to consider whether or not you want to make a
direct rollover for at least 30 days after the explanation is provided, and
2) The information you receive must clearly state that you have the right to
have 30 days to make a decision.
Contact the plan administrator if you have any questions regarding this
information.
CHOOSING THE RIGHT OPTION. As explained earlier, you can have all or part of
the distribution from your employer's plan made either as a DIRECT ROLLOVER
to an IRA or another eligible retirement plan, or as a PAYMENT TO YOU.
Also, you generally can leave all or part of the distribution in the plan.
If you do not leave the distribution in your employer's plan, the following
comparison chart may help you decide which distribution option to choose.
COMPARISON CHART. To help ensure that you choose the distribution option
that is best for you, carefully compare the following tax effects of each:
DIRECT ROLLOVER PAYMENT TO YOU
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No withholding Payer must withhold
income tax of 20% on
the taxable part (even
if you roll it over to
an IRA or other plan).
No 10% additional tax If you are under age 59 1/2
(see PREMATURE a 10% additional tax may
DISTRIBUTIONS, apply to the taxable part
later). (including an amount
equal to the tax withheld)
that is not rolled over.
Not income until later Taxable part (including an
distributed to you amount equal to the tax
from the IRA or withheld) is income to the
other plan. extent not rolled over.
IMPORTANT: If you decide to roll over tax free any part of a distribution,
the DIRECT ROLLOVER option, as indicated above, will generally be to your
advantage, because you will not have 20% withholding or be subject to the 10%
additional tax under that option.
If you have a lump-sum distribution and do not plan to roll over any part, it
may be eligible for special tax treatment that could lower your tax for the
distribution year (see LUMP-SUM DISTRIBUTIONS, earlier). In that case, you
Chapter 5 CAN I TRANSFER RETIREMENT PLAN ASSETS? Page 21
<PAGE>
may want to get Form 4972, TAX ON LUMP-SUM DISTRIBUTIONS, and its
instructions to determine whether your distribution qualifies for special tax
treatment and, if so, to figure your tax under the special methods.
You can then compare any advantages from using Form 4972 to figure your
tax on the lump-sum distribution with any advantages from rolling over tax
free all or part of the distribution. If you roll over any part of the
lump-sum distribution, however, you cannot use the Form 4972 special tax
treatment for the distribution at all.
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TRANSFERS INCIDENT TO DIVORCE
If an interest in an IRA is transferred from your spouse or former spouse to
you by a divorce or separate maintenance decree or a written document related
to such a decree, starting from the date of the transfer, the interest in the
IRA is treated as your IRA. THE TRANSFER IS TAX-FREE. For transfer of
interests in employer plans, see DISTRIBUTIONS UNDER DIVORCE OR SIMILAR
PROCEEDINGS (ALTERNATE PAYEES), under ROLLOVERS, earlier.
TRANSFER METHODS. If you are required to transfer some or all of the assets
in an IRA to your spouse or former spouse, there are two commonly used
methods that you can use to make the transfer. The methods (explained below)
are:
- -Changing the name on the IRA, and
- -Making a DIRECT TRANSFER of IRA assets.
CHANGING THE NAME ON THE IRA. If all the assets in an IRA are to be
transferred, you can make the transfer by changing the name on the IRA from
your name to the name of your spouse or former spouse, whichever applies.
DIRECT TRANSFER. Under this method, you direct the trustee of the IRA to
transfer the affected assets directly to the trustee of a new or existing IRA
set up in the name of your spouse or former spouse, whichever applies. Or, if
your spouse or former spouse is allowed to keep his or her portion of the IRA
assets in your existing IRA, you can direct the trustee to transfer the
assets you are permitted to keep directly to a new or existing IRA set up in
your name. The name on the IRA containing your spouse's or former spouse's
portion of the assets would then be changed to show his or her ownership.
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6.
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WHEN CAN I WITHDRAW OR USE ASSETS FROM AN IRA?
Because an IRA is a tax-favored means of saving for your retirement, there
are rules limiting the withdrawal and use of your IRA assets. Also, if during
a year you receive DISTRIBUTIONS from an IRA, you MUST GENERALLY INCLUDE THEM
IN YOUR GROSS INCOME for the year. A properly handled rollover, as discussed
in Chapter 5, is an exception to this rule. This chapter discusses this and
other rules affecting distributions from your IRA.
FAILED FINANCIAL INSTITUTIONS. The general rule (you must include IRA
distributions in your gross income unless properly rolled over) applies to
distributions made (with or without your consent) by a state agency as
receiver of an insolvent savings institution. For an exception to the
one-year waiting period rule for rollovers of certain distributions from
failed financial institutions, see EXCEPTION under ROLLOVER FROM ONE IRA INTO
ANOTHER in Chapter 5.
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AGE 59 1/2 RULE
Generally, you cannot withdraw assets (money or other property) from your IRA
without having to pay a 10% additional tax (that is, a 10% tax on the taxable
distribution in addition to the regular income tax), until you reach age 59
1/2. However, there are a number of exceptions to this rule as discussed
below. Also see PREMATURE DISTRIBUTIONS (EARLY WITHDRAWALS) in Chapter 7.
NOTE: If you receive a distribution from an IRA that includes a return of
NONDEDUCTIBLE CONTRIBUTIONS, the additional tax does not apply to the portion
of the distribution that is considered to be nontaxable. See FIGURING THE
NONTAXABLE AND TAXABLE AMOUNTS under TAX TREATMENT OF DISTRIBUTIONS, later in
this chapter.
EXCEPTIONS
The exceptions to the age 59 1/2 rule for distributions are in part designed
to provide relief from hardship situations such as disability and death. But
there is also an exception for distributions that are a part of a series of
substantially equal payments as discussed below under ANNUITY EXCEPTION.
Page 22 Chapter 6 WHEN CAN I WITHDRAW OR USE ASSETS FROM AN IRA?
<PAGE>
NOTE: Distributions that are rolled over, as discussed in Chapter 5, are
not subject to regular income tax or the 10% additional tax.
DISABILITY EXCEPTION. You can withdraw amounts from your IRA, without having
to pay the 10% additional tax, if you become disabled before you reach age 59
1/2.
You are considered disabled if you cannot do any substantial gainful
activity because of your physical or mental condition. A physician must
determine that the condition has lasted or can be expected to last
continuously for 12 months or more, or that the condition can be expected to
lead to death. For more information, see Publication 524, CREDIT FOR THE
ELDERLY OR THE DISABLED.
DEATH EXCEPTION. If you die before reaching age 59 1/2, the assets in your
IRA can be distributed to your beneficiary or to your estate without either
having to pay the 10% additional tax.
However, if you inherit an IRA from your deceased spouse and elect to
treat it as your own (as discussed under INHERITED IRAS in Chapter 3), any
distribution you later receive before you reach age 59 1/2 may be subject to
the 10% additional tax.
ANNUITY EXCEPTION. You can receive distributions from your IRA that are part
of a series of substantially equal payments over your life (or your life
expectancy), or over the lives of you and your beneficiary (or your joint
life expectancies), without having to pay the 10% additional tax, even if you
receive such distributions before you are age 59 1/2. You must use an
IRS-approved distribution method and you must take at least one distribution
annually for this exception to apply. See FIGURING THE MINIMUM DISTRIBUTION,
later, for one IRS-approved distribution method. Unlike for minimum
distribution purposes, this method, when used for this purpose, results in
the exact amount required, not the minimum amount.
The payments under this exception must continue for at least 5 years, or
until you reach age 59 1/2, whichever is the longer period. This 5-year rule
does not apply if a change from an approved distribution method is because of
the death or disability of the IRA owner.
If the payments under this exception are changed before the end of the
above required periods for any reason other than the death or disability of
the IRA owner, he or she will be subject to the 10% additional tax. For
example, if you made a lump-sum distribution of the balance in your IRA
before the end of the required period for your annuity distributions and you
did not make it because you were disabled, you would be subject to the 10%
additional tax. The tax would apply to the lump-sum distribution and all
previous distributions made under the exception rule.
TIMELY CONTRIBUTION WITHDRAWAL. If you make a contribution to your IRA for a
year, take no education for it, and withdraw it before the due date
(including extensions) of your income tax return for that year, as discussed
earlier under TAX-FREE WITHDRAWAL OF CONTRIBUTIONS in Chapter 4, the
withdrawal of the contribution is NOT A TAXABLE DISTRIBUTION.
However, any interest or other income earned on the contribution, which
also must be withdrawn, is treated as income in the year the contribution was
made. This withdrawn interest or other income also may be subject to the 10%
additional tax on early withdrawals discussed in Chapter 7.
- --------------------------------------------------------------------------------
REQUIRED DISTRIBUTIONS
You cannot keep funds in an IRA indefinitely. Eventually you MUST withdraw
them. See EXCESS ACCUMULATIONS, in Chapter 7. The requirements for
withdrawing IRA funds differ, depending on whether you are the IRA owner or
the beneficiary of a decedent's IRA.
IRA OWNERS
If you are an IRA owner, you must choose to withdraw the balance in your IRA
in one of the following two ways:
- -By withdrawing the ENTIRE BALANCE in your IRA by the REQUIRED BEGINNING DATE
(defined later), or
- -By starting to withdraw PERIODIC DISTRIBUTIONS of the balance in your IRA by
the required beginning date.
PERIODIC DISTRIBUTIONS. If you do not withdraw the entire balance in your IRA
by the required beginning date, you must start to withdraw periodic
distributions over one of the following periods:
1) Your life,
2) The lives of you and your DESIGNATED BENEFICIARY (defined later),
3) A period that does not extend beyond your life expectancy, or
4) A period that does not extend beyond the joint life and last survivor
expectancy of you and your designated beneficiary.
See DETERMINING LIFE EXPECTANCY, later, for more details.
A DESIGNATED BENEFICIARY, for these purposes, is any INDIVIDUAL you name to
receive your IRA upon your death.
IF YOU HAVE MORE THAN ONE BENEFICIARY AND ALL ARE INDIVIDUALS, the
beneficiary with the shortest life expectancy will be the designated
beneficiary used to determine the period over which your withdrawals must be
made. Also, see MINIMUM DISTRIBUTION INCIDENTAL BENEFIT REQUIREMENT (MDIB
REQUIREMENT), later.
REQUIRED BEGINNING DATE (RBD) -- AGE 70 1/2 RULE. You
must receive the entire balance in your IRA or start receiving periodic
distributions from your IRA by April 1 of the year following the year in
which you reach age 70 1/2.
CHAPTER 6 WHEN CAN I WITHDRAW OR USE ASSETS FROM AN IRA? PAGE 23
<PAGE>
If you choose to receive periodic distributions, you must receive at least
a minimum amount for each year starting with the year you reach age 70 1/2
(your 70 1/2 year). If you did not receive that minimum amount in your 70 1/2
year, then you must receive distributions for your 70 1/2 year that reach the
minimum amount by April 1 of the next year. See MINIMUM DISTRIBUTIONS, later.
DISTRIBUTIONS AFTER THE RBD. The required minimum distribution for any year
after your 70 1/2 year must be made by December 31 of that later year.
EXAMPLE. You reach age 70 1/2 on August 20, 1994. For 1994 (your 70 1/2
year), you must receive the required minimum distribution from your IRA no
later than April 1, 1995. You must receive the required minimum distribution
for 1995 (the first year after your 70 1/2 year) by December 31, 1995.
BENEFICIARIES
If you are the beneficiary of a decedent's IRA, the requirements for withdrawing
the IRA funds differ, depending on whether distributions that satisfy the
minimum distribution requirements have begun.
DISTRIBUTIONS BEGUN BEFORE OWNER'S DEATH. If periodic distributions that
satisfy the minimum distribution requirements have begun and the owner dies,
any undistributed amounts at the IRA owner's death must be distributed at
least as rapidly as under the method being used at the owner's death.
EXCEPTION. This rule does not apply if the designated beneficiary is the
owner's surviving spouse who becomes the new owner by choosing to treat the
IRA as his or her own IRA (see INHERITED IRAS in Chapter 3). In that case,
the surviving spouse can designate beneficiaries and should follow the
required distribution rules for IRA owners in the preceding discussion.
OWNER DIES BEFORE DISTRIBUTIONS BEGUN. If the owner dies before distributions
that satisfy the minimum distribution requirements have begun, the ENTIRE
INTEREST must be distributed under either:
RULE 1. By December 31 of the fifth year following the year of the
owner's death, or
RULE 2. Over the life of the designated beneficiary or over a period not
extending beyond the life expectancy of the designated beneficiary.
(See Table 1 (Single Life Expectancy) in Appendix E.)
The IRA terms can specify whether rule 1 or 2 applies, or they can permit
either the owner or beneficiary to choose which rule applies. If the owner
or beneficiary can choose which rule applies, the choice must generally be
made by December 31 of the year following the year of the owner's death.
Under rule 2, at least a minimum amount must be distributed each year.
IF NO RULE HAS BEEN SPECIFIED OR CHOSEN, distribution must be made under
rule 2 if the beneficiary is the surviving spouse (and he or she did not
choose to treat the IRA as his or her own), or under rule 1 if the
beneficiary is not the surviving spouse.
IF RULE 2 HAS BEEN SPECIFIED OR CHOSEN AND THE BENEFICIARY IS NOT THE
SURVIVING SPOUSE, distribution must begin by December 31 of the year
following the year of the owner's death.
IF RULE 2 HAS BEEN SPECIFIED OR CHOSEN AND THE BENEFICIARY IS THE SURVIVING
SPOUSE (and he or she did not choose to treat the IRA as his or her own),
distribution must begin by the later of:
- -December 31 of the year the IRA owner would have reached age 70 1/2, or
- -December 31 of the year following the year of the owner's death.
A special rule applies IF THE SPOUSE DIES BEFORE THE DATE DISTRIBUTIONS TO
THE SPOUSE MUST BEGIN. In this case, distributions may be made to the
spouse's beneficiary as if the spouse's beneficiary were the IRA owner's
spouse and the owner died on the spouse's date of death.
However, IF THE SPOUSE HAS REMARRIED SINCE THE OWNER'S DEATH and the new
spouse is designated as the spouse's beneficiary, the special rules that
apply to surviving spouses would not apply to the new spouse.
MINIMUM DISTRIBUTIONS
If you are the owner of an individual retirement ACCOUNT, you must figure the
minimum amount required to be distributed each year (see FIGURING THE MINIMUM
DISTRIBUTION, below).
If your IRA is an individual retirement ANNUITY, special rules apply to
figuring the minimum distribution required. For more information on rules for
annuities, get proposed regulation sections 1.401(a)(9)-1, 1.401(a)(9)-2, and
1.408-8.
FIGURING THE MINIMUM DISTRIBUTION
Figure your required minimum distribution for each year by dividing the IRA
ACCOUNT BALANCE as of the close of business on December 31 of the preceding
year by the APPLICABLE LIFE EXPECTANCY. Or, if because you have a nonspouse
beneficiary who is more than 10 years younger than you the distribution must
satisfy the minimum distribution incidental benefit requirement (MDIB),
discussed later, compare the APPLICABLE DIVISOR (see TABLE FOR DETERMINING
APPLICABLE DIVISOR FOR MDIB*, in Appendix E) and the applicable life
expectancy and use the lower number.
APPLICABLE LIFE EXPECTANCY. The applicable life expectancy is:
- -The owner's remaining life expectancy (single life expectancy),
- -The remaining joint life expectancy of the owner and the owner's
designated beneficiary, or
Page 24 CHAPTER 6 WHEN CAN I WITHDRAW OR USE ASSETS FROM AN IRA?
<PAGE>
*If the owner dies before distributions have begun, the remaining life
expectancy of the designated beneficiary.
For more information, see DETERMINING LIFE EXPECTANCY, later.
FIGURING SUBSEQUENT YEAR DISTRIBUTIONS. To figure the required minimum
distribution after the first distribution year (the owner's 70 1/2 year), reduce
the IRA account balance as of December 31 of that first year by any distribution
for that first year made by April 1 of the following year.
EXAMPLE 1. Joe, born October 1, 1923, reached 70 1/2 in 1994. His wife (his
beneficiary) turned 56 in September 1994. He must begin receiving distributions
by April 1, 1995. Joe's IRA account balance as of December 31, 1993, is $29,000.
Based on their ages at year end (December 31, 1994), the joint life expectancy
for Joe (age 71) and his beneficiary (age 56) is 29 years (see Table II in
Appendix E). The required minimum distribution for 1994, Joe's first
distribution year (his 70 1/2 year), is $1,000 ($29,000 divided by 29). This
amount is distributed to Joe on April 1, 1995.
Joe's IRA account balance as of December 31, 1994, is $29,725.
To figure the minimum amount that must be distributed for 1995, the IRA
account balance (as of December 31, 1994) of $29,725 is reduced by the $1,000
minimum required distribution for 1994 that was made on April 1, 1995. Thus, the
account balance for determining the required distribution for 1995 is $28,725.
DETERMINING LIFE EXPECTANCY
Life expectancies are determined using life expectancy tables like Tables I and
II in APPENDIX E. More extensive tables are in Publication 939.
To determine your annual minimum distribution, use the applicable life
expectancy in Table I (Single Life Expectancy) if the periodic payments are for
your life only. Use the applicable life expectancy in Table II (Joint Life and
Last Survivor Expectancy) if the payments are for the lives of you and your
designated beneficiary.
IF YOU DESIGNATE AS YOUR BENEFICIARY SOMEONE OTHER THAN YOUR SPOUSE, who is
more than 10 years younger than you, and the distributions are not made as
annuity payments under an annuity contract, be sure to see MINIMUM DISTRIBUTION
INCIDENTAL BENEFIT REQUIREMENT (MDIB REQUIREMENT), later.
FOR DISTRIBUTIONS BEGINNING BY THE REQUIRED BEGINNING DATE (RBD) (see PERIODIC
DISTRIBUTIONS under IRA OWNERS, earlier), determine life expectancies using the
ages of the owner and the designated beneficiary (assuming you are using Table
II) as of their birthdays in the owner's 70 1/2 year.
IF THE OWNER DIES BEFORE DISTRIBUTIONS HAVE BEGUN, the life expectancy of the
designated beneficiary is determined using Table I and the age as of the
beneficiary's birthday in the year distributions must begin.
LIFE EXPECTANCY FOR SUBSEQUENT YEAR DISTRIBUTIONS. Unless you choose to
REFIGURE your (or your spouse's) life expectancy each year (as discussed next),
it must be reduced by one for each year that has passed since the date the life
expectancy was initially determined. Use of this rule is said to result
in distributions under the TERM CERTAIN method.
ELECTION TO REFIGURE OR NOT TO REFIGURE LIFE EXPECTANCY. Your IRA terms may
permit you and your spouse to elect whether to refigure one or both of your life
expectancies. You must make this election by the date of the first required
minimum distribution (see REQUIRED BEGINNING DATE (RBD) -- AGE 70 1/2 RULE,
earlier).
REFIGURING LIFE EXPECTANCY. If you own an IRA and elect to refigure your life
expectancy (and that of your spouse, if it applies), it must be REFIGURED
ANNUALLY unless your IRA terms provide otherwise. If you refigure life
expectancy annually, the reduction of it by one for each year after it was
initially determined does not apply.
TO REFIGURE YOUR LIFE EXPECTANCY FOR EACH YEAR, use your age as of your
birthday during the year. Then find your "refigured" life expectancy amount on
Table I.
TO REFIGURE THE JOINT LIFE AND LAST SURVIVOR EXPECTANCY OF YOU AND YOUR SPOUSE
FOR EACH YEAR, use your and your spouse's ages as of your birthdays during the
year. Then find your "refigured" life expectancy amount on Table II.
IF YOUR BENEFICIARY IS NOT YOUR SPOUSE OR IF EITHER (BUT NOT
BOTH) YOU OR YOUR SPOUSE ELECT NOT TO REFIGURE, do not use this method to
refigure your life expectancy. You must use a special computation method that is
discussed under MINIMUM DISTRIBUTION INCIDENTAL BENEFIT REQUIREMENT, and
illustrated in Example 3, later.
See FURTHER INFORMATION, later, for relevant regulation citations.
You can use the worksheet provided at the bottom of Appendix A for determining
your required distribution whether or not you REFIGURE life expectancy.
IF YOU OR YOUR SPOUSE DIES. If the joint life expectancy of you and your
spouse is refigured annually and either of you dies, then only the survivor's
life expectancy is used to figure distributions for the years after the year in
which the death occurred.
IF YOU AND YOUR SPOUSE DIE. If the life expectancies of both you and your
spouse are refigured and both of you die after the date distributions must
start, the entire interest must be distributed before the last day of the year
following the year of the second death.
MINIMUM DISTRIBUTION
INCIDENTAL BENEFIT REQUIREMENT
(MDIB REQUIREMENT)
Distributions from an IRA during the owner's lifetime must satisfy the MDIB
requirement. This is a requirement that must be met to ensure that the IRA is
used primarily
CHAPTER 6 WHEN CAN I WITHDRAW OR USE ASSETS FROM AN IRA? PAGE 25
<PAGE>
to provide retirement benefits to the IRA owner. After the owner's death, only
"incidental" benefits are expected to remain for distribution to the owner's
beneficiary (or beneficiaries).
IF YOUR SPOUSE IS YOUR ONLY BENEFICIARY, you will satisfy the MDIB requirement
if you satisfy the general minimum distribution requirements just discussed.
IF SOMEONE OTHER THAN YOUR SPOUSE IS YOUR BENEFICIARY AND IS MORE
THAN 10 YEARS YOUNGER THAN YOU, or if you have one or more beneficiaries in
addition to your spouse and the youngest is more than 10 years younger than you,
there are additional steps to figure your required minimum distribution that
satisfies the MDIB requirement. If you have two or more beneficiaries,
including your spouse, the rule in the preceding paragraph applies only if his
or her portion of your benefit is in a separate account.
To figure a minimum distribution that meets the MDIB requirements, you must
complete the following additional steps:
1) Find the APPLICABLE DIVISOR for a person your age in Appendix E under TABLE
FOR DETERMINING APPLICABLE DIVISOR FOR MDIB. Use your age as of your birthday in
the year that you are figuring the minimum distribution.
2) Compare your applicable divisor and your APPLICABLE LIFE EXPECTANCY (see
DETERMINING LIFE EXPECTANCY, earlier) for the year, and determine which number
is smaller.
3) To figure your required minimum distribution, DIVIDE THE IRA ACCOUNT
BALANCE as of the close of business of the December 31 of the preceding year BY
THE SMALLER NUMBER (your applicable divisor or your applicable life expectancy).
EXAMPLE 2. Assume the same facts as in Example 1, earlier, except that Joe's
beneficiary is his brother. Because Joe's beneficiary is not his spouse, he must
use the TABLE FOR DETERMINING APPLICABLE DIVISOR FOR MDIB (see Appendix E) and
compare the applicable divisor from that table to the life expectancy determined
using TABLE II (JOINT LIFE AND LAST SURVIVOR EXPECTANCY) in Appendix E. Joe
must use the smaller number from the tables. In this example, the required
minimum distribution for 1994 is $1,146 ($29,000 divided by 25.3) instead of the
$1,000 computed in Example 1. Joe's adjusted December 31, 1994, account balance
to be used for determining the required distribution for 1995 is $28,579
($29,725 minus $1,146).
EXAMPLE 3. Assume the same facts as in Example 2, except that, because Joe's
IRA terms do not provide otherwise, he must refigure life expectancies to figure
his required minimum distribution for 1995. Joe's minimum distribution for 1995
is figured by dividing his adjusted account balance as of December 31, 1994
($28,579) by his and his brother's joint life and last survivor expectancy.
Their joint life and last survivor expectancy can be refigured as follows:
1) Life expectancy of nonspouse beneficiary (from Table I in Appendix E)
using his or her age as of his or her birthday in calendar year 1994.... 27.7
2) Number of years that have passed since 1994 (use whole number)....... 1
3) Remaining life expectancy period. Subtract line 2 from line 1....... 26.7
4) Find the divisor amount in Table 1 that is closest to, but less than
the amount on line 3. Enter the age shown for that divisor amount...... 58
5) IRA owner's age as of his or her birthday in calendar year 1995...... 72
6) Joint life and last survivor expectancy (from Table II in Appendix)
using the ages on lines 4 and 5......................................... 27.3
7) Applicable divisor (from Table for Determining Applicable Divisor for
MDIB)................................................................... 24.4
8) REFIGURED LIFE EXPECTANCY. Compare lines 6 and 7. Enter the smaller
number here............................................................. 24.4
Joe's required minimum distribution for 1995 using the refigured life expectancy
(line 8 above) is $1,171 ($28,579 divided by 24.4).
