<PAGE> 1
As filed with the Securities and Exchange Commission on February 27, 1996
Registration No. 2-53808
================================================================================
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
POST-EFFECTIVE AMENDMENT NO. 41
on
FORM N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 /x/
and
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 /x/
--------------------
TRUST FOR FEDERAL SECURITIES
(FedFund, T-Fund, FedCash, T-Cash, Federal Trust Fund
and Treasury Trust Fund Portfolios)
(Exact Name of Registrant as Specified in Charter)
Bellevue Park Corporate Center EDWARD J. ROACH
400 Bellevue Parkway, Suite 100 Bellevue Park Corporate Center
Wilmington, Delaware 19809 400 Bellevue Parkway, Suite 100
(Address of Principal Executive Offices) Wilmington, Delaware 19809
Registrant's Telephone Number: (Name and Address of
(302) 792-2555 Agent for Service)
Copy to:
W. BRUCE McCONNEL, III
Drinker Biddle & Reath
Philadelphia National Bank Building
1345 Chestnut Street
Philadelphia, Pennsylvania 19107-3496
It is proposed that this filing will become effective (check appropriate box)
/ / immediately upon filing pursuant to paragraph (b)
/x/ on February 28, 1996 pursuant to paragraph (b)
/ / 60 days after filing pursuant to paragraph (a)(i)
/ / on (date) pursuant to paragraph (a)(i)
/ / 75 days after filing pursuant to paragraph (a)(ii)
/ / on (date) pursuant to paragraph (a)(ii) of rule 485.
If appropriate, check the following box:
/ / this post-effective amendment designates a new effective date for a
previously filed post-effective amendment.
===============================================================================
<PAGE> 2
CALCULATION OF REGISTRATION FEE
UNDER THE SECURITIES ACT OF 1933(1)
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------
Proposed Proposed
Title of Maximum Maximum Amount
Securities Amounts Offering Aggregate of Regi-
Being Being Price Per Offering stration
Registered Registered(1) Unit(2) Price(3) Fee
- ---------- ------------- --------- --------- --------
<S> <C> <C> <C> <C>
Shares of beneficial
interest in:
FedFund
No Par Value 1,489,890,670 $1.00
- ------------------------------------------------------------------------------
T-Fund
No Par Value 92,884,651 $1.00
- ------------------------------------------------------------------------------
FedCash
No Par Value 415,178,101 $1.00
- ------------------------------------------------------------------------------
T-Cash
No Par Value 277,682,669 $1.00
- ------------------------------------------------------------------------------
Federal Trust Fund
No Par Value 161,890,960 $1.00
- ------------------------------------------------------------------------------
Treasury Trust Fund
No Par Value 458,887,641 $1.00
- ------------------------------------------------------------------------------
Short Government Fund
No Par Value 1,290,006 $9.46
- ------------------------------------------------------------------------------
Total Shares of
Beneficial Interest
in Trust for
Federal Securities
No Par Value 2,897,704,698 $290,000 $100
- ------------------------------------------------------------------------------
</TABLE>
1. Registrant has registered an indefinite number of shares of beneficial
interest in FedFund, T-Fund, FedCash, T-Cash, Federal Trust Fund, Treasury
Trust Fund and Short Government Fund Portfolios under the Securities Act
of 1933 pursuant to Rule 24f-2 under the Investment Company Act of 1940.
Registrant's Rule 24f-2 Notice for its fiscal year ending October 31, 1995
for Registration No. 2-53808 was filed on December 27, 1995.
2. Estimated solely for the purpose of calculating the registration fees
pursuant to Rule 24e-2 under the Investment Company Act of 1940 and Rule
457(c) under the Securities Act of 1933, based on an offering price of
$9.46, with respect to its Portfolio shares in Short Government Fund on
December 4, 1995. The Short Government Fund liquidated on December 5,
1995, therefore, the offering price of December 4, 1995 was used.