EFFECT OF THE IRA OWNER'S DEATH. The MDIB requirement does not apply to
distributions in years after the death of the original IRA owner. Consequently,
if you hold an IRA as the beneficiary of the IRA owner, minimum distributions
from this IRA can be figured using the general rules for minimum distributions
discussed earlier.
FURTHER INFORMATION. Required distribution rules are explained more fully in
sections 1.401(a)(9)--1, 1.401(a)(9)--2, and 1.408 of the proposed Income Tax
Regulations. These regulations can be read in many libraries and IRS offices.
MISCELLANEOUS RULES FOR
MINIMUM DISTRIBUTIONS
The following rules may apply to your minimum distribution.
INSTALLMENTS ALLOWED. The yearly minimum required distribution can be taken in a
series of installments (monthly, quarterly, etc.) as long as the total
distributions for the year equal the minimum required amount.
IF YOU HAVE MORE THAN ONE IRA, you must determine the required minimum
distribution separately for each IRA; however, you can total these minimum
amounts and take the total from any one or more of the IRAs.
EXAMPLE. Mary, born August 1, 1923, became 70 1/2 on February 1, 1994. She has
two IRAs. She must begin receiving her IRA distributions by April 1, 1995. On
December 31, 1993, Mary's account balance from IRA A was $10,000; her account
balance from IRA B was $20,000. Mary's brother, age 64 as of his birthday in
1994, is the beneficiary of IRA A. Her husband, age 78 as of his birthday in
1994, is the beneficiary of IRA B.
PAGE 26 CHAPTER 6 WHEN CAN I WITHDRAW OR USE ASSETS FROM AN IRA?
<PAGE>
Mary's required minimum distribution from IRA A is $427 ($10,000 divided by
23.4, the joint life and last survivor expectancy of Mary and her brother per
Table II in Appendix E). The amount of the required minimum distribution from
IRA B is $1,143 ($20,000 divided by 17.5, the joint life and last survivor
expectancy of Mary and her husband per Table II in Appendix E). The required
distribution that must be withdrawn by Mary from either one, or both, of her IRA
accounts by April 1, 1995, is $1,570.
IF YOU RECEIVE MORE, IN ANY YEAR, THAN THE REQUIRED MINIMUM AMOUNT FOR THAT
YEAR, you will not receive credit for the additional amount when determining the
required minimum amounts for future years. However, any amount distributed in
your 70 1/2 year will be credited toward the amount that must be distributed by
April 1 of the following year.
ANNUITY DISTRIBUTIONS FROM AN INSURANCE COMPANY. Special rules apply if you
receive distributions from your IRA as an annuity purchased from an insurance
company. See FURTHER INFORMATION, earlier.
- --------------------------------------------------------------------------------
TAX TREATMENT OF DISTRIBUTIONS
In general, include IRA distributions in your gross income in the year you
receive them. Exceptions to this general rule are rollovers and timely
withdrawals of contributions, discussed earlier, and the return of nondeductible
contributions, discussed next under DISTRIBUTIONS FULLY OR PARTLY TAXABLE.
ORDINARY INCOME. IRA distributions that you must include in income are taxed as
ordinary income.
NO SPECIAL TREATMENT. In figuring your tax, you cannot use the special
averaging or capital gain treatment that applies to lump-sum distributions from
qualified employer plans.
DISTRIBUTIONS FULLY
OR PARTLY TAXABLE
Your IRA distributions may be fully or partly taxable, depending on whether your
IRA includes only deductible contributions or any nondeductible contributions.
FULLY TAXABLE. If only deductible contributions were made to your IRA (or IRAs,
if you have more than one) since it was set up, you have NO BASIS in your IRA.
Because you have no basis in your IRA, any distributions are fully taxable when
received. See REPORTING AND WITHHOLDING REQUIREMENTS FOR TAXABLE AMOUNTS later.
PARTLY TAXABLE. If you made nondeductible contributions to any of your IRAs,
you have a COST BASIS (investment in the contract) to the extent of
those contributions. These nondeductible contributions are NOT TAXED when they
are distributed to you. They are a return of your investment in your IRA.
When IRA distributions are made, special rules apply in figuring the tax on
the distributions if:
*Only nondeductible IRA contributions were made and there are any earnings or
gains, or
*If both deductible and nondeductible IRA contributions were made.
Only the part of the distribution that represents nondeductible contributions
(your cost basis) is tax-free. Once nondeductible contributions have been made,
distributions consist partly of nondeductible contributions (basis) and partly
of deductible contributions, earnings, or gains. Until you run out of basis,
each distribution is partly taxable and partly nontaxable.
FORM 8606. You must complete, and attach to your return, Form 8606 if you
receive an IRA distribution and, at any time, have made nondeductible IRA
contributions. Using the form, you will figure the nontaxable distributions for
1994, and your total IRA basis for 1994 and earlier years. See the illustrated
Forms 8606 in Appendix D.
FIGURING THE NONTAXABLE AND TAXABLE
AMOUNTS
If your IRA includes nondeductible contributions and you received a distribution
from it in 1994, you must use Form 8606 to figure how much of your 1994 IRA
distribution is tax free.
IF YOU MADE IRA CONTRIBUTIONS FOR 1994 THAT MAY BE NONDEDUCTIBLE because you
are covered by an employer retirement plan, you also need to use a special
worksheet (See COVERED BY EMPLOYER PLAN?, next). You can then determine how much
you must include in taxable income for any part of the IRA distribution that
represents deductible contributions, earnings or gains. If you have more than
one IRA, you must consider them together, as if they were a single IRA.
COVERED BY EMPLOYER PLAN? If you are covered by an employer retirement plan and
you made IRA contributions for 1994 that may be nondeductible, depending on
whether your IRA deduction for that year is reduced (see DEDUCTION LIMITS, in
Chapter 4), you can use the following worksheet to figure how much of your 1994
IRA distribution(s) is tax-free and how much is taxable. Use the related
instructions, under REPORTING YOUR NONTAXABLE DISTRIBUTION ON FORM 8606, later,
to figure your remaining basis after the distribution.
CHAPTER 6 WHEN CAN I WITHDRAW OR USE ASSETS FROM AN IRA? PAGE 27
<PAGE>
WORKSHEET TO FIGURE
TAXABLE PART OF DISTRIBUTION
(Use only if you have to figure the taxable part of your 1994 distributions to
determine your modified AGI for that year;
see DEDUCTIONS LIMITS in Chapter 4.)
- --------------------------------------------------------------------------------
1) Enter the basis in your IRA(s) as of 12/31/93
................................................ $
----------
2) Enter all IRA contributions made for 1994,
WHETHER OR NOT DEDUCTIBLE. Include
contributions made during 1/1/95 - 4/15/95
for the 1994 year, but exclude contributions
rolled over from retirement plans............ $
-----------
3) Add lines 1 and 2............................ $
-----------
4) Enter the value of ALL your IRA(s) as of 12/
31/94 (include any outstanding rollovers).... $
-----------
5) Enter the total IRA distributions received in
1994 (Do not include outstanding rollovers).. $
-----------
6) Add lines 4 and 5 ........................... $
-----------
7) Divide line 3 by line 6. Enter the result as
a decimal (to at least two places). Do not
enter more than 1.00 ........................ $
-----------
8) NONTAXABLE PORTION of the distribution.
Multiply line 5 by line 7 ................... $
-----------
9) TAXABLE PORTION of the distribution. Subtract
line 8 from line 5 .......................... $
-----------
REPORTING YOUR NONTAXABLE DISTRIBUTION ON FORM 8606. To report your nontaxable
distribution and to figure the remaining basis in your IRA after distributions,
you can:
1) Use the worksheet in the Form 1040 instructions to figure your deductible IRA
contributions to report on lines 23a and 23b of Form 1040 or lines 15a and
15b of Form 1040A.
2) After you complete the worksheet in the Form 1040 or Form 1040A instructions,
enter your nondeductible IRA contributions on line 1 of Form 8606.
3) Complete lines 2-5 of Form 8606. If your IRA basis before 1994 distributions
(line 5 of Form 8606) is less than the nontaxable part of those distributions
(line 8 of the above worksheet), complete lines 6-13 of Form 8606 and STOP
HERE. If line 5 of Form 8606 is equal to or greater than line 8 of the above
worksheet, follow instructions 4 and 5, next. Do not complete lines 6-9 of
Form 8606.
4) Enter the amount from line 8 of the above worksheet on line 10 of Form 8606.
Enter the amount from line 9 on line 13 of Form 8606.
5) Complete lines 11 and 12 of Form 8606.
EXAMPLE. Rose Green has made the following contributions to her IRAs--
<TABLE>
Year Deductible Nondeductible
- ---- ---------- -------------
<S> <C> <C>
1987 $2,000 -0-
1988 $2,000 -0-
1989 $2,000 -0-
1990 $1,000 -0-
1991 $1,000 -0-
1992 $1,000 -0-
1993 $ 700 $300
----------------------- --------------------
Totals $9,700 $300
</TABLE>
In 1994, Rose, whose IRA deduction for that year may be reduced or eliminated,
makes a $2,000 contribution that may be partly nondeductible. She also withdraws
$5,000. At the end of that year, the fair market value of her accounts,
including earnings, total $20,000. She did not have any tax-free withdrawals in
earlier years. The amount she includes in income is figured as follows:
WORKSHEET TO FIGURE
TAXABLE PART OF DISTRIBUTION
(Use only if you have to figure the taxable part of your 1994 distributions to
determine your modified AGI for that year;
see DEDUCTION LIMITS in Chapter 4.)
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
1) Enter the basis in your IRA(s) as of 12/31/93
............................................. $ 300
2) Enter all IRA contributions made for 1994,
WHETHER OR NOT DEDUCTIBLE. Include
contributions made during 1/1/95 - 4/15/95
for the 1994 year, but exclude contributions
rolled over from retirement plans............ $ 2,000
---------
3) Add lines 1 and 2............................ $ 2,300
---------
4) Enter the value of ALL your IRA(s) as of 12/
31/94 (include any outstanding rollovers).... $ 20,000
5) Enter the total IRA distributions received in
1994 (Do not include outstanding rollovers).. $ 5,000
---------
6) Add lines 4 and 5............................. $ 25,000
---------
7) Divide line 3 by line 6. Enter the result as a
decimal (to at least two places). Do not enter
more than 1.00................................ .092
---------
8) NONTAXABLE PORTION of the distribution.
Multiply line 5 by line 7..................... $ 460
---------
9) TAXABLE PORTION of the distribution. Subtract
line 8 from line 5............................ $ 4,540
---------
</TABLE>
The following illustrated Form 8606 for Rose shows the information required
when you need to use the above worksheet to figure your nontaxable distribution.
Assume that the amount used on line 1 of Form 8606 is the amount Rose figured
using instructions 1) and 2) given earlier under REPORTING YOUR NONTAXABLE
DISTRIBUTION ON FORM 8606.
PAGE 28 CHAPTER 6 WHEN CAN I WITHDRAW OR USE ASSETS FROM AN IRA?
<PAGE>
<TABLE>
<CAPTION>
<S> <C>
FORM 8606 NONDEDUCTIBLE IRAs OMB No. 1545-1007
-----------------
(CONTRIBUTIONS, DISTRIBUTIONS, AND BASIS) 1994
Department of the Treasury PLEASE SEE WHAT RECORDS MUST I KEEP? ON PAGE 2 Attachment
Internal Revenue Service ATTACH TO FORM 1040, FORM 1040A, OR FORM 1040NR. Sequence No. 47
- --------------------------------------------------------------------------------------------------------------------------------
Name. If married, file a separate Form 8606 for each spouse. See instructions. Your social security number
Rose Green 001:00:0000
- --------------------------------------------------------------------------------------------------------------------------------
Fill in Your Address Only Home address (number and street, or P.O. box if Apt. no.
If You Are Filing This mail is not delivered to your home
Form by Itself and Not
------------------------------------------------------------------------------------------------
With Your Tax Return City, town or post office, state, and ZIP code
- --------------------------------------------------------------------------------------------------------------------------------
CONTRIBUTIONS, NONTAXABLE DISTRIBUTIONS, AND BASIS
1 Enter your IRA contributions for 1994 that you choose to be nondeductible.
Include those made during 1/1/95-4/17/95 that were for 1994. See instructions . . . . . . . . . 1 500.00
--------------------------
2 Enter your total IRA basis for 1993 and earlier years. See instructions . . . . . . . . . . . . 2 300.00
--------------------------
3 Add lines 1 and 2. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3 800.00
--------------------------
---------------
DID YOU RECEIVE-------------------------NO-----------------Enter the amount from line 3 on
ANY IRA line 12. Then, stop and read WHEN
DISTRIBUTIONS AND WHERE TO FILE on page 2.
(WITHDRAWLS)
IN 1994? -------------------------YES----------------Go to line 4.
---------------
4 Enter only those contributions included on line 1 that were made during 1/1/95-4/17/95. This
amount will be the same as line 1 if all of your nondeductible contributions for 1994 were
made in 1995 by 4/17/95. See instructions . . . . . . . . . . . . . . . . . . . . . . . . . . . 4 0
--------------------------
5 Subtract line 4 from line 3 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5 800.00
--------------------------
6 Enter the total value of ALL your IRAs as of 12/31/94 plus any outstanding
rollovers. See instructions . . . . . . . . . . . . . . . . . . . . . . . . 6
--------------------
7 Enter the total IRA distributions received during 1994. Do not include
amounts rolled over before 1/1/95. See instructions . . . . . . . . . . . . 7
--------------------
8 Add lines 6 and 7. . . . . . . . . . . . . . 8
--------------------------
9 Divide line 5 by line 8 and enter the result as a decimal (to at least two
places). Do not enter more than "1.00". . . . . . . . . . . . . . . . . . . 9 X .
--------------------
10 Multiply line 7 by line 9. This is the amount of your nontaxable
distributions for 1994 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10 460.00*
--------------------------
11 Subtract line 10 from line 5. This is the basis in your IRA(s) as of 12/31/94 . . . . . . . . . 11 340.00
--------------------------
12 Add lines 4 and 11. This is your total IRA basis for 1994 and earlier years . . . . . . . . . . 12 340.00
--------------------------
TAXABLE DISTRIBUTIONS FOR 1994
13 Subtract line 10 from line 7. Enter the result here and on Form 1040, line 15b; Form 1040A, line 10b;
or Form 1040NR, line 16b, whichever applies. . . . . . . . . . . . . . . . . . . . . . . . . . . 13 4,540.00*
- --------------------------------------------------------------------------------------------------------------------------------
SIGN HERE ONLY IF YOU Under penalties of perjury, I declare that I have examined this form, including accompanying
ARE FILING THIS FORM statements, and to the best of my knowledge and belief, it is true, correct, and complete.
BY ITSELF AND NOT WITH
----------------------------------------------------------- ----------------------
YOUR TAX RETURN Your signature Date
- --------------------------------------------------------------------------------------------------------------------------------
*From worksheet in IRS Publication 590
</TABLE>
RECOGNIZING LOSSES
ON IRA INVESTMENTS
If you have a loss on your IRA investment, you can recognize the loss on your
income tax return, but only when all the amounts in all your IRA accounts have
been distributed to you and the total distributions are less than your
unrecovered basis, if any. Your basis is the total amount of the nondeductible
contributions in your IRAs. You claim the loss as a miscellaneous itemized
deduction, subject to the 2 percent limit, on Schedule A, Form 1040.
EXAMPLE. Bill King has made nondeductible contributions to an IRA totaling
$2,000, giving him a basis at the end of 1993 of $2,000. By the end of 1994, his
IRA earns $400 in interest income. In that year, Bill withdraws $600, reducing
the value of his IRA to $1,800 at year's end. Bill figures the taxable part of
the distribution and his remaining basis on Form 8606 (ILLUSTRATED IN APPENDIX
D).
In 1995, Bill's IRA has a LOSS of $500. At the end of that year, Bill's IRA
balance is $1,300. Bill's remaining basis in his IRA is $1,500. Bill withdraws
the $1,300 balance remaining in the IRA. He can claim a loss for 1995 of $200
(the $1,500 basis minus the $1,300 withdrawn IRA balance).
INHERITED IRAS
The beneficiaries of your IRA must include distributions to them in their gross
incomes.
BENEFICIARIES. Your beneficiaries can be your estate, dependents, and anyone you
choose to receive the benefits of your IRA after you die.
SPOUSE. If you inherit an interest in an IRA from your spouse, you can elect
to treat the entire inherited interest as your own IRA as discussed under
INHERITED IRAS in Chapter 3. See the discussion earlier under REQUIRED
DISTRIBUTIONS for the rules on when you must begin to make withdrawals from the
IRA.
BENEFICIARY OTHER THAN SPOUSE. If you inherit an IRA from someone other than
your spouse, you cannot treat it as though you established it. The IRA may not
be rolled over into, or receive a rollover from, another IRA. No deduction will
be allowed for amounts paid into that inherited IRA, nor can nondeductible
contributions be made to an inherited IRA.
CHAPTER 6 WHEN CAN I WITHDRAW OR USE ASSETS FROM AN IRA? PAGE 29
<PAGE>
IRA WITH BASIS. If you inherit an IRA from a person who had a basis in the IRA
because of nondeductible contributions, that basis remains with the IRA. Unless
you are the decedent's spouse and choose to treat the IRA as your own, you
cannot combine this basis with any basis you have in your own IRA(s) or any
basis in IRA(s) you inherited from other decedents. If you take a distribution
from an inherited IRA and your IRA, and each has basis, you must complete
separate Forms 8606 to determine the taxable and nontaxable portions of those
distributions.
DEATH BENEFIT EXCLUSION. Your beneficiaries cannot claim a death benefit
exclusion for any part of a distribution from your IRA.
FEDERAL ESTATE TAX DEDUCTION. Your beneficiary may be able to claim a deduction
for estate tax attributable to certain distributions from your IRA after you
die. The beneficiary can deduct the part of the estate tax paid on any part of a
distribution that the beneficiary must include in income as income in respect of
a decedent. He or she can take the deduction for the tax year the beneficiary
reports that income. For information on claiming this deduction, see OTHER TAX
INFORMATION in Publication 559, TAX INFORMATION FOR SURVIVORS, EXECUTORS, AND
ADMINISTRATORS.
Any taxable part of a distribution that is not income in respect of a
decedent is a payment the beneficiary must include in income. However, the
beneficiary cannot take any estate tax deduction for this part.
If the beneficiary is your spouse, he or she can, as the surviving spouse,
roll over the distribution to another IRA and avoid including it in income for
the year received.
OTHER SPECIAL IRA SITUATIONS
There are other special IRA situations that you may encounter. They include
the following:
DISTRIBUTION OF AN ANNUITY CONTRACT FROM YOUR IRA ACCOUNT. You may tell the
trustee or custodian of your IRA account to use the amount in the account to
buy an annuity contract for you. You are not taxed when you receive the
annuity contract from your account. You are taxed when you start receiving
payments from that annuity contract.
TAX TREATMENT. If only deductible contributions were made to your IRA
since it was set up (this includes all your IRAs, if you have more than one),
the annuity payments are fully taxable.
If your IRA includes both deductible and nondeductible contributions, the
annuity payments are taxed as explained earlier under DISTRIBUTIONS FULLY OR
PARTLY TAXABLE.
CASHING IN RETIREMENT BONDS. When you cash in retirement bonds, you are taxed on
the entire amount you receive. If you do not cash in your bonds before the end
of the year in which you reach age 70 1/2, you will be taxed on the entire value
of the bonds at that time. This is the amount you would have received if you
had cashed in the bonds at that time. When the bonds are cashed later, you will
not be taxed again.
REPORTING AND WITHHOLDING REQUIREMENTS FOR TAXABLE AMOUNTS
If you receive a distribution from your IRA, you will receive FORM 1099-R,
DISTRIBUTIONS FROM PENSIONS, ANNUITIES, RETIREMENT OR PROFIT-SHARING PLANS,
IRAS, INSURANCE CONTRACTS, ETC., or a similar statement. IRA distributions are
shown in Boxes 1 and 2 of Form 1099-R. A number or letter code in Box 7 tells
you what type of distribution you received from your IRA. THE NUMBER CODES MEAN:
1) Early (premature) distribution, no known exception.
2) Early (premature) distribution, exception applies.
3) Disability.
4) Death.
5) Prohibited transactions.
6) Section 1035 exchange (a tax-free exchange of
insurance contracts).
7) Normal distribution.
8) Excess contributions plus earnings/
excess deferrals (and/or earnings)
taxable in 1994.
9) PS-58 costs (premiums paid by a trustee or
custodian for current insurance protection,
taxable to you currently).
THE LETTER CODES MEAN:
P--Excess contributions plus earnings/
excess deferrals taxable in 1993.
A--Eligible for 5-year/10-year averaging.
B--Eligible for death benefit exclusion.
C--Eligible for both A and B.
D--Excess contributions plus earnings/
excess deferrals taxable in 1992.
E--Excess annual additions under section 415.
F--Charitable gift annuity.
G--Direct rollover to IRA.
H--Direct rollover to qualified plan or
tax-sheltered annuity.
If the distribution shown on Form 1099-R is from your IRA (or
SEP-IRA), the small box in box 7 (labeled IRA/SEP) should be checked.
WITHHOLDING. Federal income tax is withheld from IRA distributions unless you
choose not to have tax withheld. (See also, ROLLOVER FROM EMPLOYER'S PLAN INTO
AN IRA, in Chapter 5.) The tax withheld from an annuity or a similar periodic
payment is based on your marital status and the number
Page 30 Chapter 6 WHEN CAN I WITHDRAW OR USE ASSETS FROM AN IRA?
<PAGE>
of withholding allowances you claim on your withholding certificate (Form
W-4P). If you have not filed a certificate, the tax withheld will be
determined by treating you as a married individual claiming three withholding
allowances.
Generally, tax will be withheld at a 10% rate on lump-sum distributions.
WITHHOLDING FROM IRA DISTRIBUTIONS OUTSIDE THE UNITED STATES.
In general, if you are a U.S. citizen or resident alien and your home address
is outside the United States or its possessions, you cannot choose exemption
from withholding on your IRA distributions.
To choose exemption from withholding on your IRA, you must:
- - Give the payer of the IRA distributions your home address in the United
States or in a U.S. possession, or
- - Certify under penalties of perjury that you are not a U.S. citizen, a resident
alien of the United States, or a tax-avoidance expatriate.
OTHERWISE, THE PAYER MUST WITHHOLD TAX.
For more information, see WITHHOLDING ON PENSIONS AND ANNUITIES in
Publication 505, TAX WITHHOLDING AND ESTIMATED TAX. See also Publication 515,
WITHHOLDING OF TAX ON NONRESIDENT ALIENS AND FOREIGN CORPORATIONS.
REPORTING TAXABLE DISTRIBUTIONS ON YOUR RETURN. Report fully taxable
distributions, including premature distributions, on line 15b, Form 1040 (no
entry is required on line 15a) or line 10b, Form 1040A. If only part of the
distribution is taxable, enter the total amount on line 15a, Form 1040 (or line
10a, Form 1040A) and the taxable part on line 15b (or 10b). You cannot report
distributions on Form 1040EZ.
ESTATE TAX. For information on how estate tax laws relate to certain IRAs, get
Publication 448, FEDERAL ESTATE AND GIFT TAXES.
<TABLE>
<CAPTION>
FORM 1040
- --------------------------------------------------------------------------------------------------------------------
<C> <S> <C>
INCOME
Attach Copy B of your Forms W-2, W-2G, and 1099-R here.
If you did not get a W-2, see page 15.
Enclose, but do not attach, any payment with your return.
7 Wages, salaries, tips, etc. Attach Form(s) W-2 7
------------------
8a Taxable interest income (see page 15). Attach Schedule B if over $400 8a
------------------
b Tax-exempt interest (see page 16). DON'T include on line 8a 8b
-------------------------------
9 Dividend income. Attach Schedule B if over $400 9
------------------
10 Taxable refunds, credits, or offsets of state and local income taxes (see page 16) 10
------------------
11 Alimony received 11
------------------
12 Business income or (loss). Attach Schedule C or C-EZ 12
------------------
13 Capital gain or (loss). If required, attach Schedule D (see page 16) 13
------------------
14 Other gains or (losses). Attach Form 4797 14
------------------
15a Total IRA distributions . 15a b Taxable amount (see page 17) 15b
-------------------------------- ------------------
16a Total pensions and annuities 16a b Taxable amount (see page 17) 16b
-------------------------------- ------------------
17 Rental real estate, royalties, partnerships, S corporations, trusts, etc. Attach Schedule E 17
------------------
18 Farm income or (loss). Attach Schedule F. . . . . . . . . . . . . . . . . . . . . . . . . . 18
------------------
19 Unemployment compensation (see page 18). . . . . . . . . . . . . . . . . . . . . . . . . . . 19
------------------
20a Social security benefits 20a b Taxable amount (see page 18) 20b
-------------------------------- ------------------
21 Other income. List type and amount--see page 18 . . . . . . . . . . . . . . . . . . . . . . 21
------------------
22 Add the amounts in the far right column for lines 7 through 21. This is your total income -> 22
</TABLE>
<TABLE>
<CAPTION>
FORM 1040A
- --------------------------------------------------------------------------------------------------------------------
<C> <S> <C>
FIGURE YOUR TOTAL INCOME
Attach Copy B of your Forms W-2 and 1099-R here.
If you didn't get a W-2, see page 25.
Enclose, but do not attach, any payment with your return.
7 Wages, salaries, tips, etc. This should be shown in box 1 of your W-2
form(s). Attach Form(s) W-2. 7
- --------------------------------------------------------------------------------------------------------------------
8a Taxable interest income (see page 25). If over $400, attach
Schedule 1. 8a
----------------------------------------------------------------------------------------------------------------
b Tax-exempt intest. DO NOT include on line 8a. 8b
- -----------------------------------------------------------------------------
9 Dividends. If over $400, attach Schedule 1. 9
- --------------------------------------------------------------------------------------------------------------------
10a Total IRA 10b Taxable amount
distributions. 10a (see page 26). 10b
- --------------------------------------------------------------------------------------------------------------------
11a Total pensions 11a Taxable amount
and annuities 11a (see page 27). 11b
- --------------------------------------------------------------------------------------------------------------------
12 Unemployment compensation (see page 30). 12
- --------------------------------------------------------------------------------------------------------------------
13a Social security 13b Taxable amount
benefits 13a (see page 31). 13b
- --------------------------------------------------------------------------------------------------------------------
14 Add lines 7 thorugh 13b (far right column). This is your total income.-> 14
- --------------------------------------------------------------------------------------------------------------------
</TABLE>
Chapter 6 WHEN CAN I WITHDRAW OR USE ASSETS FROM AN IRA? Page 31
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
7.
- --------------------------------------------------------------------------------
WHAT ACTS RESULT IN PENALTIES?
The tax advantages of using IRAs for retirement savings can be offset by
additional taxes and penalties if you do not follow the rules. For example,
there are additions to the regular tax for using your IRA funds in prohibited
transactions. There are also additional taxes for:
- - Making excess contributions,
- - Making early withdrawals (taking premature distributions),
- - Allowing excess amounts to accumulate (failing to make required withdrawals),
or
- - Receiving excess distributions.
There are penalties for overstating the amount of nondeductible
contributions and for failure to file Form 8606, NONDEDUCTIBLE IRAS
(CONTRIBUTIONS, DISTRIBUTIONS, AND BASIS), if required.
This chapter discusses those acts that you should avoid and the additional
taxes and other costs, including loss of IRA status, that apply if you don't.
- --------------------------------------------------------------------------------
PROHIBITED TRANSACTIONS
Generally, a prohibited transaction is any improper use of your IRA account or
annuity by you or any DISQUALIFIED PERSON.
Some examples of disqualified persons for this purpose are:
Your fiduciary, or
Members of your family (spouse, ancestor, lineal descendant and any spouse
of a lineal descendant).
Some examples of prohibited transactions with an IRA are:
1) Borrowing money from it,
2) Selling property to it,
3) Receiving unreasonable compensation for managing it,
4) Using it as security for a loan, and
5) Buying property for personal use (present or future) with IRA funds.
EFFECT ON AN IRA ACCOUNT. Generally, if YOU OR YOUR BENEFICIARY engage in a
prohibited transaction in connection with your IRA account at any time during
the year, IT WILL NOT BE TREATED AS AN IRA as of the first day of the year.
EFFECT ON YOU (OR YOUR BENEFICIARY). If you (or your beneficiary) engage in a
prohibited transaction in connection with your IRA account at any time during
the year, you (or your beneficiary) must include the fair market value of all
(or part, in certain cases) of the IRA assets in your gross income for that
year. The fair market value is the price at which the IRA assets would change
hands between a willing buyer and a willing seller, when neither has any need to
buy or sell, and both have reasonable knowledge of the relevant facts.
You must use the fair market value of the assets as of the first day of the
year you engaged in the prohibited transaction. You may also have to pay the 10%
tax on premature distributions and the 15% tax on excess distributions,
discussed later.
BORROWING ON AN ANNUITY CONTRACT. If you borrow money against your IRA
annuity contract, you must include in your gross income the fair market value
of the annuity contract as of the first day of your tax year. You may also
have to pay the 10% additional tax on premature distributions and the 15% tax
on excess distributions discussed later.
PLEDGING AN ACCOUNT AS SECURITY. If you use a part of your IRA account
as security for a loan, THAT PART is treated as a distribution and is
included in your gross income. You may have to pay the 10% additional tax on
premature distributions, and the 15% tax on excess distributions discussed
later.
TRUST ACCOUNT SET UP BY AN EMPLOYER OR AN EMPLOYEE ASSOCIATION. Your account or
annuity DOES NOT LOSE ITS IRA TREATMENT IF your employer or employee
association, with whom you have your IRA, engages in a prohibited transaction.
IF YOU PARTICIPATE in the prohibited transaction with your employer or
association, your account is no longer treated as an IRA.
EXCISE TAXES. If someone other than the owner or beneficiary of an IRA engages
in a prohibited transaction, that person may be liable for certain excise taxes.
In general, there is a 5% tax on the amount of the prohibited transaction, and a
100% additional tax if the transaction is not corrected.
IF THE IRA CEASES TO BE AN IRA because of a prohibited transaction by you
(or your beneficiary), you (or your beneficiary) are not liable for these excise
taxes. However, you (or your beneficiary) may have to pay other taxes as
discussed above under EFFECT ON YOU (OR YOUR BENEFICIARY).
OTHER ACTS TO AVOID
The following acts are also prohibited:
INVESTMENT IN COLLECTIBLES. If your IRA invests in collectibles, the amount
invested is considered distributed
Page 32 Chapter 7 WHAT ACTS RESULT IN PENALTIES?
<PAGE>
to you in the year invested. You may also have to pay the 10% tax on premature
distributions, the 15% tax on excess distributions, and the excise taxes
discussed earlier.
COLLECTIBLES include art works, rugs, antiques, metals, gems, stamps,
coins, alcoholic beverages, and certain other tangible personal property.
EXCEPTION. Your IRA can invest in one, one-half, one-quarter, or one-tenth
ounce U.S. gold coins, or one-ounce silver coins minted by the Treasury
Department.
EXEMPTIONS
Certain transactions that have been viewed previously as prohibited
transactions, have been granted exemption from prohibited transaction penalties
by the Department of Labor. Recently, exemptions have been granted for the
following, if they meet the requirements for exemption:
- - Payments by an IRA sponsor of cash, property, or other consideration to an
individual (or members of his family) for whose benefit the IRA is
established or maintained.
- - Receipt of services from a bank at reduced or no cost by an individual for
whose benefit an IRA is established or maintained.
EXEMPTION FOR PAYMENTS OF CASH, PROPERTY, OR OTHER CONSIDERATION. The following
requirements must be satisfied for this exemption to apply:
1) The payments must be given for establishing an IRA or for making additional
contributions to it;
2) The IRA must be established solely to benefit you, your spouse, and
beneficiaries (yours and your spouse's);
3) During the year the total of the fair market value of the payments you
receive cannot exceed:
a) $10 for IRA deposits of less than $5,000, or
b) $20 for IRA deposits of $5,000 or more;
4) If the consideration you are provided is group term life insurance, then the
previous two conditions do not apply provided that no more than $5,000 of the
face value of the insurance is based on a dollar for dollar basis on the
assets in your IRA.
EXEMPTION FOR SERVICES YOU RECEIVE AT REDUCED OR NO COST. After May 11, 1993,
the following conditions must be satisfied for this exemption to apply:
1) The IRA taken into account for purposes of qualifying to receive the
services must be established and maintained for the benefit of you, your
spouse, or beneficiaries (yours and your spouse's).
2) The services must be services the bank itself can legally offer.
3) The services must be provided in the ordinary course of business by the
bank (or a bank affiliate) to customers who qualify but do not maintain an
IRA (or a Keogh plan).
4) For an IRA, the determination of who qualifies for these services must be
based on an IRA (or a Keogh plan) deposit balance equal to the lowest
qualifying balance for any other type of account.
5) The rate of return on an IRA investment that qualifies cannot be less than
the return on an identical investment that could have been made at the same
time at the same branch of the bank by a customer who is not eligible for
(or does not receive) these services.
- --------------------------------------------------------------------------------
EXCESS CONTRIBUTIONS
Generally, an excess contribution is the amount contributed to your IRAs that is
more than the smaller of the following amounts:
1) Your taxable compensation for the year, or
2) $2,000.
The taxable compensation limit applies whether your contributions are deductible
or nondeductible.
CONTRIBUTIONS FOR THE YEAR YOU REACH AGE 70 1/2 and any later year are also
excess contributions.
An excess contribution could be the result of your contribution, your
spouse's contribution, your employer's contribution, or an improper rollover
contribution. If your employer makes contributions on your behalf to a SEP-IRA,
see Chapter 8, SIMPLIFIED EMPLOYEE PENSION (SEP).
TAX ON EXCESS CONTRIBUTIONS. If the excess contribution for a year is not
withdrawn by the date your return for the year is due (including extensions) as
explained later, you are subject to a 6% tax. You must pay the 6% tax each year
on excess amounts that remain in your IRA at the end of your tax year. The
excess is taxed for the year of the excess contribution and for each year after
that, until you correct it. The tax cannot be more than 6% of the value of your
IRA as of the end of your tax year.
The excise tax is figured on FORM 5329. For information on filing Form 5329,
see REPORTING ADDITIONAL TAXES, later.
EXAMPLE. For 1994, Paul Jones is single, his compensation is $31,000, and he
contributed $2,500 to his IRA. Paul has made an excess contribution to his IRA
of $500 ($2,500 minus the $2,000 limit). The contribution earned $5 interest in
1994 and $6 interest in 1995 before the due date of the return, including
extensions. He does not withdraw the $500 or the interest it earned by the due
date of his return, including extensions.
Paul figures his excess contribution tax by multiplying the excess
contribution ($500) shown on line 12, Form 5329, by .06, giving him an
additional tax liability of $30. He enters the tax on line 13, Form 5329, and on
line 51,
Chapter 7 WHAT ACTS RESULT IN PENALTIES? Page 33
<PAGE>
Form 1040. See Paul's filled-in Form 5329 in Appendix C, later.
EXCESS CONTRIBUTIONS YOU WITHDRAW BY THE DATE YOUR RETURN IS DUE. You will not
have to pay the 6% tax if you withdraw an excess contribution made during a tax
year AND interest or other income earned on it by the date your tax return for
that year is due, including extensions.
DO NOT INCLUDE in your gross income an excess contribution that you withdraw
from your IRA before your tax return is due if:
1) No deduction was allowed for the excess contribution, and
2) The interest or other income earned on the excess was also withdrawn.
However, YOU MUST INCLUDE in your gross income the interest or other income that
was earned on the excess contribution. Report it on your return for the year in
which the excess contribution was made. Your withdrawal of interest or other
income may be subject to an additional 10% tax on early withdrawals, discussed
later.
FORM 1099-R. You will receive Form 1099-R indicating the amount of the
withdrawal. If the excess contribution was made in a previous tax year, these
forms will indicate the year in which the earnings are taxable.
EXCESS CONTRIBUTIONS YOU WITHDRAW AFTER YOUR RETURN IS DUE. If the total
contributions (other than rollover contributions) for the year to your IRA are
$2,250 or less, and there are no employer contributions for the year, you can
withdraw any excess contribution after the due date for filing your tax return
for that year, including extensions, and not include the amount withdrawn in
your gross income. This applies only to the part of the excess for which you did
not take a deduction. The 6% tax applies to the excess contribution amount that
remains in your IRA at the end of a year (this includes the year of the
contribution and any later year).
EXCESS CONTRIBUTION DEDUCTED IN AN EARLIER YEAR. If you deducted an excess
contribution in an earlier year for which the total contributions were $2,250 or
less, and for which there were no employer contributions, you can still remove
the excess from your IRA and not include it in your gross income. To do this,
file Form 1040X, AMENDED U.S. INDIVIDUAL INCOME TAX RETURN, for that year and do
not deduct the excess contribution on the amended return. Generally, you can
file an amended return within 3 years after you filed your return, or 2 years
from the time the tax was paid, whichever is later.
EXCESS DUE TO INCORRECT ROLLOVER INFORMATION. If an excess contribution in
your IRA is the result of a rollover, and the excess occurred because you had
incorrect information required to be supplied by the plan, you can withdraw the
excess contribution. The $2,250 limit, mentioned above, is increased by the
amount of the excess that is due to the incorrect information. You will have to
amend your return for the year in which the excess occurred to correct the
reporting of the rollover amounts in that year. Do not include in your gross
income, in the year you withdraw it, the excess contribution that was the result
of the incorrect information.
TAKING A DEDUCTION IN A LATER YEAR FOR AN EXCESS CONTRIBUTION. You cannot reduce
an excess by applying it against an earlier year in which less than the maximum
amount allowable was contributed. But you can apply it to a later year if the
contributions for that later year are less than the maximum allowed for that
year.
You can deduct from your gross income, in the first available tax year, the
amount of the excess contributions in your IRA, from preceding years, up to the
difference between the maximum amount that is deductible in the year and the
amount actually contributed during the year.
This method lets you avoid making a withdrawal. It does not, however, let you
avoid the 6% tax on any excess contributions remaining at the end of a tax year.
EXAMPLE. Terry was entitled to contribute to her IRA and deduct $1,000 in
1993 and $1,500 in 1994, the amounts of her taxable compensation for these
years. In 1993, she actually contributed $1,400 but could deduct only $1,000. In
1993, $400 is an excess contribution, subject to the 6% tax. However, she would
not have to pay the 6% tax if she withdrew the excess (including any earnings)
before the due date of her 1993 return. Since Terry did not withdraw the excess,
she owes excise tax of $24 for 1993. To avoid the excise tax for 1994, she can
correct the $400 excess amount from 1993 in 1994 if her actual contributions are
only $1,100 in 1994 (the allowable deductible contribution of $1,500 minus the
$400 excess from 1993 she wants to treat as a deductible contribution in 1994).
Terry can deduct $1,500 in 1994 (the $1,100 actually contributed plus the $400
excess contribution from 1993).
CLOSED TAX YEAR. A special rule applies if you incorrectly deducted part of
the excess contribution in a closed tax year (one for which the period to assess
a tax deficiency has expired). The amount allowable as an IRA deduction for a
later correction year (the year you contribute less than the allowable amount)
must be reduced by the amount of the excess contribution deducted in the closed
year.
- --------------------------------------------------------------------------------
PREMATURE DISTRIBUTIONS
(EARLY WITHDRAWALS)
You must include in your gross income premature distributions (sometimes called
early withdrawals or early distributions) from your IRA. They are also subject
to an additional tax, as discussed below.
Premature distributions are amounts you withdraw from your IRA account or
annuity before you are age 59 1/2, or amounts you receive when you cash in
retirement bonds before you are age 59 1/2.
Page 34 Chapter 7 WHAT ACTS RESULT IN PENALTIES?
<PAGE>
EXCEPTIONS. In certain circumstances, the additional tax does not apply to
distributions from your IRA, even though they are made before you are
age 59 1/2. There are exceptions for:
- - Disability,
- - Death, and
- - Annuity distributions.
The exceptions are discussed in detail near the beginning of Chapter 6 under
EXCEPTIONS.
RECEIVERSHIP DISTRIBUTIONS. Premature distributions (with or without your
consent) from savings institutions placed in receivership are subject to this
tax unless one of the exceptions discussed above applies. This is true even if
the distribution is from a receiver that is a state agency.
ADDITIONAL TAX. The additional tax on premature distributions is equal to 10% of
the amount of the premature distribution that you must include in your gross
income. This tax is in addition to any regular income tax that is due.
Use FORM 5329 to figure the tax. See the discussion of Form 5329, later,
under REPORTING ADDITIONAL TAXES, for information on filing the form.
EXAMPLE. Tom, who is 35 years old, withdraws $3,000 from his IRA account. The
$3,000 is a premature distribution. Tom must include the $3,000 in his gross
income for that year and pay income tax on it. Tom must also pay an additional
tax of $300 (10% x $3,000). See the filled-in Form 5329, in Appendix C.
NONDEDUCTIBLE CONTRIBUTIONS. The tax on premature distributions does not apply
to the part of a distribution that represents a return of your nondeductible
contributions (basis).
ROLLOVERS. Distributions that are rolled over, as discussed in Chapter 5, can be
made without your having to pay the regular income tax or the 10% additional
tax.
- --------------------------------------------------------------------------------
EXCESS ACCUMULATIONS (INSUFFICIENT DISTRIBUTIONS)
Amounts contributed to your IRA cannot be kept in it indefinitely. In general,
you must begin receiving distributions by April 1 of the year following the year
in which you reach age 70 1/2. The required minimum distribution for any year
after your 70 1/2 year must be made by December 31 of that later year.
TAX ON EXCESS. If distributions are less than the required MINIMUM
DISTRIBUTION for the year, discussed in Chapter 6, you may have to pay a 50%
EXCISE TAX for the year on the amount not distributed as required.
REPORTING THE TAX. Use FORM 5329 to report the tax on excess accumulations. See
the discussion of Form 5329, later, under REPORTING ADDITIONAL TAXES, for more
information on filing the form.
REQUEST TO EXCUSE THE TAX. If the excess accumulation is due to reasonable
error, and you have taken, or are taking, steps to remedy the insufficient
distribution, you can request that the tax be excused.
HOW TO FILE THE REQUEST. File Form 5329 with your Form 1040 and pay any tax
you owe on excess accumulations. Attach an explanation for the excess
accumulation and show when you removed the excess or what you have done that
will result in its withdrawal.
If the IRS approves your request, it will refund the excess accumulations tax
you paid.
EXEMPTION FROM TAX. If you are unable to make required distributions because you
have an IRA invested in a contract issued by an insurance company that is in
state insurer delinquency proceedings, the 50% excise tax does not apply if the
CONDITIONS and REQUIREMENTS of Revenue Procedure 92-10 are satisfied. Those
conditions and requirements are summarized below. You can read the full text of
the revenue procedure at most IRS offices and at many public libraries.
CONDITIONS. To qualify for exemption from the tax, the assets in your IRA
must include an AFFECTED INVESTMENT. Also, the amount of your required
distribution must be determined as discussed in Chapter 6.
AFFECTED INVESTMENT means an annuity contract or a guaranteed investment
contract (with an insurance company) for which payments under the terms of the
contract have been reduced or suspended because of state insurer delinquency
proceedings against the contracting insurance company.
REQUIREMENTS. If your IRA (or IRAs) includes other assets in addition to your
affected investment, all IRA assets, including the AVAILABLE PORTION of your
affected investment, must be used to satisfy, to the extent possible, your IRA
distribution requirement. If the affected investment is the only asset in your
IRA, the required distribution, to the extent possible, must come from the
available portion, if any, of your affected investment.
AVAILABLE PORTION. The available portion of your affected investment is the
amount of payments remaining after they have been reduced or suspended because
of state insurer delinquency proceedings.
MAKE UP OF SHORTFALL IN DISTRIBUTION. If the payments to you under the
contract increase because all or part of the reduction or suspension is
canceled, you must make up the amount of any shortfall in a prior distribution
because of the proceedings. You make up (reduce or eliminate) the shortfall with
the increased payments you receive.
You must make up the shortfall no later than December 31 of the calendar year
following the year that you receive increased payments.
Chapter 7 WHAT ACTS RESULT IN PENALTIES? Page 35
<PAGE>
- --------------------------------------------------------------------------------
EXCESS DISTRIBUTIONS
If you received RETIREMENT DISTRIBUTIONS during the year of more than $150,000,
you may have to pay a 15% tax ON THE DISTRIBUTIONS EXCEEDING THAT AMOUNT. The
term RETIREMENT DISTRIBUTIONS means your distributions from any qualified
employer plan (including a tax-sheltered annuity plan), or IRA.
Use Form 5329 to figure the tax. See the discussion of Form 5329, later,
under REPORTING ADDITIONAL TAXES.
THIS EXCISE TAX IS REDUCED BY any tax on premature distributions that applies
to the excess distribution. See PREMATURE DISTRIBUTIONS, discussed earlier.
EXCLUDED DISTRIBUTIONS. The excess distribution tax does not apply to the
following distributions:
1) Distributions after the death of the IRA owner (or employee in the case of
employer plans),
2) Distributions that are rolled over,
3) Distributions that represent nondeductible contributions,
4) Distributions to an alternate payee under a qualified domestic relations
order, if includable in the alternate payee's income,
5) Corrective distributions of excess deferrals under a salary reduction
arrangement (or a similar qualified plan) discussed in Chapter 8,
6) Corrective distributions of excess contributions and excess aggregate
contributions, and
7) Corrective distributions of excess annual additions.
COMBINING DISTRIBUTIONS. If distributions with regard to a person are made to
that person and others, the distributions must be combined to figure the amount
of excess distributions for the year.
SPECIAL LIMITATION ON TAX. On a return filed for a tax year ended before January
1, 1989, you could have chosen not to pay the 15% tax on the part of any
distribution that is related to your accrued benefits on August 1, 1986. This
rule APPLIES ONLY IF the accrued benefit as of August 1, 1986, exceeded
$562,500.
However, if you made this choice to exclude from the tax on excess
distributions a distribution amount allocable to your August 1, 1986, benefit
accruals, your other retirement distributions are subject to the tax to the
extent they are more than $148,500 for 1994 (instead of $150,000). Furthermore,
this $148,500 amount is reduced (but not below zero) by any distributions
received during the year that are allocable to the August 1, 1986, benefit
accruals.
If you did not elect to apply this rule, then the 15% tax will apply to the
part of the distribution that exceeds $150,000.
INCREASE IN ESTATE TAX. For decedents dying after December 31, 1986, the estate
tax will be increased by 15% of the excess retirement accumulation. A person's
excess retirement accumulation, if any, is the value of the decedent's interests
in all qualified employee plans, tax-sheltered annuities, qualified annuity
plans, individual retirement accounts, and any other plans that the Internal
Revenue Service may include, OVER the "present value" of a single life annuity
with payments equal to the annual ceiling ($150,000), and payable for a period
equal to the decedent's life expectancy immediately before death. The tax may
not be offset by any credits against the estate tax, such as the unified credit.
- --------------------------------------------------------------------------------
REPORTING ADDITIONAL TAXES
Generally you must use FORM 5329 to report the tax on excess contributions,
premature (early) distributions, excess distributions, and excess accumulations.
YOU MUST FILE FORM 5329 IF YOU receive excess distributions from a qualified
retirement plan, whether or not you owe tax on them.
YOU DO NOT HAVE TO USE FORM 5329 IF:
- - Distribution code 1 (early distribution) is shown in box 7 of Form 1099-R.
Instead, multiply the taxable part of the early distribution by 10% and enter
the result on line 51 of Form 1040. HOWEVER, if you owe this tax and also owe
any other additional tax on a distribution, do not enter this 10% additional
tax directly on your Form 1040. You must file Form 5329 to report your
additional taxes.
- - You qualify for an exception to the premature distributions tax. You need not
report the exception if distribution code 2, 3, or 4 is shown in box 7 of
Form 1099-R. HOWEVER, if one of those codes is not shown, or the code shown
is incorrect, you must file Form 5329 to report the exception.
- - You properly rolled over all distributions you received during the year.
IF YOU FILE FORM 1040, complete Form 5329 and attach it to your Form 1040. Enter
the total amount of IRA tax due on line 51, Form 1040.
IF YOU DO NOT HAVE TO FILE A FORM 1040 but do have to pay one of the IRA taxes
mentioned earlier, file the completed Form 5329 with IRS at the time and place
you would have filed Form 1040. Include a check or money order payable to
Internal Revenue Service for the tax you owe, as shown on Form 5329. Write your
social security number, tax form number, and tax year on your check or money
order.
Page 36 Chapter 7 WHAT ACTS RESULT IN PENALTIES?
<PAGE>
- -----------------------------------------------------------------
8.