<PAGE> 3
3. The maximum aggregate offering price for Registrant's Portfolio shares
with respect to its FedFund, T-Fund, FedCash, T-Cash, Federal Trust Fund,
Treasury Trust Fund and Short Government Fund portfolios is calculated
pursuant to Rule 24e-2 under the 1940 Act. During the year ended October
31, 1995, Registrant redeemed a total of 17,013,231,572 FedFund Portfolio
shares, 10,913,929,463 T-Fund Portfolio shares, 4,225,466,780 FedCash
Portfolio shares, 2,370,885,047 T-Cash Portfolio shares, 2,239,024,990
Federal Trust Fund Portfolio shares, 6,588,171,696 Treasury Trust Fund
Portfolio shares and 3,472,498 Short Government Fund Portfolio shares,
respectively. Of these redeemed shares, 15,523,489,458 FedFund Portfolio
shares, 10,821,054,074 T-Fund Portfolio shares, 3,810,330,076 FedCash
Portfolio shares, 2,093,230,066 T-Cash Portfolio shares, 2,077,150,172
Federal Trust Fund Portfolio shares, 6,129,329,810 Treasury Trust Fund
Portfolio shares and 2,200,797 Short Government Fund Portfolio shares,
were used for reductions pursuant to paragraph (c) of Rule 24f-2 Notice
dated December 27, 1995 for the year ended October 31, 1995, and none of
the redeemed shares were used for reductions pursuant to Rule 24e-2 in
previous post-effective amendments filed during the current fiscal year.
As a result, 1,489,742,114 redeemed FedFund Portfolio shares, 92,875,389
redeemed T-Fund Portfolio shares, 415,136,704 redeemed FedCash Portfolio
shares, 277,654,981 redeemed T-Cash Portfolio shares, 161,874,818 redeemed
Federal Trust Fund Portfolio shares, and 458,841,886 redeemed Treasury
Trust Fund Portfolio shares and 1,289,879 redeemed Short Government Fund
Portfolio shares are being used to reduce, pursuant to paragraph (a) of
Rule 24e-2, the number of shares for which the registration fee is payable
with respect to this Post-Effective Amendment.
================================================================================
-2-
<PAGE> 4
TRUST FOR FEDERAL SECURITIES
(FedFund Portfolio)
Cross Reference Sheet
<TABLE>
<CAPTION>
Form N-1A Item Prospectus Caption
-------------- ------------------
<S> <C> <C>
1. Cover Page . . . . . . . . . . . . . . . . . Cover Page
2. Synopsis . . . . . . . . . . . . . . . . . Background and
Expense Information
3. Condensed Financial Information . . . . . . Financial Highlights;
Yields
4. General Description of
Registrant . . . . . . . . . . . . . . . . Cover Page; Financial
Highlights; Investment
Objective and Policies;
Description of Shares
and Miscellaneous
5. Management of the Fund . . . . . . . . . . . Management of the Fund;
Dividends
6. Capital Stock and Other
Securities . . . . . . . . . . . . . . . . Cover Page; Financial
Highlights; Dividends;
Taxes; Description of
Shares and
Miscellaneous
7. Purchase of Securities Being
Offered . . . . . . . . . . . . . . . Management of the Fund;
Purchase and Redemption
of Shares
8. Redemption or Repurchase . . . . . . . . . . Purchase and Redemption
of Shares
9. Pending Legal Proceedings . . . . . . . . . Inapplicable
</TABLE>
<PAGE> 5
FedFund
An Investment Portfolio Offered By
Trust for Federal Securities
<TABLE>
<S> <C>
Bellevue Park Corporate Center For purchase and redemption orders only call:
400 Bellevue Parkway 800-441-7450 (in Delaware: 302-791-5350).
Suite 100 For yield information call: 800-821-6006
Wilmington, DE 19809 (FedFund shares code: 30; FedFund Dollar
shares code: 31).
For other information call: 800-821-7432.
</TABLE>
Trust for Federal Securities (the "Company") is a no-load, diversified,
open-end investment company that currently offers shares in six separate
investment portfolios. The shares described in this Prospectus represent
interests in the FedFund portfolio (the "Fund"), a money market portfolio.
The Fund's investment objective is to seek current income with liquidity
and security of principal. The Fund invests in a portfolio consisting of U.S.
Treasury bills, notes and other obligations issued or guaranteed by the U.S.
Government, its agencies or instrumentalities and repurchase agreements relating
to such obligations.
Fund shares may not be purchased by individuals directly, but institutional
investors may purchase shares for accounts maintained by individuals. In
addition to FedFund Shares, investors may purchase FedFund "Dollar Shares" which
accrue daily dividends in the same manner as FedFund Shares but bear all fees
payable by the Fund to institutional investors for certain services they provide
to the beneficial owners of such Shares. (See "Management of the Fund-Service
Organizations.")
PNC Institutional Management Corporation ("PIMC") and PNC Bank, National
Association ("PNC Bank") serve as the Fund's adviser and sub-adviser,
respectively. PFPC Inc. ("PFPC") and Provident Distributors, Inc. ("PDI") serve
as the Fund's administrators. PDI also serves as the Fund's distributor.