- -----------------------------------------------------------------
SIMPLIFIED EMPLOYEE PENSION (SEP)
A simplified employee pension (SEP) is a written arrangement (a plan) that
allows an employer to make contributions toward his or her own (if a
SELF-EMPLOYED INDIVIDUAL) and employees' retirement, without becoming
involved in more complex retirement plans. The contributions are made to IRAs
(SEP-IRAs) of the participants in the plan. Under a SEP, IRAs are set up for,
at a minimum, each QUALIFYING EMPLOYEE (defined below). IRAs may have to be
set up for LEASED EMPLOYEES (defined below), but they do not have to be set
up for EXCLUDABLE EMPLOYEES (defined below).
An employer can use FORM 5305-SEP to satisfy the written arrangement
requirement for a SEP. A SEP can be established at any time during a year.
However, the time for making contributions for a year under a SEP agreement
is limited. See TIME LIMIT FOR CONTRIBUTIONS, later.
NOTE. The SEP plan under which contributions are made can be set up after
the close of the year for which contributions are made. However, the plan
must exist at the time the contributions are made and they must be made
within the time limit.
An employer who signs a SEP agreement does not have to make any
contribution to the SEP-IRAs that are set up. But, if the employer does make
contributions, the contributions must be based on a written allocation
formula and must not discriminate in favor of HIGHLY COMPENSATED EMPLOYEES
(defined below).
- -----------------------------------------------------------------
DEFINITIONS
A SELF-EMPLOYED INDIVIDUAL is an employee for SEP purposes. He or she is also
the employer. Even if the self-employed individual is the only qualifying
employee, he or she can have a SEP-IRA.
A QUALIFYING EMPLOYEE is one who:
Is at least 21 years old,
Has worked for the employer during at least 3 of the 5 years
immediately preceding the tax year, and
Has received from the employer at least $396 in compensation
in the tax year.
NOTE. An employer can establish less restrictive participation
requirements for its employees than those listed, but not more restrictive
ones.
LEASED EMPLOYEES. The person or firm for whom you perform services (the
recipient) may have to include you in a SEP if you are a "leased employee"
and are treated as an employee of the recipient. A leased employee is any
person who is not an employee of the recipient and who is hired by a leasing
organization, but who performs services for another (the recipient of the
services). You are a leased employee if:
1) Your services are provided under an agreement between the
recipient and the leasing organization,
2) Your services are performed for the recipient, or for the
recipient and related persons, on a substantially full-time
basis, for a period of at least one year, and
3) Your services are of a type historically performed by
employees in the recipient's field of business.
For more information on leased employees, see the discussion in
Publication 560.
EXCLUDABLE EMPLOYEES. The following employees can be excluded from coverage
under a SEP:
Employees covered by a union agreement and whose retirement benefits were
bargained for in good faith by their union and their employer, and
Nonresident alien employees who have no U.S. source earned
income from their employer. For more information about
nonresident aliens, see Publication 519, U.S. TAX GUIDE FOR ALIENS.
A HIGHLY COMPENSATED EMPLOYEE is an employee who during the year
or preceding year:
1) Owns more than 5% of the capital or profits interest in the
employer (if not a corporation); or more than 5% of the
outstanding stock or more than 5% of the total voting power
of all stock of the employer corporation;
2) Received annual compensation from the employer of more than $99,000;
3) Received annual compensation from the employer of more than
$66,000 and was a member of the top-paid group (20%) of
employees during the year; or
4) Is an officer whose annual compensation exceeds $59,400.
- -----------------------------------------------------------------
CONTRIBUTIONS
The SEP rules permit an employer to contribute (and deduct) each year to each
participating employee's SEP-IRA up to 15% of the employee's compensation OR
$30,000, whichever is less. These contributions are funded by the employer.
FIGURING THE 15% LIMIT. For purposes of determining the 15%
limit, COMPENSATION is generally limited to
Chapter 8 SIMPLIFIED EMPLOYEE PENSION (SEP) Page 37
<PAGE>
$150,000, NOT INCLUDING your employer's contribution to your SEP-IRA.
NOTE. For employees in a collective bargaining unit covered by a SEP for
which the $150,000 limit is not effective for the plan year beginning in
1994, the compensation limit is $242,280.
EXAMPLE. Barry's nonunion employer has a SEP for its employees. Barry's
compensation for 1994, before his employer's contribution to his SEP-IRA, was
$160,000. Barry's employer can contribute up to $22,500 (15% X $150,000) to
Barry's SEP-IRA.
DEDUCTION LIMIT FOR A SELF-EMPLOYED PERSON. If you are self-employed and
contribute to your own SEP-IRA, special rules apply when figuring your
maximum deduction for these contributions.
FOR DETERMINING THE 15% LIMIT ON CONTRIBUTIONS, discussed above, your
COMPENSATION is your NET EARNINGS FROM SELF-EMPLOYMENT. See NET EARNINGS FROM
SELF-EMPLOYMENT, below. Note that, for SEP purposes, your net earnings
(compensation) must take into account your deduction for contributions to
your own SEP-IRA. Because your deduction amount and your net earnings amount
are each dependent on the other, this adjustment presents a problem.
To solve this problem, you make the adjustment to net earnings indirectly
by, in figuring your maximum deduction, reducing the contribution rate called
for in the plan. Use the following worksheets to find this reduced
contribution rate and your maximum deduction. Make no reduction to the
contribution rate for any common-law employees.
SELF-EMPLOYED PERSON'S RATE WORKSHEET
1) Plan contribution rate as a decimal (for example,
10 1/2% would be 0.105)..............................
---------
2) Rate in line 1 plus one (for example, 0.105
plus one would be 1.105).............................
---------
3) Self-employed rate as a decimal (divide line 1
by line 2) ..........................................
---------
---------
SELF-EMPLOYED PERSON'S DEDUCTION WORKSHEET
STEP 1
Enter your rate from the SELF-EMPLOYED PERSON'S
RATE WORKSHEET....................................
---------
STEP 2
Enter your net earnings from line 3, Schedule C-EZ
(Form 1040), line 31, Schedule C (Form 1040),
line 36, Schedule F (Form 1040), or line 15a,
Schedule K-1 (Form 1065)........................ $
---------
STEP 3
Enter your deduction for self-employment tax from
line 25, Form 1040................................. $
---------
STEP 4
Subtract Step 3 from Step 2 and enter the
result............................................. $
---------
STEP 5
Multiply Step 4 by Step 1 and enter the
result............................................. $
---------
STEP 6
Multiply $150,000 by your plan contribution rate.
Enter the result but not more than $30,000......... $
---------
STEP 7
Enter the smaller of Step 5 or Step 6. This is
your MAXIMUM DEDUCTIBLE CONTRIBUTION. Enter your
deduction on line 27, Form 1040.................... $
---------
---------
EXAMPLE. You are a sole proprietor and have employees. The terms of your
plan provide that you contribute 10 1/2% (.105) of your compensation, and 10
1/2% of your common-law employees' compensation. Your net earnings from line
31, Schedule C (Form 1040) is $200,000. In figuring this amount, you deducted
your common-law employees' compensation of $100,000 and contributions for
them of $10,500 (10 1/2% x $100,000). This net earnings amount is now reduced
to $193,565 by subtracting your self-employment tax deduction of $6,435. You
figure your self-employed rate and maximum deduction for employer
contributions on behalf of yourself as follows:
SELF-EMPLOYED PERSON'S RATE WORKSHEET
1) Plan contribution rate as a decimal (for example,
10 1/2% would be 0.105)........................... 0.105
---------
2) Rate in line 1 plus one, (for example, 0.105
plus one would be 1.105)............................. 1.105
---------
3) Self-employed rate as a decimal (divide line 1
by line 2) .......................................... 0.0950
---------
---------
SELF-EMPLOYED PERSON'S DEDUCTION WORKSHEET
STEP 1
Enter your rate from the SELF-EMPLOYED PERSON'S
RATE WORKSHEET..................................... 0.0950
---------
STEP 2
Enter your net earnings from line 3, Schedule
C-EZ (Form 1040), line 31, Schedule C (Form 1040),
line 36, Schedule F (Form 1040), or line 15a,
Schedule K-1 (Form 1065)........................... $ 200,000
---------
Page 38 Chapter 8 SIMPLIFIED EMPLOYEE PENSION (SEP)
<PAGE>
STEP 3
Enter your deduction for self-employment tax from
line 25, Form 1040................................. $ 6,435
--------
STEP 4
Subtract Step 3 from Step 2 and enter the result... $193,565
--------
STEP 5
Multiply Step 4 by Step 1 and enter the result..... $ 18,389
--------
STEP 6
Multiply $150,000 by your plan contribution rate.
Enter the result but not more than $30,000........ $ 15,750
--------
STEP 7
Enter the smaller of Step 5 or Step 6. This is
your MAXIMUM DEDUCTIBLE CONTRIBUTION. Enter your
deduction on line 27, Form 1040. $ 15,750
--------
--------
NET EARNINGS FROM SELF-EMPLOYMENT. For SEP purposes, your net earnings are
your gross income from your business minus allowable deductions for that
business. Allowable deductions include contributions to your employees'
SEP-IRAs. You also take into account the deduction allowed for one-half of
your self-employment tax, and the deduction for contributions to your own
SEP-IRA. Net earnings do not include tax-free items (or deductions related to
them), but do include foreign earned income and housing cost amounts. Net
earnings include a partner's distributive share of partnership income or loss
(other than separately treated items such as capital gains or losses). If
paid for services to or for the partnership, net earnings include guaranteed
payments to a limited partner. They do not include distributions of income or
loss to a limited partner.
TIME LIMIT FOR CONTRIBUTIONS. To deduct contributions for a year, the
employer must make the contributions not later than the due date (including
extensions) of the employer's return for the year.
OVERALL LIMIT -- EMPLOYER WITH DEFINED CONTRIBUTION AND SEP PLANS. If an
employer contributes to a defined contribution retirement plan (a plan under
which an individual account is set up for each participant), annual additions
to an account are limited to the lesser of (1) $30,000 or (2) 25% of the
participant's compensation. Moreover, for purposes of these limits,
contributions to more than one such plan must be added. Since a SEP is
considered a defined contribution plan for purposes of these limits, employer
contributions to a SEP must be added to other contributions to defined
contribution plans.
TAX TREATMENT OF EMPLOYER'S CONTRIBUTIONS
Unlike your contributions to IRAs, contributions to your SEP-IRA by your
employer are EXCLUDED from your income rather than deducted from it. Your
employer's contributions to your SEP-IRA should not be included in your wages
on your Form W-2, WAGE AND TAX STATEMENT, unless there are contributions in
excess of the limit that applies, or unless there are contributions under a
salary reduction arrangement.
CONTRIBUTIONS UNDER A SALARY REDUCTION ARRANGEMENT. Form W-2 should
include contributions under a salary reduction arrangement (discussed later)
for social security and Medicare tax purposes only.
IF THERE ARE NO EXCESS CONTRIBUTIONS, you do not include any contributions
in your gross income; nor do you deduct any of them.
IF THERE ARE EXCESS EMPLOYER CONTRIBUTIONS, you must include them in your
gross income, without any offsetting deduction, and your Form W-2 should
include the amount.
EXCESS EMPLOYER CONTRIBUTIONS YOU WITHDRAW BEFORE YOUR RETURN IS DUE. If your
employer contributes more to your SEP-IRA than 15% of your compensation or
$30,000, whichever is less, you will not have to pay the 6% tax (discussed in
Chapter 7) on it if you withdraw this excess amount (and any interest or
other income earned on it) from your SEP-IRA before the date for filing your
tax return, including extensions. However, you may have to pay an additional
10% tax (discussed in Chapter 7) on the early withdrawal of the interest or
other income earned on the excess contribution.
EXCESS EMPLOYER CONTRIBUTIONS YOU WITHDRAW AFTER YOUR RETURN IS DUE. If
employer contributions for the year are $30,000 or less, you may withdraw any
excess employer contributions from your SEP-IRA after the due date for filing
your tax return, including extensions, free of the 10% tax on premature
distributions, discussed earlier. However, the excess contribution is subject
to the annual 6% excise tax. Also, you may have to pay the additional 10% tax
on the early withdrawal of interest or other income earned on the excess
contribution.
CONTRIBUTIONS YOU MAKE TO YOUR SEP-IRA
If you make contributions to your SEP-IRA independent of employer SEP
contributions, you can deduct them the same way as contributions to a regular
IRA. However, your deduction may be reduced or eliminated because, as a
participant in a SEP, you are covered by an employer retirement plan. See
Chapter 4, HOW MUCH CAN I CONTRIBUTE AND DEDUCT?
Chapter 8 SIMPLIFIED EMPLOYEE PENSION (SEP) Page 39
<PAGE>
EXCESS CONTRIBUTIONS YOU MAKE. For information on excess contributions you
make to your SEP-IRA independent of employer SEP contributions, see Chapter
7, WHAT ACTS RESULT IN PENALTIES?
TAX TREATMENT BY SELF-EMPLOYED INDIVIDUALS.
If you are self-employed (a sole proprietor or partner) and have a SEP plan,
take your deduction for employer contributions to your own SEP-IRA on line
27, Form 1040. If you also make deductible contributions to your SEP-IRA (or
any other IRA you own) independent of your employer contributions, take your
deduction on line 23, Form 1040.
For more employer information on SEP-IRAs get Publication 560.
- -----------------------------------------------------------------
SALARY REDUCTION ARRANGEMENT
A SEP may include a salary reduction arrangement. Under the arrangement, you
can elect to have your employer contribute part of your pay to your SEP-IRA.
Only the remaining portion of your pay is currently taxable. The tax on the
contribution is deferred. Thus, this choice is called an ELECTIVE DEFERRAL.
Form 5305A-SEP can be used by an employer to set up such an arrangement.
RESTRICTIONS ON ELECTION. You can choose elective deferrals only
if:
- - At least 50% of employees eligible to participate choose
elective deferrals,
- - There were no more than 25 eligible employees at any time
during the preceding year, and
- - The amount deferred each year by each eligible highly
compensated employee as a percentage of pay is no more than
125% of the average deferral percentage of all other eligible
employees (ADP TEST). Generally, compensation in excess of
$150,000 cannot be considered in figuring an employee's
deferral percentage.
NOTE. For collectively bargained SEPs for which the $150,000 limit is not
effective for the plan year beginning in 1994, the compensation limit for
covered bargaining unit employees is $242,280.
EXCEPTIONS. An elective deferral arrangement is not available for a SEP
maintained by a state or local government, or any of their political
subdivisions, agencies, or instrumentalities, or to a tax-exempt organization.
LIMITS ON DEFERRALS. In general, the total income you can defer under a
salary reduction arrangement included in your SEP and certain other elective
deferral arrangements, for 1994, is limited to $9,240. This limit applies
only to the amounts that represent a reduction from your salary, not to any
contributions from employer funds.
Elective deferrals, not exceeding the ADP test, are excluded from your
income in the year of deferral, but are included in wages for social
security, Medicare, and unemployment (FUTA) tax purposes.
OVERALL LIMITS ON SEP CONTRIBUTIONS
Contributions, including elective deferrals (salary reductions), made by your
employer to the SEP-IRA are subject to the overall limit of 15% of your
compensation (generally up to $150,000 for 1994) or $30,000, whichever is
less.
- -----------------------------------------------------------------
DISTRIBUTIONS (WITHDRAWALS)
An employer cannot prohibit withdrawals from a SEP-IRA. Also, an employer
cannot condition contributions to a SEP-IRA on the keeping of any part of
them in the account.
Distributions (withdrawals) from a SEP-IRA are subject to IRA rules. For
information on these rules, including tax treatment of distributions,
tax-free rollovers, required distributions, and income tax withholding, see
Chapter 6, WHEN CAN I WITHDRAW AND USE ASSETS FROM AN IRA?
Page 40 Chapter 8 SIMPLIFIED EMPLOYEE PENSION (SEP)
<PAGE>
Table 8.1. CONTRIBUTION/DISTRIBUTION QUICK REFERENCE CHART -- IRAS
AND SEPS
<TABLE>
<CAPTION>
CAN CONTRIBUTE FOR THE YEAR MAXIMUM CONTRIBUTION FOR MUST BEGIN DISTRIBUTIONS (1)
BY THE YEAR LIMITED TO: BY:
<S> <C> <C> <C>
- ----------------------------------------------------------------------------------------------------
IRA Due date of return The lesser of $2000 or April 1 of the year following
(NOT including extensions) owner's taxable the year in which owner
compensation (2) reaches age 70 1/2
SEP-IRA Due date of return The lesser of $30,000 or April 1 of the year following
(including extensions) 15% of participant's the year in which owner
compensation (3) reaches age 70 1/2
</TABLE>
(1) The entire balance or periodic distributions of the balance. See Chapter
6 for additional rules.
(2) If owner also has a SEP-IRA (or only a SEP-IRA) this contribution can be
made instead to the SEP-IRA (in addition to the employer's contributions
under the SEP plan).
(3) Compensation does not include your employer's contribution to your
SEP-IRA and generally is limited to $150,000 in 1994. A special
computation is required to figure the self-employed participant's
contribution limit. See Chapter 8.
Chapter 8 SIMPLIFIED EMPLOYEE PENSION (SEP) Page 41
<PAGE>
APPENDICES
To help you complete your tax return, the following appendices include the
following chart, worksheets, sample forms, and tables:
- - APPENDIX A -- SUMMARY RECORD OF IRA(s) FOR 1994 and WORKSHEET FOR DETERMINING
REQUIRED ANNUAL DISTRIBUTIONS FROM YOUR IRA(s).
- - APPENDIX B -- contains worksheets that you use if you receive social security
benefits and are subject to the IRA deduction phaseout rules. A filled-in
example is included.
a) Worksheet 1, COMPUTATION OF MODIFIED AGI
b) Worksheet 2, COMPUTATION OF IRA DEDUCTION
c) Worksheet 3, COMPUTATION OF TAXABLE SOCIAL SECURITY BENEFITS
d) Example and completed worksheets
- - APPENDIX C -- Filled-in Form 5329, ADDITIONAL TAXES ATTRIBUTABLE TO QUALIFIED
RETIREMENT PLANS (INCLUDING IRAs), ANNUITIES, AND MODIFIED ENDOWMENT
CONTRACTS
- - APPENDIX D -- Filled-in Forms 8606, NONDEDUCTIBLE IRAs (CONTRIBUTIONS,
DISTRIBUTIONS, AND BASIS)
- - APPENDIX E -- LIFE EXPECTANCY TABLES and the TABLE FOR DETERMINING APPLICABLE
DIVISOR FOR MDIB (MINIMUM DISTRIBUTION INCIDENTAL BENEFIT). These tables are
included to assist you in computing your required minimum distribution amount
if you have not taken all your assets from all your IRA(s) before age 70 1/2.
Page 42
<PAGE>
APPENDIX A. SUMMARY RECORD OF IRA(S) FOR 1994 (You May Keep This for Your
Records)
Name ____________________________________
I was / / covered / / not covered by my employer's retirement plan during
the year.
I became age 59 1/2 on ________________________.
(month) (day) (year)
I became age 70 1/2 on ________________________.
(month) (day) (year)
CONTRIBUTIONS
-------------
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------
Fair Market value of
Check, if rollover IRA as of December 31,
Name of IRA Date Amount contributed for 1994 contribution 1994, from Form 5498
- ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
1.
- ---------------------------------------------------------------------------------------------------------------------
2.
- ---------------------------------------------------------------------------------------------------------------------
3.
- ---------------------------------------------------------------------------------------------------------------------
4.
- ---------------------------------------------------------------------------------------------------------------------
5.
- ---------------------------------------------------------------------------------------------------------------------
Total
- ---------------------------------------------------------------------------------------------------------------------
Total contributions deducted on tax return $
---------
Total contributions treated as nondeductible on Form 8606 $
---------
</TABLE>
DISTRIBUTIONS
- -------------
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------------
Reason Taxable
(e.g., for retirement, amount Nontaxable
rollover, withdrawal Income reported on amount from
Amount of of excess earned on income tax Form 8606,
Name of IRA Date distribution contributions, etc.) IRA return line 10
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
1.
- ---------------------------------------------------------------------------------------------------------------------------
2.
- ---------------------------------------------------------------------------------------------------------------------------
3.
- ---------------------------------------------------------------------------------------------------------------------------
4.
- ---------------------------------------------------------------------------------------------------------------------------
Total
- ---------------------------------------------------------------------------------------------------------------------------
Basis of all IRAs as of 12/31/94 (from Form 8606, line 11) $
---------
Basis of all IRAs for 1994 (from Form 8606, line 12) $
---------
</TABLE>
NOTE: You should keep copies of your income tax return, and Forms W-2, 8606, and
5498.
WORKSHEET
FOR
DETERMINING REQUIRED ANNUAL DISTRIBUTIONS FROM YOUR IRA(S)
<TABLE>
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
- -------------------------------------------------------------------------------------------------------------------
1. Age 70 1/2 71 1/2 72 1/2 73 1/2 74 1/2 75 1/2
- -------------------------------------------------------------------------------------------------------------------
2. Year age was reached
- -------------------------------------------------------------------------------------------------------------------
3. Value of IRA at the
close of business on
December 31 of the
year immediately prior
to the year on line 2(1)
- -------------------------------------------------------------------------------------------------------------------
4. Divisor from Life
Expectancy Table I or
Table II(2)
- -------------------------------------------------------------------------------------------------------------------
5. Required distribution
(divide line 3 by
line 4)(3)
- -------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) If you have more than one IRA, you must figure the required distribution
separately for each IRA.
(2) Use the appropriate divisor for each year and for each IRA. You can either
(a) use the appropriate divisor from the table each year, or (b) use the
appropriate divisor from the table for your 70 1/2 year and reduce it by 1
(one) for each subsequent year. To find the appropriate divisor, use your
age (and that of your beneficiary, if applicable) as of your birthday(s) in
the year shown on line 2. If your beneficiary is someone other than your
spouse, see MINIMUM DISTRIBUTION INCIDENTAL BENEFIT REQUIREMENT in
Chapter 6.
(3) If you have more than one IRA, you must withdraw an amount equal to the
total of the required distributions figured for each IRA. You can, however,
withdraw the total from one IRA or from more than one IRA.
Page 43
<PAGE>
APPENDIX B. WORKSHEETS FOR SOCIAL SECURITY RECIPIENTS WHO CONTRIBUTE TO AN IRA
If you receive social security benefits, have taxable compensation,
contribute to your IRA, and are covered (or considered covered) by an
employer retirement plan, complete the following worksheets.(See WHO IS
COVERED BY AN EMPLOYER PLAN? in Chapter 4.)
Use Worksheet 1 to figure your modified adjusted gross income. This
amount is needed in the computation of your IRA deduction, if any, which is
figured using Worksheet 2.
The IRA deduction figured using Worksheet 2 is entered on your tax
return.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
WORKSHEET 1
COMPUTATION OF MODIFIED AGI
(FOR USE ONLY BY TAXPAYERS WHO RECEIVE SOCIAL SECURITY BENEFITS)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
FILING STATUS -- Check only one box:
/ / A. Married filing a joint return
/ / B. Single, Head of Household, Qualifying Widow(er), or Married
filing separately and LIVED APART from your spouse during the
ENTIRE YEAR
/ / C. Married filing separately and LIVED WITH your spouse at ANY TIME
during the year
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
1) Adjusted gross income (AGI) from Form 1040 or Form 1040A (not
taking into account any social security benefits from Form
SSA-1099 or RRB-1099, any deduction for an IRA, or any exclusion
of interest from savings bonds to be reported on Form 8815).......
-------
-------
2) Enter the amount in Box 5 of all Forms SSA-1099 and Forms
RRB-1099..........................................................
-------
-------
3) Enter one half of line 2..........................................
-------
-------
4) Enter the amount of any foreign earned income exclusion, foreign
housing exclusion, U.S. possessions income exclusion, or exclusion
of income from Puerto Rico you claimed as a bona fide resident
of Puerto Rico.....................................................
-------
-------
5) Enter the amount of any tax-exempt interest reported on line
8b of Form 1040 or 1040A...........................................
-------
-------
6) Add lines 1, 3, 4, and 5...........................................
-------
-------
7) Enter the amount listed below for your filing status...............
-------
-------
- $32,000 if you checked box A above, or
- $25,000 if you checked box B above, or
- $-0- if you checked box C above.
8) Subtract line 7 from line 6. If zero or less, enter 0 on this
line...............................................................
-------
-------
Page 44
<PAGE>
APPENDIX B. (CONTINUED)
<S> <C> <C>
9) If line 8 is zero, STOP HERE. None of your social security benefits
are taxable. If line 8 is more than 0, enter the amount listed below
for your filing status.............................................
-------
-------
$12,000 if you checked box A above
$ 9,000 if you checked box B above
$-0- if you checked box C above
10) Subtract line 9 from line 8. If zero or less, enter -0-...........
-------
-------
11) Enter the smaller of line 8 or line 9..............................
-------
-------
12) Enter one half of line 11..........................................
-------
-------
13) Enter the smaller of line 3 or line 12............................
-------
-------
14) Multiply line 10 by .85. If line 10 is zero, enter -0-............
-------
-------
15) Add lines 13 and 14...............................................
-------
-------
16) Multiply line 2 by .85............................................
-------
-------
17) TAXABLE BENEFITS to be included in MODIFIED AGI for IRA deduction
purposes. Enter the smaller of line 15 or line 16.................
-------
-------
18) Enter the amount of any foreign earned income exclusion and
foreign housing exclusion or deduction that you claimed............
-------
-------
19) MODIFIED AGI for determining you reduced IRA Deduction--add lines
1, 17, and 18. Enter here and on line 2 of Worksheet 2, next.......
-------
-------
</TABLE>
Page 45
<PAGE>
APPENDIX B (CONTINUED)
WORKSHEET 2
COMPUTATION OF IRA DEDUCTION
(FOR USE ONLY BY TAXPAYERS WHO RECEIVE SOCIAL SECURITY BENEFITS)
- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
IF YOUR FILING AND YOUR MODIFIED AGI ENTER ON LINE 1
STATUS IS: IS OVER: BELOW:
- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
Married-joint return,
or qualifying widow(er) $40,000* $50,000
Single, or Head
of household $25,000* $35,000
Married-separate return** $ -0-* $10,000
* If your modified AGI is NOT over this amount, you can take an IRA
deduction for your contributions of up to the lesser of $2,000 or your
taxable compensation. Skip this worksheet and proceed to Worksheet 3.
** If you did NOT live with your spouse AT ANY TIME during the year,
consider your filing status as single.
NOTE: If you were married and both you and your spouse worked and you both
contributed to IRAs, figure the deduction for each of you separately.
- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
1. Enter the applicable amount from above...........................
--------
--------
2. Enter your MODIFIED AGI from Worksheet 1, line 19................
--------
--------
NOTE: If line 2 is equal to or more than the amount on line 1, STOP HERE;
your IRA contributions are NOT deductible. Proceed to Worksheet 3.
3. Subtract line 2 from line 1.....................................
--------
--------
4. Multiply line 3 by 20% (.20). If the result is not a multiple
of $10, round it to the next highest multiple of $10. (For
example, $611.40 is rounded to $620.) However, if the result
is less than $200, enter $200....................................
--------
--------
5. Enter your compensation. (Do not include your spouse's
compensation.)...................................................
--------
--------
6. Enter contributions you made, or plan to make, to your IRA for
1994, but do not enter more than $2,000..........................
--------
--------
7. IRA DEDUCTION. Compare lines 4, 5, and 6. Enter the smallest
amount here (or a smaller amount if you choose). Enter this
amount on the Form 1040 or 1040A line for your IRA. (If the
amount on line 6 is more than the amount on line 7, complete
line 8.)........................................................
--------
--------
8. NONDEDUCTIBLE CONTRIBUTIONS. Subtract line 7 from line 5 or 6,
whichever is smaller. Enter the result here and on line 1 of
your Form 8606, NONDEDUCTIBLE IRAS (CONTRIBUTIONS, DISTRIBUTIONS,
AND BASIS)......................................................
--------
--------
NOTE: If you qualify to contribute to a SPOUSAL IRA, continue with
line 9.
9. Compare the amount on line 5 to $2,250 and enter the smaller
amount..........................................................
--------
--------
10. Add lines 7 and 8...............................................
--------
--------
11. Subtract line 10 from line 9....................................
--------
--------
NOTE: If line 11 is zero or less, STOP HERE. You cannot make contributions
to an IRA for your spouse. If line 11 is more than zero, go to line 12.
<PAGE>
APPENDIX B (CONTINUED)
12. Enter the smallest of...........................................
--------
--------
A. IRA contributions you made, or plan to make, for 1994 to your
spouse's IRA;
B. The amount on line 11; or
C. $2,000.
13. Multiply line 3 by 22.5% (.225). If the result is not a
multiple of $10, round it up to the next multiple of $10. If
the result is less than $200, enter $200........................
--------
--------
14. Enter the amount from line 7....................................
--------
--------
15. Subtract 14 from line 13........................................
--------
--------
16. Compare the amounts on lines 12 and 15. Enter the
smaller amount..................................................
--------
--------
17. SPOUSAL IRA DEDUCTION. Compare the amounts on lines 4, 5,
and 16. Enter the smallest amount (or a smaller amount if you
choose) here and on Form 1040 or 1040A..........................
--------
--------
NOTE: If line 12 is more than line 17, Complete line 18.
18. MAXIMUM SPOUSAL IRA NONDEDUCTIBLE CONTRIBUTIONS. Subtract
line 17 from line 12. Enter the result here and on line 1 of
your spouse's Form 8606.........................................
--------
--------
Page 47
<PAGE>
APPENDIX B. (CONTINUED)
WORKSHEET 3
COMPUTATION OF TAXABLE SOCIAL SECURITY BENEFITS
(FOR USE BY TAXPAYERS WHO RECEIVE SOCIAL
SECURITY BENEFITS AND TAKE AN IRA DEDUCTION)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
FILING STATUS--Check only one box:
/ / A. Married filing a joint return
/ / B. Single, Head of Household, Qualifying Widow(er), or Married
filing separately and LIVED APART from your spouse during the
ENTIRE YEAR
/ / C. Married filing separately and LIVED WITH your spouse at ANY TIME
during the year
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
1) Adjusted gross income (AGI) from Form 1040 or Form 1040A (NOT
TAKING INTO ACCOUNT any IRA deduction, any social security
benefits from Form SSA-1099 or RRB-1099, or any exclusion of
interest from savings bonds to be reported on Form 8815)..........
-------
-------
2) IRA deduction(s) from line 7, and, if applicable, line 17 of
Worksheet 2.......................................................
-------
-------
3) Subtract line 2 from line 1.......................................
-------
-------
4) Enter amount in Box 5 of all Forms SSA-1099 and Forms RRB-1099....
-------
-------
5) Enter one half of line 2..........................................
-------
-------
6) Enter the amount of any foreign earned income exclusion, foreign
housing exclusion, exclusion of income from U.S. possessions, or
exclusion of income from Puerto Rico you claimed as a bona fide
resident of Puerto Rico...........................................
-------
-------
7) Enter the amount of any tax-exempt interest reported on line 8b
of Form 1040 or 1040A.............................................
-------
-------
8) Add lines 3, 5, 6, and 7..........................................
-------
-------
9) Enter the amount listed below for your filing status..............
-------
-------
- $32,000 if you checked box A above, or
- $25,000 if you checked box B above, or
- $-0- if you checked box C above.
10) Subtract line 9 from line 8. If zero or less, enter 0 on this line..
-------
-------
</TABLE>
Page 48
<PAGE>
APPENDIX B. (CONTINUED)
<TABLE>
<S> <C> <C>
11) If line 10 is zero, STOP HERE. None of your social security
benefits are taxable. If line 10 is more than 0, enter the amount
listed below for your filing status...............................
-------
-------
$12,000 if you checked box A above
$ 9,000 if you checked box B above
$-0- if you checked C above
12) Subtract line 11 from line 10. If zero or less, enter -0-.........
-------
-------
13) Enter the smaller of line 10 or line 11...........................
-------
-------
14) Enter one half of line 13.........................................
-------
-------
15) Enter the smaller of line 5 or line 14............................
-------
-------
16) Multiply line 12 by .85. If line 12 is zero, enter -0-............
-------
-------
17) Add lines 15 and 16...............................................
-------
-------
18) Multiply line 4 by .85............................................
-------
-------
19) TAXABLE SOCIAL SECURITY BENEFITS. Enter the smaller of line 17
or line 18........................................................
-------
-------
</TABLE>
Page 49
<PAGE>
APPENDIX B. (CONTINUED)
COMPREHENSIVE EXAMPLE
DETERMINING YOUR IRA DEDUCTION AND THE TAXABLE PORTION OF YOUR
SOCIAL SECURITY BENEFITS
John Black is married and files a joint return. He had 1994 wages of
$42,500. His wife did not work in 1994. He also received social security
benefits of $7,000 and made a $2,000 contribution to his IRA and a $250
contribution to a spousal IRA for his wife for the year. He had no foreign
income, no tax-exempt interest, and no adjustments to income on lines 24
through 29 on his Form 1040. He participated in a section 401(k) retirement
plan at work.
John completes Worksheets 1 and 2. Worksheet 2 shows that his 1994 IRA
deduction is $460 and the spousal IRA deduction of $60. He must either
withdraw the excess amounts ($1,540 shown on line 8 and $190 shown on line 18
of Worksheet 2), or treat that excess amounts as nondeductible contributions
(in which case he must complete two Forms 8606 and attach them to his Form
1040).
The completed worksheets that follow show how John figured his modified
AGI to determine the IRA deductions and the taxable social security benefits
to report on his Form 1040.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
WORKSHEET 1
COMPUTATION OF MODIFIED AGI
(FOR USE ONLY BY TAXPAYERS WHO RECEIVE SOCIAL SECURITY BENEFITS)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
FILING STATUS -- Check only one box:
/X/ A. Married filing a joint return
/ / B. Single, Head of Household, Qualifying Widow(er), or Married
filing separately and LIVED APART from your spouse during the
ENTIRE YEAR
/ / C. Married filing separately and LIVED WITH your spouse at ANY TIME
during the year
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
1) Adjusted gross income (AGI) from Form 1040 or Form 1040A (not
taking into account any social security benefits from Form
SSA-1099 or RRB-1099, any deduction for an IRA, or any exclusion
of interest from savings bonds to be reported on Form 8815)....... $42,500
-------
-------
2) Enter the amount in Box 5 of all Forms SSA-1099 and Forms
RRB-1099.......................................................... 7,000
-------
-------
3) Enter one half of line 2.......................................... 3,500
-------
-------
4) Enter the amount of any foreign earned income exclusion, foreign
housing exclusion, U.S. possessions income exclusion, or exclusion
of income from Puerto Rico you claimed as a bona fide resident
of Puerto Rico..................................................... -0-
-------
-------
5) Enter the total amount of any tax-exempt interest reported on line
8b of Form 1040 or 1040A........................................... -0-
-------
-------
6) Add lines 1, 3, 4, and 5........................................... 46,000
-------
-------
7) Enter the amount listed below for your filing status............... 32,000
-------
-------
- $32,000 if you checked box A above, or
- $25,000 if you checked box B above, or
- -0- if you checked box C above.
8) Subtract line 7 from line 6. If zero or less, enter zero on this
line............................................................... 14,000
-------
-------
Page 50
<PAGE>
APPENDIX B (CONTINUED)
<S> <C>
9) If line 8 is zero, STOP HERE. None of your social security benefits
are taxable. If line 8 is more than 0, enter the amount listed
below for your filing status....................................... 12,000
-------
-------
$12,000 if you checked box A above
$9,000 if you checked box B above
$-0- if you checked box C above
10) Subtract line 9 from line 8. If zero or less, enter -0-............ 2,000
-------
-------
11) Enter the smaller of line 8 or line 9.............................. 12,000
-------
-------
12) Enter one half of line 11.......................................... 6,000
-------
-------
13) Enter the smaller of line 3 or line 12............................ 3,500
-------
-------
14) Multiply line 10 by .85. If line 10 is zero, enter -0-............ 1,700
-------
-------
15) Add lines 13 and 14............................................... 5,200
-------
-------
16) Multiply line 2 by .85............................................ 5,950
-------
-------
17) TAXABLE BENEFITS to be included in MODIFIED AGI for IRA deduction
purposes. Enter the smaller of line 15 or line 16................. 5,200
-------
-------
18) Enter the amount of any foreign earned income exclusion and
foreign housing exclusion or deduction that you claimed............ -0-
-------
-------
19) MODIFIED AGI for determining your reduced IRA Deduction--add lines
1, 17, and 18. Enter here and on line 2 of Worksheet 2, next....... 47,700
-------
-------
</TABLE>
Page 51
<PAGE>
APPENDIX B. (CONTINUED)
WORKSHEET 2
COMPUTATION OF IRA DEDUCTION
(FOR USE ONLY BY TAXPAYERS WHO RECEIVE SOCIAL SECURITY BENEFITS)
- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
IF YOUR FILING AND YOUR MODIFIED AGI ENTER ON LINE 1
STATUS IS: IS OVER: BELOW:
- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
Married-joint return,
or qualifying widow(er) $40,000* $50,000
Single, or Head
of household $25,000* $35,000
Married-separate return** $ -0-* $10,000
* If your modified AGI is NOT over this amount, you can take an IRA
deduction for your contributions of up to the lesser of $2,000 or your
taxable compensation. Skip this worksheet and proceed to Worksheet 3.
** If you did NOT live with your spouse AT ANY TIME during the year,
consider your filing status as single.
NOTE: If you were married and both you and your spouse worked and you both
contributed to IRAs, figure the deduction for each of you separately.
- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
1. Enter the applicable amount from above...........................$50,000
-------
-------
2. Enter your MODIFIED AGI from Worksheet 1, line 19................ 47,700
-------
-------
NOTE: If line 2 is equal to or more than the amount on line 1, STOP HERE;
your IRA contributions are NOT deductible.
Proceed to worksheet 3.
3. Subtract line 2 from line 1..................................... 2,300
-------
-------
4. Multiply line 3 by 20% (.20). If the result is not a multiple
of $10, round it to the next highest multiple of $10. (For
example, $611.40 is rounded to $620.) However, if the result
is less than $200, enter $200.................................... 460
-------
-------
5. Enter your compensation. (Do not include your spouse's
compensation.)................................................... 42,500
-------
-------
6. Enter contributions you made, or plan to make, to your IRA for
1994, but do not enter more than $2,000.......................... 2,000
-------
-------
7. IRA DEDUCTION. Compare lines 4, 5, and 6. Enter the smallest
amount here (or a smaller amount if you choose). Enter this
amount on the Form 1040 or 1040A line for your IRA. (If the
amount on line 6 is more than the amount on line 7, complete
line 8.)........................................................ 460
-------
-------
8. NONDEDUCTIBLE CONTRIBUTIONS. Subtract line 7 from line 5 or 6,
whichever is smaller. Enter the result here and on line 1 of
your Form 8606, NONDEDUCTIBLE IRAS (CONTRIBUTIONS, DISTRIBUTIONS,
AND BASIS)...................................................... 1,540
-------
-------
NOTE: If you qualify to contribute to a SPOUSAL IRA, continue with
line 9.
9. Compare the amount on line 5 to $2,250 and enter the smaller
amount.......................................................... 2,250
-------
-------
10. Add lines 7 and 8............................................... 2,000
-------
-------
11. Subtract line 10 from line 9.................................... 250
-------
-------
NOTE: If line 11 is zero or less, STOP HERE. You cannot make contributions
to an IRA for your spouse. If line 11 is more than zero, go to line 12.
Page 52
<PAGE>
APPENDIX B. (CONTINUED)
12. Enter the smallest of:.......................................... 250
-------
-------
A. IRA contributions you made, or plan to make, for 1994 to your
spouse's IRA;
B. The amount on line 11; or
C. $2,000.
13. Multiply line 3 by 22.5% (.225). If the result is not a
multiple of $10, round it up to the next multiple of $10. If
the result is less than $200, enter $200........................ 520
-------
-------
14. Enter the amount from line 7.................................... 460
-------
-------
15. Subtract line 14 from line 13................................... 60
-------
-------
16. Compare the amounts on lines 12 and 15. Enter the
smaller amount.................................................. 60
-------
-------
17. SPOUSAL IRA DEDUCTION. Compare the amounts on lines 4, 5,
and 16. Enter the smallest amount (or a smaller amount if you
choose) here and on Form 1040 or 1040A.......................... 60
-------
-------
NOTE: If line 12 is more than line 17, complete line 18.
18. MAXIMUM SPOUSAL IRA NONDEDUCTIBLE CONTRIBUTIONS. Subtract
line 17 from line 12. Enter the result here and on line 1 of
your spouse's Form 8606......................................... 190
-------
-------
Page 53
<PAGE>
APPENDIX B. (CONTINUED)
WORKSHEET 3
COMPUTATION OF TAXABLE SOCIAL SECURITY BENEFITS
(FOR USE BY TAXPAYERS WHO RECEIVE SOCIAL
SECURITY BENEFITS AND TAKE AN IRA DEDUCTION)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
FILING STATUS--Check only one box:
/X/ A. Married filing a joint return
/ / B. Single, Head of Household, Qualifying Widow(er), or Married
filing separately and LIVED APART from your spouse during the
ENTIRE YEAR
/ / C. Married filing separately and LIVED WITH your spouse at ANY TIME
during the year
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
1) Adjusted gross income (AGI) from Form 1040 or Form 1040A (NOT
TAKING INTO ACCOUNT any IRA deduction, any social security benefits
from Form SSA-1099 or RRB-1099, or any exclusion of interest from
savings bonds to be reported on Form 8815)........................ $42,500
-------
-------
2) IRA deduction(s) from line 7, and, if applicable, line 17 of
Worksheet 2....................................................... 520
-------
-------
3) Subtract line 2 from line 1....................................... 41,980
-------
-------
4) Enter amount in Box 5 of all Forms SSA-1099 and Forms RRB-1099.... 7,000
-------
-------
5) Enter one half of line 4.......................................... 3,500
-------
-------
6) Enter the amount of any foreign earned income exclusion, foreign
housing exclusion, exclusion of income from U.S. possessions, or
exclusion of income from Puerto Rico you claimed as a bona fide
resident of Puerto Rico........................................... -0-
-------
-------
7) Enter the amount of any tax-exempt interest reported on line 8b
of Form 1040 or 1040A............................................. -0-
-------
-------
8) Add lines 3, 5, 6, and 7.......................................... 45,480
-------
-------
9) Enter the amount listed below for your filing status.............. 32,000
-------
-------
- $32,000 if you checked box A above, or
- $25,000 if you checked box B above, or
- $-0- if you checked box C above.
10) Subtract line 9 from line 8. If zero or less, enter 0 on this line.. 13,480
-------
-------
</TABLE>
Page 54
<PAGE>
APPENDIX B. (CONTINUED)
<TABLE>
<S> <C>
11) If line 10 is zero, STOP HERE. None of your social security
benefits are taxable. If line 10 is more than 0, enter the amount
listed below for your filing status............................... 12,000
-------
-------
$12,000 if you checked box A above
$ 9,000 if you checked box B above
$-0- if you checked box C above
12) Subtract line 11 from line 10. If zero or less, enter -0-......... 1,480
-------
-------
13) Enter the smaller of line 10 or line 11........................... 12,000
-------
-------
14) Enter one half of line 13......................................... 6,000
-------
-------
15) Enter the smaller of line 5 or line 14............................ 3,500
-------
-------
16) Multiply line 12 by .85. If line 12 is zero, enter -0-............ 1,258
-------
-------
17) Add lines 15 and 16............................................... 4,758
-------
-------
18) Multiply line 4 by .85............................................ 5,950
-------
-------
19) TAXABLE SOCIAL SECURITY BENEFITS. Enter the smaller of line 17
or line 18........................................................ 4,758
-------
-------
</TABLE>
Page 55
<PAGE>
APPENDIX C. FILLED-IN FORM 5329
FORM 5329 OMB NO. 1545-0203
1994
Department of the Treasury Attachment
Internal Revenue Service Sequence No. 29
ADDITIONAL TAXES ATTRIBUTABLE TO QUALIFIED
RETIREMENT PLANS (INCLUDING IRAs), ANNUITIES,
AND MODIFIED ENDOWMENT CONTRACTS
(UNDER SECTIONS 72, 4973, 4974 AND 4980A OF THE INTERNAL REVENUE CODE)
ATTACH TO FORM 1040. SEE SEPARATE INSTRUCTIONS.
Name of individual subject to additional tax (if married filing jointly, see
instructions)
/s/ Paul Jones
Your social security number
003:00:0000
FILL IN YOUR ADDRESS ONLY IF YOU ARE FILING THIS FORM BY ITSELF AND NOT WITH
YOUR TAX RETURN
Home address (number and street), or P O box if mail is not delivered to your
home
Apt. no
City, town or post office, state, and ZIP code
If this is an amended return, check here / /
If you are subject to the 10% tax on early distributions ONLY, see
WHO MUST FILE in the instructions before continuing. You may be
able to report this tax directly on Form 1040 without filing Form
5329.
PART I TAX ON EARLY DISTRIBUTIONS
COMPLETE THIS PART IF A TAXABLE DISTRIBUTION WAS MADE FROM YOUR QUALIFIED
RETIREMENT PLAN (INCLUDING AN IRA), ANNUITY CONTRACT, OR MODIFIED ENDOWMENT
CONTRACT BEFORE YOU REACHED AGE 59 1/2 (OR WAS INCORRECTLY INDICATED AS SUCH
ON YOUR FORM 1099-R--SEE INSTRUCTIONS). NOTE: YOU MUST INCLUDE THE AMOUNT OF
THE DISTRIBUTION ON LINE 15B OR 16B OF FORM 1040 OR ON THE APPROPRIATE LINE
OF FORM 4972.
1 Early distributions included in gross income
(see instructions)............................................ 1 3,000.00
2 Distributions excepted from additional tax (see
instructions). Enter appropriate exception number from
instructions__............................................... 2 -0-
3 Amount subject to additional tax. Subtract line 2 from line 1 3 3,000.00
4 TAX DUE. Multiply line 3 by 10% (.10). Enter here and on
Form 1040, line 51........................................... 4 300.00
PART II TAX ON EXCESS CONTRIBUTIONS TO INDIVIDUAL RETIREMENT
ARRANGEMENTS
COMPLETE THIS PART IF, EITHER IN THIS YEAR OR IN EARLIER YEARS, YOU
CONTRIBUTED MORE TO YOUR IRA THAN IS OR WAS ALLOWABLE AND YOU HAVE AN EXCESS
CONTRIBUTION SUBJECT TO TAX.
5 Excess contributions for 1994 (see instructions). Do not
include this amount on Form 1040, line 23a or 23b....... 5 500.00
6 Earlier year excess contributions not previously
eliminated (see instructions).................... 6
7 Contribution credit. If your actual contribution
for 1994 is less than your maximum allowable
contribution, see instructions; otherwise
enter -0-........................................ 7
8 1994 distributions from your IRA account that are
includible in taxable income..................... 8
9 1993 tax year excess contributions (if any)
withdrawn after the due date (including extensions)
of your 1993 income tax return, and 1992 and
earlier tax year excess contributions withdrawn in
1994............................................. 9
10 Add lines 7, 8 and 9............................ 10
11 Adjusted earlier year excess contributions. Subtract line
10 from from line 6. Enter the result, but not less than
zero....................................................... 11
12 Total excess contributions. Add lines 5 and 11............. 12 500.00
13 TAX DUE. Enter the SMALLER of 6% (.06) of line 12 or 6%
(.06%) of the value of your IRA on the last day of 1994.
Also enter this amount on Form 1040, line 51............... 13 30.00
FOR PAPERWORK REDUCTION ACT NOTICE, SEE PAGE 1 OF SEPARATE INSTRUCTIONS.
Cat. No 133290 Form 5329 (1994)
PAGE 56
<PAGE>
APPENDIX C. (CONTINUED)
Form 5329 (1994) Page 2
PART III TAX ON EXCESS ACCUMULATION IN QUALIFIED RETIREMENT PLANS
(INCLUDING IRAs)
14 Minimum required distribution (see instructions)........... 14
15 Amount actually distributed to you......................... 15
16 Subtract line 15 from line 14. If line 15 is more than line
14, enter -0-.............................................. 16
17 TAX DUE. Multiply line 16 by 50% (.50). Enter here and on
Form 1040, line 51......................................... 17
PART IV TAX ON EXCESS DISTRIBUTIONS FROM QUALIFIED RETIREMENT
PLANS (INCLUDING IRAs)
COMPLETE COLUMN A FOR REGULAR DISTRIBUTIONS. COMPLETE COLUMN A COLUMN B
COLUMN B FOR LUMP-SUM DISTRIBUTIONS. REGULAR LUMP-SUM
DISTRIBU- DISTRIBU-
TIONS TIONS
18 Total amount of regular retirement or
lump-sum distributions....................... 18
19 Amount excluded from additional tax. Enter
appropriate exception number from
instructions__............................... 19
20 Subtract line 19 from line 18................ 20
21 Enter the GREATER of the threshold amount or
the 1994 recovery of the grandfather amount
(from Worksheet 1 or 2). See instructions.... 21
22 Excess distributions. Subtract line 21 from
line 20. If less than zero, enter -0-........ 22
23 Tentative tax. Multiply line 22 by 15% (.15). 23
24 Early distributions tax offset (see
(instructions)............................... 24
25 Subtract line 24 from line 23................ 25
26 TAX DUE. Combine columns (a) and (b) of line 25.
Enter here and on Form 1040, line 51....................... 26
ACCELERATION ELECTIONS (SEE THE INSTRUCTIONS FOR PART IV)
1 If you elected the discretionary method in 1987 or 1988 and wish to make an
acceleration election beginning in 1994 under Temporary Regulations section
54.4981A-1T, Q&A b-12, check here / /.