------------------------
SHARES OF THE FUND ARE NOT DEPOSITS OR OBLIGATIONS OF OR GUARANTEED, ENDORSED,
OR OTHERWISE SUPPORTED BY PNC BANK CORP. OR ITS AFFILIATES, OR THE U.S.
GOVERNMENT, AND ARE NOT FEDERALLY INSURED BY THE FEDERAL DEPOSIT
INSURANCE CORPORATION, THE FEDERAL RESERVE BOARD OR ANY OTHER
AGENCY. AN INVESTMENT IN THE FUND INVOLVES INVESTMENT RISKS,
INCLUDING THE POSSIBLE LOSS OF PRINCIPAL. THERE CAN BE NO
ASSURANCE THAT IT WILL BE ABLE TO MAINTAIN ITS NET ASSET
VALUE OF $1.00 PER SHARE.
------------------------
This Prospectus briefly sets forth certain information about the Fund that
investors should know before investing. Investors are advised to read this
Prospectus and retain it for future reference. Additional information about the
Fund, contained in a Statement of Additional Information currently dated
February 28, 1996, has been filed with the Securities and Exchange Commission
and is available to investors without charge by calling the Fund at
800-821-7432. The Statement of Additional Information, as amended from time to
time, is incorporated in its entirety by reference into this Prospectus.
------------------------
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.
------------------------
February 28, 1996
<PAGE> 6
BACKGROUND AND EXPENSE INFORMATION
Two classes of shares are offered by this Prospectus: FedFund Shares and
FedFund Dollar Shares. Shares of each class represent equal, pro rata interests
in the Fund and accrue daily dividends in the same manner except that the Dollar
Shares bear fees payable by the Fund (at the rate of .25% per annum) to
institutional investors for services they provide to the beneficial owners of
such shares. (See "Management of the Fund--Service Organizations.")
EXPENSE SUMMARY
<TABLE>
<CAPTION>
FEDFUND
FEDFUND DOLLAR
SHARES SHARES
---------- ----------
<S> <C> <C> <C> <C>
ANNUAL FUND OPERATING EXPENSES
(as a percentage of average net assets)
Management Fees (net of waivers)................................. .07% .07%
Other Expenses................................................... .13% .38%
Administration Fees (net of waivers)........................ .07% .07%
Shareholder Servicing Fees.................................. 0% .25%
Miscellaneous............................................... .04% .04%
--- ---
Total Fund Operating Expenses (net of waivers)................... .20% .45%
=== ===
</TABLE>
- ------------
<TABLE>
<CAPTION>
EXAMPLE 1 YEAR 3 YEARS 5 YEARS 10 YEARS
------ ------- ------- --------
<S> <C> <C> <C> <C>
You would pay the following expenses on a $1,000 investment,
assuming (1) a 5% annual return and (2) redemption at the
end of each time period with respect to the following
shares:
FedFund Shares: $2 $ 6 $11 $ 26
FedFund Dollar Shares: $5 $14 $25 $ 57
</TABLE>
THE FOREGOING SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR FUTURE
EXPENSES OR RATE OF RETURN. ACTUAL EXPENSES AND RATE OF RETURN MAY BE GREATER OR
LESSER THAN THOSE SHOWN.
The purpose of the foregoing table is to assist an investor in
understanding the various costs and expenses that an investor in the Fund will
bear directly or indirectly. The table is based on expenses incurred by the
FedFund Shares and Dollar Shares during the last fiscal year, restated to
reflect the expenses which each class of shares expects to incur during the
current fiscal year. In addition, institutional investors may charge fees for
providing administrative services in connection with their customers' investment
in Dollar Shares. Absent fee waivers, Management and Administration fees for
FedFund Shares and Dollar Shares would have been each .13% and Total Fund
Operating Expenses would have been .29% and .54%, respectively. (For more
complete descriptions of the various costs and expenses, see "Management of the
Fund" in this Prospectus and the Statement of Additional Information and the
financial statements and related notes contained in the Statement of Additional
Information.) The investment adviser and administrators may from time to time
waive the advisory and administration fees otherwise payable to them or may
reimburse the Fund for its operating expenses. The foregoing table has not been
audited by the Fund's independent accountants.
2
<PAGE> 7
FINANCIAL HIGHLIGHTS
The following financial highlights for FedFund Shares and for FedFund
Dollar Shares for the fiscal year ended October 31, 1995 and for each of the
nine preceding fiscal years. The financial highlights for the fiscal years set
forth below have been audited by Coopers & Lybrand L.L.P. independent
accountants whose report on the financial statements and financial highlights
(for the most recent five years) of the Fund is included in the Statement of
Additional Information. The tables should be read in conjunction with the
financial statements and related notes included in the Statement of Additional
Information. Further information about the performance of the Fund is available
in the annual report to shareholders, which may be obtained without charge by
calling 800-821-7432.
TRUST FOR FEDERAL SECURITIES
FINANCIAL HIGHLIGHTS
(For a Share Outstanding Throughout Each Period)
FEDFUND SHARES
<TABLE>
<CAPTION>
YEAR ENDED OCTOBER 31,
----------------------------------------------------------------------------------
1995 1994 1993 1992 1991
---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Period... $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
----------- ---------- ---------- ---------- ----------
Income From Investment Operations:
Net Investment Income................ .0571 .0377 .0308 .0397 .0637
Net Capital Gains.................... -- -- .0001 .0010 --
----------- ---------- ---------- ---------- ----------
Total From Investment Operations..... .0571 .0377 .0309 .0407 .0637
----------- ---------- ---------- ---------- ----------
Less Distributions:
Dividends to Shareholders from:
Net Investment Income................ (.0571) (.0377) (.0308) (.0397) (.0637)
Net Capital Gains.................... -- -- (.0001) (.0010) --
----------- ---------- ---------- ---------- ----------
Total Distributions.................. (.0571) (.0377) (.0309) (.0407) (.0637)
----------- ---------- ---------- ---------- ----------
Net Asset Value, End of Period......... $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
========== ========= ========= ========= =========
Total Return......................... 5.86% 3.84% 3.12% 4.15% 6.56%
Ratios/Supplemental Data
Net Assets, End of Period (in 000s).. $1,377,175 $1,557,562 $1,290,971 $2,976,954 $1,918,966
Ratio of Expenses to Average Net
Assets............................. .18%(1) .18%(1) .20%(1) .27% .30%
Ratio of Net Investment Income to
Average Net Assets................. 5.71% 3.78% 3.08% 3.91% 6.36%
<CAPTION>
YEAR ENDED OCTOBER 31,
-----------------------------------------------------------------------------
1988 1987 1986 1990 1989
---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Period... $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
---------- ---------- ---------- ---------- ----------
Income From Investment Operations:
Net Investment Income................ .0703 .0614 .0676 .0800 .0891
Net Capital Gains.................... -- -- -- -- --
---------- ---------- ---------- ---------- ----------
Total From Investment Operations..... .0703 .0614 .0676 .0800 .0891
---------- ---------- ---------- ---------- ----------
Less Distributions:
Dividends to Shareholders from:
Net Investment Income................ (.0703) (.0614) (.0676) (.0800) (.0891)
Net Capital Gains.................... -- -- -- -- --
---------- ---------- ---------- ---------- ----------
Total Distributions.................. (.0703) (.0614) (.0676) (.0800) (.0891)
---------- ---------- ---------- ---------- ----------
Net Asset Value, End of Period......... $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
========= ========= ========= ========= =========
Total Return......................... 7.28% 6.32% 6.98% 8.29% 9.29%
Ratios/Supplemental Data
Net Assets, End of Period (in 000s).. $1,772,390 $2,108,838 $2,135,060 $1,488,141 $1,786,196
Ratio of Expenses to Average Net
Assets............................. .30%(1) .30%(1) .33 .30%(1) .30%(1)
Ratio of Net Investment Income to
Average Net Assets................. 7.02% 6.12% 6.70% 8.00% 8.91%
</TABLE>
- ------------
(1) Without the waiver of advisory and administration fees, the ratios of
expenses to average daily net assets would have been .29%, .30%, .27%, .34%,
.35%, .32%, and .32% respectively, for each of the years ended October 31,
1995, 1994, 1993, 1990, 1989, 1988, and 1987, respectively, for FedFund
Shares.