2 If you previously made an acceleration election and wish to revoke that
election, check here / /.
SIGNATURE. COMPLETE ONLY IF YOU ARE FILING THIS FORM BY ITSELF AND NOT WITH
YOUR TAX RETURN.
PLEASE Under penalties of perjury, I declare that I have examined this form,
SIGN including accompanying schedules and statements, and to the best of my
HERE knowledge and belief, it is true, correct and complete. Declaration of
preparer (other than taxpayer) is based on all information of which
preparer has any knowledge.
Your signature Date
PAID Preparer's Date Check if self- Preparer's
PREPARER'S signature employed / / social security no.
USE ONLY
Firm's name (or yours, E.f. No.
if self employed) and ZIP code
address.
[LOGO] PRINTED ON RECYCLED PAPER
Page 57
<PAGE>
APPENDIX D. FILLED-IN FORM 8606
<TABLE>
<C> <S> <C> <C> <C> <C> <C> <C>
Form 8606 NONDEDUCTIBLE IRAS OMB No. 1545-1007
(CONTRIBUTIONS, DISTRIBUTIONS AND BASIS) 1994
Department of the Treasury - Please see What Records Must I Keep? on page 2. Attachment
Internal Revenue Service - Attach to Form 1040, Form 1040A, or Form 1040NR. Sequence No. 47
Name. If married, file a separate Form 8606 for each spouse. See instructions. Your social security number
/s/ Bill King 002 00 0000
______________________________________________________________________________ ___________________
FILL IN YOUR ADDRESS ONLY Home address (number and street, or P.O. box if mail is not delivered to your home) Apt. no.
IF YOU ARE FILING THIS __________________________________________________________________________________ ________
FORM BY ITSELF AND NOT City, town or post office, state, and ZIP code
WITH YOUR TAX RETURN __________________________________________________________________________________________________
CONTRIBUTIONS, NONTAXABLE DISTRIBUTIONS, AND BASIS
1 Enter your IRA contributions for 1994 that you choose to be nondeductible. Include
those made during 1/1/95-4/17/95 that were for 1994. See instructions. . . . . . . . . 1 0.00
2 Enter your total IRA basis for 1993 and earlier years. See instructions. . . . . . . . 2 2,000.00
3 Add lines 1 and 2. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3 2,000.00
DID YOU RECEIVE NO ENTER THE AMOUNT FROM LINE 3 ON
ANY IRA LINE 12. THEN, STOP AND READ WHEN
DISTRIBUTIONS AND WHERE TO FILE ON PAGE 2.
(WITHDRAWALS)
IN 1994? YES GO TO LINE 4.
4 Enter only those contributions included on line 1 that were made during 1/1/95-4/17/95.
This amount will be the same as line 1 if all of your nondeductible contributions for
1994 were made in 1995 by 4/17/95. See instructions. . . . . . . . . . . . . . . . . . 4 0.00
5 Subtract line 4 from line 3. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5 2,000.00
6 Enter the total value of ALL your IRAs as of 12/31/94 plus any
outstanding rollovers. See instructions. . . . . . . . . . . . . . 6 1,800.00
7 Enter the total IRA distributions received during 1994. Do not
include amounts rolled over before 1/1/95. See instructions. . . . 7 600.00
8 Add lines 6 and 7. . . . . . . . . 8 2,400.00
9 Divide line 5 by line 8 and enter the result as a decimal (to at
least two places). Do not enter more than "1.00" . . . . . . . . . 9 0.8333
10 Multiply line 7 by line 9. This is the amount of your NONTAXABLE DISTRIBUTIONS FOR
1994 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10 500.00
11 Subtract line 10 from line 5. This is the BASIS IN YOUR IRA(S) as of 12/31/94. . . . 11 1,500.00
12 Add lines 4 and 11. This is your TOTAL IRA BASIS FOR 1994 AND EARLIER YEARS. . . . . 12 1,500.00
TAXABLE DISTRIBUTIONS FOR 1994
13 Subtract line 10 from line 7. Enter the result here and on Form 1040, line 15b;
Form 1040A, line 10b; or Form 1040NR, line 16b, whichever applies . . . . . . . . . 13 100.00
SIGN HERE ONLY IF YOU Under penalties of perjury, I declare that I have examined this form, including
ARE FILING THIS FORM accompanying attachments, and to the best of my knowledge and belief, it is true,
BY ITSELF AND NOT WITH correct, and complete.
YOUR TAX RETURN -- _________________________________________ -- _________________________
Your signature Date
</TABLE>
Page 58
<PAGE>
APPENDIX D. (CONTINUED)
IN THIS ILLUSTRATION, WE HAVE USED THE 1994 FORM BECAUSE THE 1995 FORM WILL NOT
BE AVAILABLE UNTIL 1995.
<TABLE>
<C> <S> <C> <C> <C> <C> <C> <C>
Form 8606 NONDEDUCTIBLE IRAS OMB No. 1545-1007
(CONTRIBUTIONS, DISTRIBUTIONS AND BASIS) 1994
Department of the Treasury - Please see What Records Must I Keep? on page 2. Attachment
Internal Revenue Service - Attach to Form 1040, Form 1040A, or Form 1040NR. Sequence No. 47
Name. If married, file a separate Form 8606 for each spouse. See instructions. Your social security number
/s/ Bill King 002 00 0000
______________________________________________________________________________ ________________
FILL IN YOUR ADDRESS ONLY Home address (number and street, or P.O. box if mail is not delivered to your home) Apt. no.
IF YOU ARE FILING THIS ___________________________________________________________________________________ ________
FORM BY ITSELF AND NOT City, town or post office, state and ZIP code
WITH YOUR TAX RETURN __________________________________________________________________________________________________
CONTRIBUTIONS, NONTAXABLE DISTRIBUTIONS, AND BASIS
1 Enter your IRA contributions for 1994 that you choose to be nondeductible. Include
those made during 1/1/95-4/17/95 that were for 1994. See instructions. . . . . . . . . 1 0.00
2 Enter your total IRA basis for 1993 and earlier years. See instructions. . . . . . . . 2 1,500.00
3 Add lines 1 and 2. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3 1,500.00
DID YOU RECEIVE NO ENTER THE AMOUNT FROM LINE 3 ON
ANY IRA LINE 12. THEN, STOP AND READ WHEN
DISTRIBUTIONS AND WHERE TO FILE ON PAGE 2.
(WITHDRAWALS)
IN 1994? YES GO TO LINE 4.
4 Enter only those contributions included on line 1 that were made during 1/1/95-4/17/95.
This amount will be the same as line 1 if all of your nondeductible contributions for
1994 were made in 1995 by 4/17/95. See instructions. . . . . . . . . . . . . . . . . . 4 0.00
5 Subtract line 4 from line 3. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5 1,500.00
6 Enter the total value of ALL your IRAs as of 12/31/94 plus any
outstanding rollovers. See instructions. . . . . . . . . . . . . . 6 0.00
7 Enter the total IRA distributions received during 1994. Do not
include amounts rolled over before 1/1/95. See instructions. . . . 7 1,300.00
8 Add lines 6 and 7. . . . . . . . . . . . . . . . . . 8 1,300.00
9 Divide line 5 by line 8 and enter the result as a decimal (to at
least two places). Do not enter more than "1.00" . . . . . . . . . 9 1.00
10 Multiply line 7 by line 9. This is the amount of your NONTAXABLE DISTRIBUTIONS FOR
1994 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10 1,300.00
11 Subtract line 10 from line 5. This is the BASIS IN YOUR IRA(S) as of 12/31/94. . . . 11 200.00
12 Add lines 4 and 11. This is your TOTAL IRA BASIS FOR 1994 AND EARLIER YEARS. . . . . 12 200.00
TAXABLE DISTRIBUTIONS FOR 1994
13 Subtract line 10 from line 7. Enter the result here and on Form 1040, line 15b;
Form 1040A, line 10b; or Form 1040NR, line 16b, whichever applies . . . . . . . . . 13 0.00
SIGN HERE ONLY IF YOU Under penalties of perjury, I declare that I have examined this form, including
ARE FILING THIS FORM accompanying attachments, and to the best of my knowledge and belief, it is true,
BY ITSELF AND NOT WITH correct, and complete.
YOUR TAX RETURN -- _________________________________________ -- _________________________
Your signature Date
</TABLE>
Page 59
<PAGE>
APPENDIX E. TABLE FOR DETERMINING APPLICABLE DIVISOR FOR MDIB*
(MINIMUM DISTRIBUTION INCIDENTAL BENEFiT)
- -------------------------------------------------------------------------------
APPLICABLE APPLICABLE
AGE DIVISOR AGE DIVISOR
- -------------------------------------------------------------------------------
70 26.2 93 8.8
71 25.3 94 8.3
72 24.4 95 7.8
73 23.5 96 7.3
74 22.7 97 6.9
75 21.8 98 6.5
76 20.9 99 6.1
77 20.1 100 5.7
78 19.2 101 5.3
79 18.4 102 5.0
80 17.6 103 4.7
81 16.8 104 4.4
82 16.0 105 4.1
83 15.3 106 3.8
84 14.5 107 3.6
85 13.8 108 3.3
86 13.1 109 3.1
87 12.4 110 2.8
88 11.8 111 2.6
89 11.1 112 2.4
90 10.5 113 2.2
91 9.9 114 2.0
92 9.4 115 and older 1.8
- -------------------------------------------------------------------------------
* Use this table if your beneficiary is someone other than your spouse. For
additional instructions, see MINIMUM DISTRIBUTION INCIDENTAL BENEFIT
REQUIREMENT in Chapter 6.
Page 60
<PAGE>
APPENDIX E. LIFE EXPECTANCY TABLES
- -------------------------------------------------------------------------------
TABLE I
(SINGLE LIFE EXPECTANCY)*
- -------------------------------------------------------------------------------
AGE DIVISOR AGE DIVISOR
- -------------------------------------------------------------------------------
35 47.3 73 13.9
36 46.4 74 13.2
37 45.4 75 12.5
38 44.4 76 11.9
39 43.5 77 11.2
40 42.5 78 10.6
41 41.5 79 10.0
42 40.6 80 9.5
43 39.6 81 8.9
44 38.7 82 8.4
45 37.7 83 7.9
46 36.8 84 7.4
47 35.9 85 6.9
48 34.9 86 6.5
49 34.0 87 6.1
50 33.1 88 5.7
51 32.2 89 5.3
52 31.3 90 5.0
53 30.4 91 4.7
54 29.5 92 4.4
55 28.6 93 4.1
56 27.7 94 3.9
57 26.8 95 3.7
58 25.9 96 3.4
59 25.0 97 3.2
60 24.2 98 3.0
61 23.3 99 2.8
62 22.5 100 2.7
63 21.6 101 2.5
64 20.8 102 2.3
65 20.0 103 2.1
66 19.2 104 1.9
67 18.4 105 1.8
68 17.6 106 1.6
69 16.8 107 1.4
70 16.0 108 1.3
71 15.3 109 1.1
72 14.6 110 1.0
- -------------------------------------------------------------------------------
* Table I does not provide for IRA owners younger than 35 years of age. For
additional life expectancy tables, see Publication 939.
Page 61
<PAGE>
APPENDIX E. (CONTINUED)
TABLE II
(JOINT LIFE AND LAST SURVIVOR EXPECTANCY)*
- ------------------------------------------------------------------------------
AGES 35 36 37 38 39 40 41 42 43 44
- ------------------------------------------------------------------------------
35 54.0 53.5 53.0 52.6 52.2 51.8 51.4 51.1 50.8 50.5
36 53.5 53.0 52.5 52.0 51.6 51.2 50.8 50.4 50.1 49.8
37 53.0 52.5 52.0 51.5 51.0 50.6 50.2 49.8 49.5 49.1
38 52.6 52.0 51.5 51.0 50.5 50.0 49.6 49.2 48.8 48.5
39 52.2 51.6 51.0 50.5 50.0 49.5 49.1 48.6 48.2 47.8
40 51.8 51.2 50.6 50.0 49.5 49.0 48.5 48.1 47.6 47.2
41 51.4 50.8 50.2 49.6 49.1 48.5 48.0 47.5 47.1 46.7
42 51.1 50.4 49.8 49.2 48.6 48.1 47.5 47.0 46.6 46.1
43 50.8 50.1 49.5 48.8 48.2 47.6 47.1 46.6 46.0 45.6
44 50.5 49.6 49.1 48.5 47.8 47.2 46.7 46.1 45.6 45.1
45 50.2 49.5 48.8 48.1 47.5 46.9 46.3 45.7 45.1 44.6
46 50.0 49.2 48.5 47.8 47.2 46.5 45.9 45.3 44.7 44.1
47 49.7 49.0 48.3 47.5 46.8 46.2 45.5 44.9 44.3 43.7
48 49.5 48.8 48.0 47.3 46.6 45.9 45.2 44.5 43.9 43.3
49 49.3 48.5 47.8 47.0 46.3 45.6 44.9 44.2 43.6 42.9
50 49.2 48.4 47.6 46.8 46.0 45.3 44.6 43.9 43.2 42.6
51 49.0 48.2 47.4 46.6 45.8 45.1 44.3 43.6 42.9 42.2
52 48.8 48.0 47.2 46.4 45.6 44.8 44.1 43.3 42.6 41.9
53 48.7 47.9 47.0 46.2 45.4 44.6 43.9 43.1 42.4 41.7
54 48.6 47.7 46.9 46.0 45.2 44.4 43.6 42.9 42.1 41.4
55 48.5 47.6 46.7 45.9 45.1 44.2 43.4 42.7 41.9 41.2
56 48.3 47.5 46.6 45.8 44.9 44.1 43.3 42.5 41.7 40.9
57 48.3 47.4 46.5 45.6 44.8 43.9 43.1 42.3 41.5 40.7
58 48.2 47.3 46.4 45.5 44.7 43.8 43.0 42.1 41.3 40.5
59 48.1 47.2 46.3 45.4 44.5 43.7 42.8 42.0 41.2 40.4
60 48.0 47.1 46.2 45.3 44.4 43.6 42.7 41.9 41.0 40.2
61 47.9 47.0 46.1 45.2 44.3 43.5 42.6 41.7 40.9 40.0
62 47.9 47.0 46.0 45.1 44.2 43.4 42.5 41.6 40.8 39.9
63 47.8 46.9 46.0 45.1 44.2 43.3 42.4 41.5 40.6 39.8
64 47.8 46.8 45.9 45.0 44.1 43.2 42.3 41.4 40.5 39.7
65 47.7 46.8 45.9 44.9 44.0 43.1 42.2 41.3 40.4 39.6
66 47.7 46.7 45.8 44.9 44.0 43.1 42.2 41.3 40.4 39.5
67 47.6 46.7 45.8 44.8 43.9 43.0 42.1 41.2 40.3 39.4
68 47.6 46.7 45.7 44.8 43.9 42.9 42.0 41.1 40.2 39.3
69 47.6 46.6 45.7 44.8 43.8 42.9 42.0 41.1 40.2 39.3
70 47.5 46.6 45.7 44.7 43.8 42.9 41.9 41.0 40.1 39.2
71 47.5 46.6 45.6 44.7 43.8 42.8 41.9 41.0 40.1 39.1
72 47.5 46.6 45.6 44.7 43.7 42.8 41.9 40.9 40.0 39.1
73 47.5 46.5 45.6 44.6 43.7 42.8 41.8 40.9 40.0 39.0
74 47.5 46.5 45.6 44.6 43.7 42.7 41.8 40.9 39.9 39.0
75 47.4 46.5 45.5 44.6 43.6 42.7 41.8 40.8 39.9 39.0
76 47.4 46.5 45.5 44.6 43.6 42.7 41.7 40.8 39.9 38.9
77 47.4 46.5 45.5 44.6 43.6 42.7 41.7 40.8 39.8 38.9
78 47.4 46.4 45.5 44.5 43.6 42.6 41.7 40.7 39.8 38.9
79 47.4 46.4 45.5 44.5 43.6 42.6 41.7 40.7 39.8 38.9
80 47.4 46.4 45.5 44.5 43.6 42.6 41.7 40.7 39.8 38.8
81 47.4 46.4 45.5 44.5 43.5 42.6 41.6 40.7 39.8 38.8
82 47.4 46.4 45.4 44.5 43.5 42.6 41.6 40.7 39.7 38.8
83 47.4 46.4 45.4 44.5 43.5 42.6 41.6 40.7 39.7 38.8
84 47.4 46.4 45.4 44.5 43.5 42.6 41.6 40.7 39.7 38.8
85 47.4 46.4 45.4 44.5 43.5 42.6 41.6 40.7 39.7 38.8
86 47.3 46.4 45.4 44.5 43.5 42.5 41.6 40.6 39.7 38.8
87 47.3 46.4 45.4 44.5 43.5 42.5 41.6 40.6 39.7 38.7
88 47.3 46.4 45.4 44.5 43.5 42.5 41.6 40.6 39.7 38.7
89 47.3 46.4 45.4 44.4 43.5 42.5 41.6 40.6 39.7 38.7
90 47.3 46.4 45.4 44.4 43.5 42.5 41.6 40.6 39.7 38.7
91 47.3 46.4 45.4 44.4 43.5 42.5 41.6 40.6 39.7 38.7
92 47.3 46.4 45.4 44.4 43.5 42.5 41.6 40.6 39.7 38.7
* Table II does not provide for IRA owners or survivors younger than 35 years
of age. For additional life expectancy tables, see IRS Publication 939.
Page 62
<PAGE>
APPENDIX E. (CONTINUED)
TABLE II (CONTINUED)
(JOINT LIFE AND LAST SURVIVOR EXPECTANCY)
- -------------------------------------------------------------------------------
AGES 45 46 47 48 49 50 51 52 53 54
- -------------------------------------------------------------------------------
45 44.1 43.6 43.2 42.7 42.3 42.0 41.6 41.3 41.0 40.7
46 43.6 43.1 42.6 42.2 41.8 41.4 41.0 40.6 40.3 40.0
47 43.2 42.6 42.1 41.7 41.2 40.8 40.4 40.0 39.7 39.3
48 42.7 42.2 41.7 41.2 40.7 40.2 39.8 39.4 39.0 38.7
49 42.3 41.8 41.2 40.7 40.2 39.7 39.3 38.8 38.4 38.1
50 42.0 41.4 40.8 40.2 39.7 39.2 38.7 38.3 37.9 37.5
51 41.6 41.0 40.4 39.8 39.3 38.7 38.2 37.8 37.3 36.9
52 41.3 40.6 40.0 39.4 38.8 38.3 37.8 37.3 36.8 36.4
53 41.0 40.3 39.7 39.0 38.4 37.9 37.3 36.8 36.3 35.8
54 40.7 40.0 39.3 38.7 38.1 37.5 36.9 36.4 35.8 35.3
55 40.4 39.7 39.0 38.4 37.7 37.1 36.5 35.9 35.4 34.9
56 40.2 39.5 38.7 38.1 37.4 36.8 36.1 35.6 35.0 34.4
57 40.0 39.2 38.5 37.8 37.1 36.4 35.8 35.2 34.6 34.0
58 39.7 39.0 38.2 37.5 36.8 36.1 35.5 34.8 34.2 33.6
59 39.6 38.8 38.0 37.3 36.6 35.9 35.2 34.5 33.9 33.3
60 39.4 38.6 37.8 37.1 36.3 35.6 34.9 34.2 33.6 32.9
61 39.2 38.4 37.6 36.9 36.1 35.4 34.6 33.9 33.3 32.6
62 39.1 38.3 37.5 36.7 35.9 35.1 34.4 33.7 33.0 32.3
63 38.9 38.1 37.3 36.5 35.7 34.9 34.2 33.5 32.7 32.0
64 38.8 38.0 37.2 36.3 35.5 34.8 34.0 33.2 32.5 31.8
65 38.7 37.9 37.0 36.2 35.4 34.6 33.8 33.0 32.3 31.6
66 38.6 37.8 36.9 36.1 35.2 34.4 33.6 32.9 32.1 31.4
67 38.5 37.7 36.8 36.0 35.1 34.3 33.5 32.7 31.8 31.2
68 38.4 37.6 36.7 35.8 35.0 34.2 33.4 32.5 31.8 31.0
69 38.4 37.5 36.6 35.7 34.9 34.1 33.2 32.4 31.6 30.8
70 38.3 37.4 36.5 35.7 34.8 34.0 33.1 32.3 31.5 30.7
71 38.2 37.3 36.5 35.6 34.7 33.9 33.0 32.2 31.4 30.5
72 38.2 37.3 36.4 35.5 34.6 33.8 32.9 32.1 31.2 30.4
73 38.1 37.2 36.3 35.4 34.6 33.7 32.8 32.0 31.1 30.2
74 38.1 37.2 36.3 35.4 34.5 33.6 32.8 31.9 31.1 30.2
75 38.1 37.1 36.2 35.3 34.5 33.6 32.7 31.8 31.0 30.1
76 38.0 37.1 36.2 35.3 34.4 33.5 32.6 31.8 30.9 30.1
77 38.0 37.1 36.2 35.3 34.4 33.5 32.6 31.7 30.8 30.0
78 38.0 37.0 36.1 35.2 34.3 33.4 32.5 31.7 30.8 29.9
79 37.9 37.0 36.1 35.2 34.3 33.4 32.5 31.6 30.7 29.9
80 37.9 37.0 36.1 35.2 34.2 33.4 32.5 31.6 30.7 29.8
81 37.9 37.0 36.0 35.1 34.2 33.3 32.4 31.5 30.7 29.8
82 37.9 36.9 36.0 35.1 34.2 33.3 32.4 31.5 30.6 29.7
83 37.9 36.9 36.0 35.1 34.2 33.3 32.4 31.5 30.6 29.7
84 37.8 36.9 36.0 35.1 34.2 33.2 32.3 31.4 30.6 29.7
85 37.8 36.9 36.0 35.1 34.1 33.2 32.3 31.4 30.5 29.6
86 37.8 36.9 36.0 35.0 34.1 33.2 32.3 31.4 30.5 29.6
87 37.8 36.9 35.9 35.0 34.1 33.2 32.3 31.4 30.5 29.6
88 37.8 36.9 35.9 35.0 34.1 33.2 32.3 31.4 30.5 29.6
89 37.8 36.9 35.9 35.0 34.1 33.2 32.3 31.4 30.5 29.6
90 37.8 36.9 35.9 35.0 34.1 33.2 32.3 31.3 30.5 29.6
91 37.8 36.8 35.9 35.0 34.1 33.2 32.2 31.3 30.4 29.5
92 37.8 36.8 35.9 35.0 34.1 33.2 32.2 31.3 30.4 29.5
Page 63
<PAGE>
APPENDIX E. LIFE EXPECTANCY TABLES (CONTINUED)
TABLE II (CONTINUED)
(JOINT LIFE AND LAST SURVIVOR EXPECTANCY)
<TABLE>
- ---------------------------------------------------------------------------------------------------------------------------
AGES 55 56 57 58 59 60 61 62 63 64 65 66 67 68 69 70 71 72 73 74
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
55 34.4 33.9 33.5 33.1 32.7 32.3 32.0 31.7 31.4 31.1
56 33.9 33.4 33.0 32.5 32.1 31.7 31.4 31.0 30.7 30.4
57 33.5 33.0 32.5 32.0 31.6 31.2 30.8 30.4 30.1 29.6
58 33.1 32.5 32.0 31.5 31.1 30.6 30.2 29.8 29.5 29.2
59 32.7 32.1 31.6 31.1 30.6 30.1 29.7 29.3 28.9 28.6
60 32.3 31.7 31.2 30.6 30.1 29.7 29.2 28.6 28.4 28.0
61 32.0 31.4 30.8 30.2 29.7 29.2 28.7 28.2 27.8 27.4
62 31.7 31.0 30.4 29.9 29.3 28.6 28.3 27.8 27.3 26.9
63 31.4 30.7 30.1 29.5 28.9 28.4 27.8 27.3 26.9 26.4
64 31.1 30.4 29.8 29.2 28.6 28.0 27.4 26.9 26.4 25.9
65 30.9 30.2 29.5 28.9 28.2 27.6 27.1 26.5 26.0 25.5 25.0 24.6 24.2 23.8 23.4 23.1 22.8 22.5 22.2 22.0
66 30.6 29.9 29.2 28.6 27.9 27.3 26.7 26.1 25.6 25.1 24.6 24.1 23.7 23.3 22.9 22.5 22.2 21.9 21.6 21.4
67 30.4 29.7 29.0 28.3 27.6 27.0 26.4 25.8 25.2 24.7 24.2 23.7 23.2 22.8 22.4 22.0 21.7 21.3 21.0 20.8
68 30.2 29.5 28.8 28.1 27.4 26.7 26.1 25.5 24.9 24.3 23.8 23.3 22.8 22.3 21.9 21.5 21.2 20.8 20.5 20.2
69 30.1 29.3 28.6 27.8 27.1 26.5 25.8 25.2 24.6 24.0 23.4 22.9 22.4 21.9 21.5 21.1 20.7 20.3 20.0 19.6
70 29.9 29.1 28.4 27.6 26.9 26.2 25.6 24.9 24.3 23.7 23.1 22.5 22.0 21.5 21.1 20.8 20.2 19.8 19.4 19.1
71 29.7 29.0 28.2 27.5 26.7 26.0 25.3 24.7 24.0 23.4 22.8 22.2 21.7 21.2 20.7 20.2 19.8 19.4 19.0 18.6
72 29.6 28.8 28.1 27.3 26.5 25.8 25.1 24.4 23.8 23.1 22.5 21.9 21.3 20.8 20.3 19.8 19.4 18.9 18.5 18.2
73 29.5 28.7 27.9 27.1 26.4 25.6 24.9 24.2 23.5 22.9 22.2 21.8 21.0 20.5 20.0 19.4 19.0 18.5 18.1 17.7
74 29.4 28.6 27.8 27.0 26.2 25.5 24.7 24.0 23.3 22.7 22.0 21.4 20.8 20.2 19.6 19.1 18.6 18.2 17.7 17.3
75 29.3 28.5 27.7 26.9 26.1 25.3 24.6 23.8 23.1 22.4 21.8 21.1 20.5 19.9 19.3 18.8 18.3 17.9 17.3 16.9
76 29.2 28.4 27.6 26.8 26.0 25.2 24.4 23.7 23.0 22.3 21.6 20.9 20.3 19.7 19.1 18.5 18.0 17.5 17.0 16.5
77 29.1 28.3 27.5 26.7 25.9 25.1 24.3 23.6 22.8 22.1 21.4 20.7 20.1 19.4 18.8 18.3 17.7 17.2 16.7 16.2
78 29.1 28.2 27.4 26.6 25.8 25.0 24.2 23.4 22.7 21.9 21.2 20.5 19.9 19.2 18.8 18.0 17.5 16.9 16.4 15.9
79 29.0 28.2 27.3 26.5 25.7 24.8 24.1 23.3 22.6 21.8 21.1 20.4 19.7 19.0 18.4 17.8 17.2 16.7 16.1 15.6
80 29.0 28.1 27.3 26.4 25.6 24.8 24.0 23.2 22.4 21.7 21.0 20.2 19.5 18.9 18.2 17.6 17.0 16.4 15.9 15.4
81 28.9 28.1 27.2 26.4 25.5 24.7 23.9 23.1 22.3 21.6 20.8 20.1 19.4 18.7 18.1 17.4 16.8 16.2 15.7 15.1
82 28.9 28.0 27.2 26.3 25.5 24.6 23.8 23.0 22.3 21.5 20.7 20.0 19.3 18.6 17.9 17.3 16.6 16.0 15.5 14.9
83 28.8 28.0 27.1 26.3 25.4 24.6 23.8 23.0 22.2 21.4 20.6 19.9 19.2 18.5 17.8 17.1 16.5 15.9 15.3 14.7
84 28.8 27.9 27.1 26.2 25.4 24.5 23.7 22.9 22.1 21.3 20.5 19.8 19.1 18.4 17.7 17.0 16.3 15.7 15.1 14.5
85 28.8 27.9 27.0 26.2 25.3 24.5 23.7 22.8 22.0 21.3 20.5 19.7 19.0 18.3 17.6 16.9 16.2 15.6 15.0 14.4
86 28.7 27.9 27.0 26.1 25.3 24.5 23.6 22.8 22.0 21.2 20.4 19.6 18.9 18.2 17.5 16.8 16.1 15.5 14.8 14.2
87 28.7 27.8 27.0 26.1 25.3 24.4 23.6 22.8 21.9 21.1 20.4 19.6 18.8 18.1 17.4 16.7 16.0 15.4 14.7 14.1
88 28.7 27.8 27.0 26.1 25.2 24.4 23.5 22.7 21.9 21.1 20.3 19.5 18.8 18.0 17.2 16.6 15.9 15.3 14.6 14.0
89 28.7 27.8 26.9 26.1 25.2 24.4 23.5 22.7 21.9 21.1 20.3 19.5 18.7 18.0 17.2 16.5 15.8 15.2 14.5 13.9
90 28.7 27.8 26.9 26.1 25.2 24.3 23.5 22.7 21.8 21.0 20.2 19.4 18.7 17.9 17.2 16.5 15.8 15.1 14.5 13.8
91 28.7 27.8 26.9 26.0 25.2 24.3 23.5 22.6 21.8 21.0 20.2 19.4 18.6 17.9 17.1 16.4 15.7 15.0 14.4 13.7
92 28.6 27.8 26.9 26.0 25.2 24.3 23.5 22.6 21.8 21.0 20.2 19.4 18.6 17.8 17.1 16.4 15.7 15.0 14.3 13.7
93 28.6 27.8 26.9 26.0 25.1 24.3 23.4 22.6 21.8 20.9 20.1 19.3 18.6 17.8 17.1 16.3 15.6 14.9 14.3 13.6
94 28.6 27.7 26.9 26.0 25.1 24.3 23.4 22.6 21.7 20.9 20.1 19.3 18.5 17.8 17.0 16.3 15.6 14.9 14.2 13.6
95 28.6 27.7 26.9 26.0 25.1 24.3 23.4 22.6 21.7 20.9 20.1 19.3 18.5 17.8 17.0 16.3 15.6 14.9 14.2 13.5
96 28.6 27.7 26.9 26.0 25.1 24.2 23.4 22.6 21.7 20.9 20.1 19.3 18.5 17.7 17.0 16.2 15.5 14.8 14.2 13.5
97 28.6 27.7 26.8 26.0 25.1 24.2 23.4 22.5 21.7 20.9 20.1 19.3 18.5 17.7 17.0 16.2 15.5 14.8 14.1 13.5
98 28.6 27.7 26.8 26.0 25.1 24.2 23.4 22.5 21.7 20.9 20.1 19.3 18.5 17.7 16.9 16.2 15.5 14.8 14.1 13.4
99 28.6 27.7 26.8 26.0 25.1 24.2 23.4 22.5 21.7 20.9 20.0 19.2 18.5 17.7 16.9 16.2 15.5 14.7 14.1 13.4
100 28.6 27.7 26.8 26.0 25.1 24.2 23.4 22.5 21.7 20.8 20.0 19.2 18.4 17.7 16.9 16.2 15.4 14.7 14.0 13.4
101 28.6 27.7 26.8 25.9 25.1 24.2 23.4 22.5 21.7 20.8 20.0 19.2 18.4 17.7 16.9 16.1 15.4 14.7 14.0 13.3
102 28.6 27.7 26.8 25.9 25.1 24.2 23.3 22.5 21.7 20.8 20.0 19.2 18.4 17.6 16.9 16.1 15.4 14.7 14.0 13.3
103 28.6 27.7 26.8 25.9 25.1 24.2 23.3 22.5 21.7 20.8 20.0 19.2 18.4 17.6 16.9 16.1 15.4 14.7 14.0 13.3
104 28.6 27.7 26.8 25.9 25.1 24.2 23.3 22.5 21.6 20.8 20.0 19.2 18.4 17.6 16.9 16.1 15.4 14.7 14.0 13.3
105 28.6 27.7 26.8 25.9 25.1 24.2 23.3 22.5 21.6 20.8 20.0 19.2 18.4 17.6 16.8 16.1 15.4 14.6 13.9 13.3
106 28.6 27.7 26.8 25.9 25.1 24.2 23.3 22.5 21.6 20.8 20.0 19.2 18.4 17.6 16.8 16.1 15.3 14.6 13.9 13.3
107 28.6 27.7 26.8 25.9 25.1 24.2 23.3 22.5 21.6 20.8 20.0 19.2 18.4 17.6 16.8 16.1 15.3 14.6 13.9 13.2
108 28.6 27.7 26.8 25.9 25.1 24.2 23.3 22.5 21.6 20.8 20.0 19.2 18.4 17.6 16.8 16.1 15.3 14.6 13.9 13.2
109 28.6 27.7 26.8 25.9 25.1 24.2 23.3 22.5 21.6 20.8 20.0 19.2 18.4 17.6 16.8 16.1 15.3 14.6 13.9 13.2
110 28.6 27.7 26.8 25.9 25.1 24.2 23.3 22.5 21.6 20.8 20.0 19.2 18.4 17.6 16.8 16.1 15.3 14.6 13.9 13.2
111 28.6 27.7 26.8 25.9 25.0 24.2 23.3 22.5 21.6 20.8 20.0 19.2 18.4 17.6 16.8 16.0 15.3 14.6 13.9 13.2
112 28.6 27.7 26.8 25.9 25.0 24.2 23.3 22.5 21.6 20.8 20.0 19.2 18.4 17.6 16.8 16.0 15.3 14.6 13.9 13.2
113 28.6 27.7 26.8 25.9 25.0 24.2 23.3 22.5 21.6 20.8 20.0 19.2 18.4 17.6 16.8 16.0 15.3 14.6 13.9 13.2
114 28.6 27.7 26.8 25.9 25.0 24.2 23.3 22.5 21.6 20.8 20.0 19.2 18.4 17.6 16.8 16.0 15.3 14.6 13.9 13.2
115 28.6 27.7 26.8 25.9 25.0 24.2 23.3 22.5 21.6 20.8 20.0 19.2 18.4 17.6 16.8 16.0 15.3 14.6 13.9 13.2
</TABLE>
Page 64
<PAGE>
APPENDIX E. LIFE EXPECTANCY TABLES (CONTINUED)
TABLE II (CONTINUED)
(JOINT LIFE AND LAST SURVIVOR EXPECTANCY)
<TABLE>
- ---------------------------------------------------------------------------------------------------------------------------
AGES 75 76 77 78 79 80 81 82 83 84 85 86 87 88 89 90 91 92 93 94
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
75 16.5 16.1 15.8 15.4 15.1 14.9 14.6 14.4 14.2 14.0
76 16.1 15.7 15.4 15.0 14.7 14.4 14.1 13.9 13.7 13.5
77 15.8 15.4 15.0 14.6 14.3 14.0 13.7 13.4 13.2 13.0
78 15.4 15.0 14.6 14.2 13.9 13.5 13.2 13.0 12.7 12.5
79 15.1 14.7 14.3 13.9 13.5 13.2 12.8 12.5 12.3 12.0
80 14.9 14.4 14.0 13.5 13.2 12.8 12.5 12.2 11.9 11.6
81 14.6 14.1 13.7 13.2 12.8 12.5 12.1 11.8 11.5 11.2
82 14.4 13.9 13.4 13.0 12.5 12.2 11.8 11.5 11.1 10.9
83 14.2 13.7 13.2 12.7 12.3 11.9 11.5 11.1 10.8 10.5
84 14.0 13.5 13.0 12.5 12.0 11.6 11.2 10.9 10.5 10.2
85 13.8 13.3 12.8 12.3 11.8 11.4 11.0 10.6 10.2 9.9 9.6 9.3 9.1 8.9 8.7 8.5 8.3 8.2 8.0 7.9
86 13.7 13.1 12.6 12.1 11.6 11.2 10.8 10.4 10.0 9.7 9.3 9.1 8.8 8.6 8.3 8.2 8.0 7.8 7.7 7.6
87 13.5 13.0 12.4 11.9 11.4 11.0 10.6 10.1 9.8 9.4 9.1 8.8 8.5 8.3 8.1 7.9 7.7 7.5 7.4 7.2
88 13.4 12.8 12.3 11.8 11.3 10.8 10.4 10.0 9.6 9.2 8.9 8.6 8.3 8.0 7.8 7.6 7.4 7.2 7.1 6.9
89 13.3 12.7 12.2 11.6 11.1 10.7 10.2 9.8 9.4 9.0 8.7 8.3 8.1 7.8 7.5 7.3 7.1 6.9 6.8 6.6
90 13.2 12.6 12.1 11.5 11.0 10.5 10.1 9.6 9.2 8.8 8.5 8.2 7.9 7.6 7.3 7.1 6.9 6.7 6.5 6.4
91 13.1 12.5 12.0 11.4 10.9 10.4 9.9 9.5 9.1 8.7 8.3 8.0 7.7 7.4 7.1 6.9 6.7 6.5 6.3 6.2
92 13.1 12.5 11.9 11.3 10.8 10.3 9.8 9.4 8.9 8.5 8.2 7.8 7.5 7.2 6.9 6.7 6.5 6.3 6.1 5.9
93 13.0 12.4 11.8 11.3 10.7 10.2 9.7 9.3 8.8 8.4 8.0 7.7 7.4 7.1 6.8 6.5 6.2 6.1 5.9 5.8
94 12.9 12.3 11.7 11.2 10.6 10.1 9.6 9.2 8.7 8.3 7.9 7.6 7.2 6.9 6.6 6.4 6.2 5.9 5.8 5.6
95 12.9 12.3 11.7 11.1 10.6 10.1 9.6 9.1 8.6 8.2 7.8 7.5 7.1 6.8 6.5 6.3 6.0 5.8 5.6 5.4
96 12.9 12.2 11.6 11.1 10.5 10.0 9.5 9.0 8.5 8.1 7.7 7.3 7.0 6.7 6.4 6.1 5.9 5.7 5.5 5.3
97 12.8 12.2 11.6 11.0 10.5 9.9 9.4 8.9 8.5 8.0 7.6 7.3 6.9 6.6 6.3 6.0 5.8 5.5 5.3 5.1
98 12.8 12.2 11.5 11.0 10.4 9.9 9.4 8.9 8.4 8.0 7.5 7.2 6.8 6.5 6.2 5.9 5.6 5.4 5.2 5.0
99 12.7 12.1 11.5 10.9 10.4 9.8 9.3 8.8 8.3 7.9 7.5 7.1 6.7 6.4 6.1 5.8 5.5 5.3 5.1 4.9
100 12.7 12.1 11.5 10.9 10.3 9.8 9.2 8.7 8.3 7.8 7.4 7.0 6.6 6.3 6.0 5.7 5.4 5.2 5.0 4.8
101 12.7 12.1 11.4 10.8 10.3 9.7 9.2 8.7 8.2 7.8 7.3 6.9 6.6 6.2 5.9 5.6 5.3 5.1 4.9 4.7
102 12.7 12.0 11.4 10.8 10.2 9.7 9.2 8.7 8.2 7.7 7.3 6.9 6.5 6.2 5.8 5.5 5.3 5.0 4.8 4.6
103 12.6 12.0 11.4 10.8 10.2 9.7 9.1 8.6 8.1 7.7 7.2 6.8 6.4 6.1 5.8 5.5 5.2 4.9 4.7 4.5
104 12.6 12.0 11.4 10.8 10.2 9.6 9.1 8.6 8.1 7.6 7.2 6.8 6.4 6.0 5.7 5.4 5.1 4.8 4.6 4.4
105 12.6 12.0 11.3 10.7 10.2 9.6 9.1 8.5 8.0 7.6 7.1 6.7 6.3 6.0 5.6 5.3 5.0 4.8 4.5 4.3
106 12.6 11.9 11.3 10.7 10.1 9.6 9.0 8.5 8.0 7.5 7.1 6.7 6.3 5.9 5.6 5.3 5.0 4.7 4.5 4.2
107 12.6 11.9 11.3 10.7 10.1 9.6 9.0 8.5 8.0 7.5 7.1 6.6 6.2 5.9 5.5 5.2 4.9 4.6 4.4 4.2
108 12.6 11.9 11.3 10.7 10.1 9.5 9.0 8.5 8.0 7.5 7.0 6.6 6.2 5.8 5.5 5.2 4.9 4.6 4.3 4.1
109 12.6 11.9 11.3 10.7 10.1 9.5 9.0 8.4 7.9 7.5 7.0 6.6 6.2 5.8 5.5 5.1 4.8 4.5 4.3 4.1
110 12.5 11.9 11.3 10.7 10.1 9.5 9.0 8.4 7.9 7.4 7.0 6.6 6.2 5.8 5.4 5.1 4.8 4.5 4.3 4.0
111 12.5 11.9 11.3 10.7 10.1 9.5 8.9 8.4 7.9 7.4 7.0 6.5 6.1 5.7 5.4 5.1 4.8 4.5 4.2 4.0
112 12.5 11.9 11.3 10.6 10.1 9.5 8.9 8.4 7.9 7.4 7.0 6.5 6.1 5.7 5.4 5.0 4.7 4.4 4.2 3.9
113 12.5 11.9 11.2 10.6 10.0 9.5 8.9 8.4 7.9 7.4 6.9 6.5 6.1 5.7 5.4 5.0 4.7 4.4 4.2 3.9
114 12.5 11.9 11.2 10.6 10.0 9.5 8.9 8.4 7.9 7.4 6.9 6.5 6.1 5.7 5.3 5.0 4.7 4.4 4.1 3.9
115 12.5 11.9 11.2 10.6 10.0 9.5 8.9 8.4 7.9 7.4 6.9 6.5 6.1 5.7 5.3 5.0 4.7 4.4 4.1 3.9
</TABLE>
Page 65
<PAGE>
INDEX
A
Adjusted gross income limitation............................ 10
Deduction phaseout......................................... 11
Filing status.............................................. 11
Modified AGI............................................... 10
AGI limit................................................... 10
- ---------------------------------------------------------------
- ---------------------------------------------------------------
B
Basis....................................................... 27
Broker's commissions......................................... 8
- ---------------------------------------------------------------
- ---------------------------------------------------------------
C
Can you take an IRA deduction chart.......................... 8
Collectibles................................................ 33
Exception.................................................. 33
Community property laws...................................... 8
Compensation................................................. 4
Alimony and separate maintenance............................ 5
Commissions................................................. 4
Not Compensation............................................ 5
Self-employment income...................................... 4
Self-employment loss........................................ 4
Wages, salaries, etc........................................ 4
Contribution limits.......................................... 7
Spousal IRA................................................. 7
Contributions................................................ 6
Annuity or endowment contracts.............................. 8
Both spouses have compensation.............................. 7
Designating the year........................................ 8
Filing before making your contribution...................... 8
Filing status............................................... 7
Form of..................................................... 6
Less than maximum........................................... 7
Not required................................................ 7
Tax-free withdrawal........................................ 15
When to contribute.......................................... 6
Cost basis.................................................. 27
- ---------------------------------------------------------------
- ---------------------------------------------------------------
D
Death benefit exclusion..................................... 30
Deductible contributions..................................... 8
Reporting.................................................. 12
Deduction limits............................................ 10
Full deduction............................................. 10
Reduced or no deduction.................................... 10
Spousal IRA................................................ 12
Deduction phaseout.......................................... 11
Disclosures, required........................................ 6
Distributions............................................... 22
Age 59 1/2 rule............................................ 22
Annuity contracts.......................................... 30
Beneficiaries.............................................. 29
Beneficiary other than spouse.............................. 29
Designated beneficiary..................................... 23
Exceptions to age 59 1/2 rule.............................. 22
Fully or partly taxable.................................... 27
Inherited IRAs............................................. 29
Losses on IRA investments.................................. 29
Minimum.................................................... 24
Reporting and withholding requirements..................... 30
Required................................................... 23
Required beginning date.................................... 23
Retirement bonds........................................... 30
Rollovers............................................... 17,18
Tax treatment.............................................. 27
Divorce..................................................... 20
Qualified domestic relations order......................... 20
Rollovers.................................................. 20
Transfer of interest....................................... 22
Transfers incident to...................................... 22
- ---------------------------------------------------------------
- ---------------------------------------------------------------
E
Employer and employee association trust accounts............. 6
Employer plans............................................... 8
Defined benefit plan........................................ 9
Defined contribution plan................................... 9
Federal judges............................................. 10
Marital status............................................. 10
Married filing a joint return.............................. 10
Married filing separate return............................. 10
Nonvested employees........................................ 10
Receiving retirement benefits.............................. 10
Reservists and volunteer fire fighters..................... 10
Social Security and railroad retirement coverage........... 10
Spouse died................................................ 10
When are you covered?....................................... 9
When are you not covered?.................................. 10
Example, comprehensive...................................... 15
Excess accumulations........................................ 35
Excess Contributions........................................ 33
Excess distributions........................................ 36
- ---------------------------------------------------------------
- ---------------------------------------------------------------
F
Filing status............................................... 11
Married filing separate exception.......................... 11
Forms:
1099-R..................................................... 30
5329....................................................... 35
5498....................................................... 13
8606....................................................... 14
W-2......................................................... 8
- ---------------------------------------------------------------
- ---------------------------------------------------------------
I
Individual retirement account................................ 5
Individual retirement annuity................................ 5
Individual retirement arrangement............................ 3
Inherited IRAs..............................................6,8
Contributions............................................... 8
Distributions.............................................. 24
In general.................................................. 6
Making it your own.......................................... 8
MDIB requirement exception................................. 26
Premature distribution penalty exception................... 23
Rollovers.................................................. 18
Taxation of Distributions.................................. 29
Insufficient Distributions.................................. 35
Investment in collectibles.................................. 32
IRA.......................................................... 3
As a holding account....................................... 19
Conduit..................................................19,21
- ---------------------------------------------------------------
- ---------------------------------------------------------------
K
Kinds of IRAs................................................ 5
- ---------------------------------------------------------------
- ---------------------------------------------------------------
M
Minimum distributions....................................... 24
Incidental benefit requirement............................. 25
Life expectancy............................................ 25
Miscellaneous rules........................................ 26
More than one IRA............................................ 7
- ---------------------------------------------------------------
- ---------------------------------------------------------------
N
Nondeductible contributions................................. 13
Basis...................................................... 13
Otherwise deductible....................................... 14
Penalty for overstatement.................................. 14
Reporting.................................................. 14
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<PAGE>
Withdrawals............................................... 15
- --------------------------------------------------------------
- --------------------------------------------------------------
P
Penalties.................................................. 32
Excess accumulations...................................... 35
Excess contributions...................................... 33
Excess distributions...................................... 36
Premature distributions (early withdrawals)............... 34
Prohibited transactions................................... 32
Reporting.............................................. 35,36
Premature distributions (early withdrawals)................ 34
Annuity exception......................................... 23
Death exception........................................... 23
Disability exception...................................... 23
Prohibited transactions.................................... 32
Borrowing on an annuity contract.......................... 32
Pledging an account as security........................... 32
- --------------------------------------------------------------
- --------------------------------------------------------------
Q
Qualified domestic relations order......................... 20
- --------------------------------------------------------------
- --------------------------------------------------------------
R
Reduced IRA deduction, how to figure....................... 11
Required distributions..................................... 23
Beneficiaries............................................. 24
IRA owners................................................ 23
Retirement bonds........................................... 6
Rollovers............................................... 17,18
Conduit IRA............................................ 19,21
Direct rollover option.................................... 19
Distributions received by a surviving spouse.............. 20
Distributions under divorce proceedings................... 20
Eligible rollover distribution............................ 18
Extension of rollover period.............................. 17
From employer's plan into an IRA.......................... 18
From one IRA into another................................. 18
Frozen deposit............................................ 17
Keogh plans............................................... 20
Partial rollovers......................................... 18
Reporting.............................................. 18,21
Required distributions.................................... 18
Tax-sheltered annuity..................................... 21
Time limit................................................ 17
Waiting period between rollovers.......................... 18
Withholding requirements.................................. 18
- --------------------------------------------------------------
- --------------------------------------------------------------
S
SEP...................................................... 6,37
Simplified employee pension.............................. 6,37
Contributions............................................. 37
Contributions you make.................................... 39
Definitions............................................... 37
Elective deferrals........................................ 40
Employer's contributions.................................. 39
Excess employer contributions............................. 39
Excludable employees...................................... 37
Highly compensated employee............................... 37
Leased employees.......................................... 37
Limits.................................................... 37
Limits on deferrals....................................... 40
Overall limits on employer contributions.................. 40
Qualifying employee....................................... 37
Salary reduction arrangement.............................. 40
Self-employed individual.................................. 37
Social Security Recipients................................. 10
Spousal IRA............................................... 4,7
Eligibility requirements................................... 4
Spouse has compensation.................................... 7
Spouse under age 70 1/2.................................... 7
Surviving spouse........................................... 20
Distributions received.................................... 20
- --------------------------------------------------------------
- --------------------------------------------------------------
T
Transfers.................................................. 17
Rollovers................................................. 17
Transfers incident to divorce.............................. 22
Trustee's fees.............................................. 8
- --------------------------------------------------------------
- --------------------------------------------------------------
W
When are you covered?........................................ 9
Withdrawals................................................. 15
Tax-free................................................... 15
Withholding................................................. 30
Withholding from IRA distributions outside the United
States..................................................... 31
Withholding allowances...................................... 13
Page 67
<PAGE>
- -------------------------------------
- -------------------------------------
HOW TO GET IRS FORMS AND PUBLICATIONS
- --------------------------------------------------------------------------------
You can visit your local IRS office or order tax forms and publications from
the IRS Forms Distribution Center listed for your state at the address on this
page. Or, if you prefer, you can photocopy tax forms from reproducible copies
kept at participating public libraries. In addition, many of these libraries
have reference sets of IRS publications that you can read or copy.
WHERE TO MAIL YOUR ORDER BLANK FOR FREE FORMS AND PUBLICATIONS
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------
IF YOU LIVE IN: MAIL TO: OTHER LOCATIONS:
- ---------------------------------------------------------------------------------------------------------
<S> <C> <C>
Alaska, Arizona, California, Colorado, Hawaii, Western Area FOREIGN ADDRESSES-
Idaho, Kansas, Montana, Nevada, New Distribution Center Taxpayers with mailing addresses
Mexico, Oklahoma, Oregon, Utah, Rancho Cordova, CA in foreign countries should mail
Washington, Wyoming, Guam, Northern 95743-0001 this order blank to either: Eastern
Marianas, American Samoa Area Distribution Center, P.O. Box
- -------------------------------------------------------------------- 25866, Richmond, VA 23286-8107;
Alabama, Arkansas, Illinois, Indiana, Iowa, Central Area or Western Area Distribution
Kentucky, Louisiana, Michigan, Minnesota, Distribution Center Center, Rancho Cordova, CA
Mississippi, Missouri, Nebraska, North P.O. Box 8903 95743-0001, whichever is closer.
Dakota, Ohio, South Dakota, Tennessee, Bloomington, IL Mail letter requests for other forms
Texas, Wisconsin 61702-8903 and publications to: Eastern Area
- -------------------------------------------------------------------- Distribution Center, P.O. Box
Connecticut, Delaware, District of Columbia, Eastern Area 25866, Richmond, VA 23286-8107.
Florida, Georgia, Maine, Maryland, Distribution Center
Massachusetts, New Hampshire, New P.O. Box 85074
Jersey, New York, North Carolina, Richmond, VA PUERTO RICO--Eastern Area
Pennsylvania, Rhode Island, South Carolina, 23261-5074 Distribution Center,
Vermont, Virginia, West Virginia P.O. Box 25866,
Richmond, VA 23286-8107.
VIRGIN ISLANDS--V.I. Bureau of
Internal Revenue, Lockhart
Gardens, No. 1-A
Charlotte Amalie,
St. Thomas, VI 00802
</TABLE>
DETACH AT THIS LINE
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Order Blank
We will send you 2 copies of each form and 1 copy of each publication or set
of instructions you circle. Please cut the order blank on the dotted line
above and BE SURE TO PRINT OR TYPE YOUR NAME AND ADDRESS ACCURATELY ON THE
BOTTOM PORTION.
Enclose this order blank in your own envelope and address your envelope to
the IRS address shown above for your state.
To help reduce waste, please order only the forms, instructions, and
publications you think you will need to prepare your return.
Use the blank spaces to order items not listed. If you need more space,
attach a separate sheet of paper listing the additional forms and publications
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You should either receive your order or notification of the status of your
order within 7-15 work days after we receive your request.
<TABLE>
<S> <C> <C> <C> <C> <C> <C>
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1040 Schedule F 1040EZ 2441 & 8822 & Pub. 505 Pub. 554
(1040) Instructions Instructions
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Instructions Schedule R Instructions 3903 & 8829 & Pub. 508 Pub. 575
for 1040 & (1040)& for 1040EZ Instructions Instructions
Schedules Instructions
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Schedules Schedule 1040-ES 4562 & Pub. 1 Pub. 521 Pub. 590
A&B (1040) SE (1040) (1995) & Instructions
Instructions
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Schedule C 1040A 1040X & 4868 & Pub. 17 Pub. 523 Pub. 596
(1040) Instructions Instructions
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Schedule Instructions 2106 & 5329 & Pub. 334 Pub. 525 Pub. 910
C-EZ (1040) for 1040A & Instructions Instructions
Schedules
- -------------------------------------------------------------------------------------------
Schedule D Schedule 1 2106-EZ & 8283 & Pub. 463 Pub. 527 Pub. 917
(1040) (1040A) Instructions Instructions
- -------------------------------------------------------------------------------------------
Schedule E Schedule 2 2119 & 8582 & Pub. 501 Pub. 529 Pub. 929
(1040) (1040A) Instructions Instructions
- -------------------------------------------------------------------------------------------
Schedule Schedule 3 2210 & 8606 & Pub. 502 Pub. 550 Pub. 936
EIC (1040A (1040A) & Instructions Instructions
or 1040) Instructions
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</TABLE>
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Name
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Number and street
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City or town State ZIP Code
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<PAGE>
Exhibit 15a
FBL SERIES FUND, INC.
DISTRIBUTION AND SHAREHOLDER SERVICING
PLAN AND AGREEMENT
PLAN AND AGREEMENT made as of the 1st day of December, 1987, by and
between FBL SERIES FUND, INC., a Maryland corporation (the "Fund"), and FBL
INVESTMENT ADVISORY SERVICES, INC., a Delaware corporation (the "Underwriter").
WHEREAS, Rule 12b-1 under the Investment Company Act of 1940 (the "Act"),
provides that a registered open-end management investment company may act as a
distributor of securities of which it is the issuer, provided that any payments
made by such company in connection with such distribution are made pursuant to a
written plan describing all material aspects of the proposed financing of
distribution; and
WHEREAS, the Fund is a registered open-end investment company; the
Underwriter acts as the underwriter in selling shares of the Fund; and the
Underwriter and various securities dealers (the "Dealers") sell shares of the
Fund and provide services to existing shareholders;
WHEREAS, the Board of Directors of the Fund has determined that the Fund
should make direct payments to the Underwriter to compensate the Underwriter and
to permit it to compensate Dealers in connection with the selling of Fund shares
and the rendering of shareholder services and that such payments should be
separate from the investment advisory and management fee paid to FBL Investment
Advisory Services, Inc. pursuant to a separate agreement; and
WHEREAS, the Fund wants to adopt this FBL Series Fund, Inc. Distribution
and Shareholder Servicing Plan and Agreement (the "Plan") in the manner and on
the terms and conditions hereinafter set forth pursuant to Rule 12b-1 under the
Act;
WHEREAS, the Underwriter wants to enter into the Plan on said terms and
conditions; and
WHEREAS, the Board of Directors of the Fund has determined that there is a
reasonable likelihood that the adoption of the Plan will benefit the Fund and
its shareholders;
NOW, THEREFORE, the following shall constitute the written Plan:
SECTION 1. The Fund is hereby authorized to make payments from its
assets to the Underwriter pursuant to this Plan to compensate the Underwriter
and to permit it to compensate Dealers for (i) providing shareholder services to
existing and prospective fund shareholders, including, without limitation,
assisting in the establishment and maintenance of shareholder accounts and
records, furnishing information as to the status of shareholder accounts,
processing shareholder service
<PAGE>
requests, forwarding purchase and redemption requests, responding to telephone
and written inquiries, and assisting shareholders with tax information, and (ii)
rendering assistance in the distribution and promotion of the sale of Fund
shares to the public.
In consideration of the activities described above, the Fund shall pay the
Underwriter a fee after the end of each month at the annual rate of 0.75% of the
average daily net assets of the Fund. The Underwriter shall pay to the Dealers
a service fee of 0.15% of the average daily net assets that have been maintained
and serviced in recognition of their services and assistance described above.
The Underwriter may compensate Dealers for sales of Fund shares in amounts up to
4% of the amount invested. The Underwriter shall be entitled to retain any
contingent deferred sales charges imposed pursuant to the Fund's prospectus.
SECTION 2. This Plan shall not take effect until it has been approved
by a vote of at least a majority (as defined in the Act) of the outstanding
shares of the Fund.
SECTION 3. This Plan shall not take effect until it has been approved
together with any related forms of agreement by votes of the majority of both
(a) the Board of Directors of the Fund, and (b) those Directors of the Fund who,
except for their positions as Directors of the Fund, are not "interested
persons" (as defined in the Act) of the Fund and who have no direct or indirect
financial interest in the operation of this Plan or any agreements related to
this Plan (the "Disinterested Directors"), cast in person at a meeting called
for the purpose of voting on this Plan or such agreements.
SECTION 4. Unless sooner terminated pursuant to Section 6, this Plan
shall continue in effect until November 30, 1988 and thereafter shall continue
in effect so long as such continuance is specifically approved at least annually
in the manner provided for approval of this Plan in Section 3.
SECTION 5. The President of the Underwriter, or such other person as he
may designate, shall provide to the Board and the Board shall review at least
quarterly a written report of the amounts so expended and purposes for which
such expenditures were made.
SECTION 6. This Plan may be terminated at any time by vote of a
majority of the Disinterested Directors, or by vote of a majority (as defined in
the Act) of the Fund's outstanding shares.
SECTION 7. Any agreement of the Fund related to this Plan shall be in
writing and shall provide:
A. That such agreement may be terminated at any time, without payment
of any penalty, by vote of a majority of the members of the Board of
Directors of the Fund who are not interested persons of the Fund and
have no direct or indirect financial interest in the operation of
the Plan or in any agreements related to the Plan
<PAGE>
or by a vote of a majority (as defined in the Act) of the Fund's
outstanding shares on not more than sixty days' written notice to
any other party to the agreement; and
B. That such agreement shall terminate automatically in the event of
its assignment.
SECTION 8. While the Plan is in effect, the selection and nomination of
Directors who are not interested persons (as defined in the Act) of the Fund
shall be committed to the discretion of the Fund Directors who are not
interested persons.
SECTION 9. The fund shall preserve copies of this Plan and any related
agreements and all reports made pursuant to Section 5, for a period of not less
than six years from the date of the Plan, or the agreements or such report, as
the case may be, the first two years in an easily accessible place.
SECTION 10. This Plan may not be amended to increase materially the
amount of distribution expenses provided for in Section 1 hereof unless such
amendment is approved in the manner provided for initial approval in Sections 2
and 3 hereof and no other material amendment to this Plan shall be made unless
approved in the manner provided for initial approval in Section 3 hereof.
IN WITNESS WHEREOF, the parties hereto have executed and delivered this
Plan as of the first date written above.
FBL SERIES FUND, INC.
BY:
----------------------------------
FBL INVESTMENT ADVISORY SERVICES, INC.
BY:
----------------------------------
<PAGE>
Exhibit 15b
FBL SERIES FUND, INC.
AMENDED DISTRIBUTION PLAN AND AGREEMENT
PLAN AND AGREEMENT amended as of the 25th day of November, 1991, by and
between FBL SERIES FUND, INC., a Maryland corporation (the "Fund"), and FBL
INVESTMENT ADVISORY SERVICES, INC., a Delaware corporation (the "Underwriter").
WHEREAS, Rule 12b-1 under the Investment Company Act of 1940 (the "Act"),
provides that a registered open-end management investment company may act as a
distributor of securities of which it is the issuer, provided that any payments
made by such company in connection with such distribution are made pursuant to a
written plan describing all material aspects of the proposed financing of
distribution;
WHEREAS, the Fund is a registered open-end investment company; the
Underwriter acts as the underwriter in selling shares of the Fund; and the
Underwriter and various securities dealers (the "Dealers") sell shares of the
Fund and provide services to existing shareholders;
WHEREAS, the Board of Directors of the Fund has determined that the Fund
should make direct payments to the Underwriter to compensate the Underwriter and
to permit it to compensate Dealers in connection with the selling of Fund
shares, and that such payments should be separate from the investment advisory
and management fee and the administrative service fee paid to FBL Investment
Advisory Services, Inc. pursuant to separate agreements;
WHEREAS, the original Plan and Agreement between the Fund and the
Underwriter, which is amended hereby, was approved by the vote of at least a
majority (as defined in the Act) of the outstanding shares of the Fund and
became ineffective on December 1, 1987;
WHEREAS, the Fund wants to enter into this FBL Series Fund, Inc. Amended
Distribution Plan and Agreement (the "Plan") in the manner and on the terms and
conditions hereinafter set forth pursuant to Rule 12b-1 under the Act;
WHEREAS, the Underwriter wants to enter into the Plan on said terms and
conditions; and
WHEREAS, the Board of Directors of the Fund has determined that there is a
reasonable likelihood that the Plan will benefit the Fund and its shareholders;
NOW, THEREFORE, the following shall constitute the written Plan:
SECTION 1. The Fund is hereby authorized to make payments from its
assets to the Underwriter pursuant
<PAGE>
to this Plan to compensate the Underwriter and to permit it to compensate
Dealers for rendering assistance in the distribution and promotion of the sale
of Fund shares to the public.
In consideration of the activities described above, the Fund shall pay the
Underwriter a fee after the end of each month at the annual rate of 0.50% of the
average daily net assets of the Fund. The Underwriter may compensate Dealers
for sales of Fund shares in amounts up to 4% of the amount invested. The
Underwriter shall be entitled to retain any contingent deferred sales charges
imposed pursuant to the Fund's prospectus.
SECTION 2. This Plan, which in its original form had an initial term
that ended November 30, 1988, is to continue in effect in its amended form until
November 30, 1992 and shall thereafter continue in effect so long as such
continuance is specifically approved at least annually by votes of the majority
of both (a) the Board of Directors of the Fund, and (b) those Directors of the
Fund who, except for their positions as Directors of the Fund, are not
"interested persons" (as defined in the Act) of the Fund and who have no direct
or indirect financial interest in the operation of this Plan or any agreements
related to this Plan (the "Disinterested Directors"), cast in person at a
meeting called for the purpose of voting on this Plan or such agreements.
SECTION 3. The President of the Underwriter, or such other person as he
may designate, shall provide to the Board and the Board shall review at least
quarterly a written report of the amounts so expended and purposes for which
such expenditures were made.
SECTION 4. This Plan may be terminated at any time by vote of a
majority of the Disinterested Directors, or by vote of a majority (as defined in
the Act) of the Fund's outstanding shares.
SECTION 5. Any agreement of the Fund related to this Plan shall be in
writing and shall provide:
A. That such agreement may be terminated at any time, without payment of
any penalty, by vote of a majority of the members of the Board of
Directors of the Fund who are not interested persons of the Fund and
have no direct or indirect financial interest in the operation of the
Plan or in any agreements related to the Plan or by a vote of a
majority (as defined in the Act) of the Fund's outstanding shares on
not more than sixty days' written notice to any other party to the
agreement; and
B. That such agreement shall terminate automatically in the event of its
assignment.
SECTION 6. While the Plan is in effect, the selection and nomination of
Directors who are not interested persons (as defined in the Act) of the Fund
shall be committed to the discretion of the Fund Directors who are not
interested persons.
<PAGE>
SECTION 7. The Fund shall preserve copies of this plan and any related
agreements and all reports made pursuant to Section 3, for a period of not less
than six years from the date of the Plan, or the agreements or such reports, as
the case may be, the first two years in an easily accessible place.
SECTION 8. This Plan may not be amended to increase materially the
amount of distribution expenses provided for in Section 1 hereof unless such
amendment is approved in the manner provided for in Section 2 as well as being
approved by a vote of at least a majority (as defined in the Act) of the
outstanding shares of the Fund and no other material amendment to this Plan
shall be made unless approved in the manner provided for in Section 2 hereof.
SECTION 9. This Plan supersedes all prior distribution plans and
agreements between the Fund and the Underwriter.
IN WITNESS WHEREOF, the parties hereto have executed and delivered this
Plan as of the first date written above.
FBL SERIES FUND, INC.
By:
----------------------------------------------
Title:
-------------------------------------------
FBL INVESTMENT ADVISORY SERVICES, INC.
By:
---------------------------------------------
Title:
-------------------------------------------
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
<SERIES>
<NUMBER> 1
<NAME> GROWTH COMMON STOCK
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> JUL-31-1995
<PERIOD-END> JUL-31-1995
<INVESTMENTS-AT-COST> 68,687,815
<INVESTMENTS-AT-VALUE> 70,997,899
<RECEIVABLES> 268,737
<ASSETS-OTHER> 2,499
<OTHER-ITEMS-ASSETS> 26,742
<TOTAL-ASSETS> 71,295,877
<PAYABLE-FOR-SECURITIES> 312,050
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 37,324
<TOTAL-LIABILITIES> 349,374
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<PAID-IN-CAPITAL-COMMON> 66,985,376
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<SHARES-COMMON-PRIOR> 4,920,212
<ACCUMULATED-NII-CURRENT> 1,457,162
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 188,440
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 2,310,084
<NET-ASSETS> 70,946,503
<DIVIDEND-INCOME> 2,473,760
<INTEREST-INCOME> 888,498
<OTHER-INCOME> 0
<EXPENSES-NET> 1,077,115
<NET-INVESTMENT-INCOME> 2,285,143
<REALIZED-GAINS-CURRENT> 2,239,764
<APPREC-INCREASE-CURRENT> 1,538,922
<NET-CHANGE-FROM-OPS> 6,063,829
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 1,942,351
<DISTRIBUTIONS-OF-GAINS> 3,592,463
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 456,086
<NUMBER-OF-SHARES-REDEEMED> 399,968
<SHARES-REINVESTED> 465,616
<NET-CHANGE-IN-ASSETS> 6,631,875
<ACCUMULATED-NII-PRIOR> 1,114,370
<ACCUMULATED-GAINS-PRIOR> 1,541,139
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 331,615
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<GROSS-EXPENSE> 1,077,115
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<PER-SHARE-DIVIDEND> 0.39
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<PER-SHARE-NAV-END> 13.04
<EXPENSE-RATIO> 1.62
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<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
<SERIES>
<NUMBER> 3
<NAME> HIGH GRADE BOND
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> JUL-31-1995
<PERIOD-END> JUL-31-1995
<INVESTMENTS-AT-COST> 7,872,647
<INVESTMENTS-AT-VALUE> 8,091,828
<RECEIVABLES> 170,601
<ASSETS-OTHER> 237
<OTHER-ITEMS-ASSETS> 98,811
<TOTAL-ASSETS> 8,361,477
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 16,448
<TOTAL-LIABILITIES> 16,448
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 8,163,783
<SHARES-COMMON-STOCK> 813,312
<SHARES-COMMON-PRIOR> 749,541
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (38,748)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 219,181
<NET-ASSETS> 8,345,029
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 652,064
<OTHER-INCOME> 0
<EXPENSES-NET> 156,397
<NET-INVESTMENT-INCOME> 495,667
<REALIZED-GAINS-CURRENT> (33,881)
<APPREC-INCREASE-CURRENT> 170,813
<NET-CHANGE-FROM-OPS> 632,599
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 495,667
<DISTRIBUTIONS-OF-GAINS> 24,669
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 97,267
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<SHARES-REINVESTED> 37,987
<NET-CHANGE-IN-ASSETS> 749,215
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 19,802
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 31,381
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 156,397
<AVERAGE-NET-ASSETS> 7,821,174
<PER-SHARE-NAV-BEGIN> 10.13
<PER-SHARE-NII> 0.64
<PER-SHARE-GAIN-APPREC> 0.16
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<PER-SHARE-NAV-END> 10.26
<EXPENSE-RATIO> 1.99
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
<SERIES>
<NUMBER> 4
<NAME> HIGH YIELD BOND
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> JUL-31-1995
<PERIOD-END> JUL-31-1995
<INVESTMENTS-AT-COST> 6,457,065
<INVESTMENTS-AT-VALUE> 6,453,172
<RECEIVABLES> 177,038
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<OTHER-ITEMS-ASSETS> 75,367
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<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 15,260
<TOTAL-LIABILITIES> 15,260
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 6,700,925
<SHARES-COMMON-STOCK> 666,735
<SHARES-COMMON-PRIOR> 642,497
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (7,192)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> (3,893)
<NET-ASSETS> 6,690,507
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 626,932
<OTHER-INCOME> 0
<EXPENSES-NET> 127,329
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<REALIZED-GAINS-CURRENT> 10,150
<APPREC-INCREASE-CURRENT> 87,293
<NET-CHANGE-FROM-OPS> 597,046
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 499,603
<DISTRIBUTIONS-OF-GAINS> 66,536
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<NUMBER-OF-SHARES-SOLD> 85,943
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<ACCUMULATED-NII-PRIOR> 0
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<PER-SHARE-NAV-BEGIN> 10.00
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<EXPENSE-RATIO> 2.00
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
<SERIES>
<NUMBER> 6
<NAME> MANAGED
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> JUL-31-1995
<PERIOD-END> JUL-31-1995
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<PAID-IN-CAPITAL-COMMON> 20,789,151
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<SHARES-COMMON-PRIOR> 1,644,166
<ACCUMULATED-NII-CURRENT> 1,272
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<OVERDISTRIBUTION-GAINS> 0
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<NET-ASSETS> 21,104,826
<DIVIDEND-INCOME> 846,078
<INTEREST-INCOME> 499,625
<OTHER-INCOME> 0
<EXPENSES-NET> 384,089
<NET-INVESTMENT-INCOME> 961,614
<REALIZED-GAINS-CURRENT> 176,989
<APPREC-INCREASE-CURRENT> 671,829
<NET-CHANGE-FROM-OPS> 1,810,432
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 963,801
<DISTRIBUTIONS-OF-GAINS> 400,478
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 206,561
<NUMBER-OF-SHARES-REDEEMED> 178,193
<SHARES-REINVESTED> 107,958
<NET-CHANGE-IN-ASSETS> 2,004,525
<ACCUMULATED-NII-PRIOR> 3,459
<ACCUMULATED-GAINS-PRIOR> 62,234
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 118,526
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 384,089
<AVERAGE-NET-ASSETS> 19,649
<PER-SHARE-NAV-BEGIN> 11.62
<PER-SHARE-NII> 0.56
<PER-SHARE-GAIN-APPREC> 0.47
<PER-SHARE-DIVIDEND> 0.56
<PER-SHARE-DISTRIBUTIONS> 0.24
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 11.85
<EXPENSE-RATIO> 1.94
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
<SERIES>
<NUMBER> 7
<NAME> BLUE CHIP
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> JUL-31-1995
<PERIOD-END> JUL-31-1995
<INVESTMENTS-AT-COST> 6,202,994
<INVESTMENTS-AT-VALUE> 9,570,468
<RECEIVABLES> 15,265
<ASSETS-OTHER> 284
<OTHER-ITEMS-ASSETS> 87,907
<TOTAL-ASSETS> 9,673,924
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 16,653
<TOTAL-LIABILITIES> 16,653
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 62,522,283
<SHARES-COMMON-STOCK> 422,597
<SHARES-COMMON-PRIOR> 359,664
<ACCUMULATED-NII-CURRENT> 41,475
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (4,384)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 3,367,474
<NET-ASSETS> 9,657,271
<DIVIDEND-INCOME> 179,229
<INTEREST-INCOME> 33,968
<OTHER-INCOME> 0
<EXPENSES-NET> 140,430
<NET-INVESTMENT-INCOME> 72,767
<REALIZED-GAINS-CURRENT> 80
<APPREC-INCREASE-CURRENT> 1,636,574
<NET-CHANGE-FROM-OPS> 1,709,421
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 53,615
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
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<TABLE> <S> <C>
<PAGE>
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<NAME> MONEY MARKET
<S> <C>
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