3
<PAGE> 8
TRUST FOR FEDERAL SECURITIES
FINANCIAL HIGHLIGHTS
(For a Share Outstanding Throughout Each Period)
FEDFUND DOLLAR SHARES
<TABLE>
<CAPTION>
YEAR ENDED OCTOBER 31,
-----------------------------------------------------------------------------
1995 1994 1993 1992 1991
-------- -------- -------- -------- -------
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Period............. $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
-------- -------- -------- -------- -------
Income From Investment Operations:
Net Investment Income.......................... .0546 .0352 .0283 .0372 .0612
Net Capital Gains.............................. -- -- .0001 .0010 --
-------- -------- -------- -------- -------
Total From Investment Operations............... .0546 .0352 .0284 .0382 .0612
-------- -------- -------- -------- -------
Less Distributions:
Dividends to Shareholders from:
Net Investment Income.......................... (.0546) (.0352) (.0283) (.0372) (.0612)
Net Capital Gains.............................. -- -- (.0001) (.0010) --
-------- -------- -------- -------- -------
Total Distributions............................ (.0546) (.0352) (.0284) (.0382) (.0612)
-------- -------- -------- -------- -------
Net Asset Value, End of Period................... $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
======== ======== ======== ======== =======
Total Return................................... 5.61% 3.59% 2.87% 3.90% 6.31%
Ratios/Supplemental Data
Net Assets, End of Period (in 000s)............ $213,177 $135,769 $169,877 $148,363 $62,842
Ratio of Expenses to Average Net Assets........ .43%(1) .43%(1) .45%(1) .52% .55%
Ratio of Net Investment Income to Average Net
Assets....................................... 5.46% 3.51% 2.83% 3.66% 6.11%
<CAPTION>
YEAR ENDED OCTOBER 31,
----------------------------------------------------------------------
1988 1987 1986 1990 1989
------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Period............. $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
------- ------- ------- ------- -------
Income From Investment Operations:
Net Investment Income.......................... .0678 .0589 .0651 .0775 .0866
Net Capital Gains.............................. -- -- -- -- --
------- ------- ------- ------- -------
Total From Investment Operations............... .0678 .0589 .0651 .0775 .0866
------- ------- ------- ------- -------
Less Distributions:
Dividends to Shareholders from:
Net Investment Income.......................... (.0678) (.0589) (.0651) (.0775) (.0866)
Net Capital Gains.............................. -- -- -- -- --
------- ------- ------- ------- -------
Total Distributions............................ (.0678) (.0589) (.0651) (.0775) (.0866)
------- ------- ------- ------- -------
Net Asset Value, End of Period................... $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
======= ======= ======= ======= =======
Total Return................................... 7.02% 6.05% 6.71% 8.04% 9.04%
Ratios/Supplemental Data
Net Assets, End of Period (in 000s)............ $35,741 $29,372 $37,131 $19,815 $15,473
Ratio of Expenses to Average Net Assets........ .55%(1) .55%(1) .58%(1) .55%(1) .55%(1)
Ratio of Net Investment Income to Average Net
Assets....................................... 6.77% 5.87% 6.45% 7.75% 8.66%
</TABLE>
- ------------
(1) Without the waiver of advisory and administration fees, the ratio of
expenses to average daily net assets would have been .54%, .55%, .52%, .59%,
.60%, .57%, and .57%, respectively, for each of the years ended October 31,
1995, 1994, 1993, 1990, 1989, 1988, and 1987, respectively, for FedFund
Dollar Shares.
4
<PAGE> 9
INVESTMENT OBJECTIVE AND POLICIES
The Fund's investment objective is to seek current income with liquidity
and security of principal. The Fund invests in obligations issued or guaranteed
by the U.S. Government, its agencies or instrumentalities (in addition to direct
Treasury obligations) and repurchase agreements relating to such obligations.
Portfolio obligations held by the Fund have remaining maturities of 397 days
(thirteen months) or less (with certain exceptions), subject to the quality,
diversification, and other requirements of Rule 2a-7 under the Investment
Company Act of 1940, as amended (the "1940 Act") and other rules of the
Securities and Exchange Commission (the "SEC").
The "instrumentalities" or "agencies" of the U.S. Government the
obligations of which may be purchased by FedFund include: the Central Bank for
Cooperatives, Export-Import Bank of the United States, Farmers Home
Administration, Federal Farm Credit Banks, Federal Financing Bank, Federal Home
Loan Banks, Federal Home Loan Mortgage Corporation, Federal Housing
Administration, Federal Intermediate Credit Banks, Federal Land Banks, Federal
National Mortgage Association, Financing Corporation, General Services
Administration, Government National Mortgage Association, International Bank for
Reconstruction and Development, Maritime Administration, Private Export Funding
Corp., Resolution Trust Company, Small Business Administration, Student Loan
Marketing Association, Tennessee Valley Authority and Washington D.C. Armory
Board. Obligations of certain agencies or instrumentalities of the U.S.
Government are backed by the full faith and credit of the United States; others
are backed by the right of the issuer to borrow from the U.S. Treasury or are
backed only by the credit of the agency or instrumentality issuing the
obligation.
Securities issued or guaranteed by the U.S. Government, its agencies and
instrumentalities have historically involved little risk of loss of principal if
held to maturity. However, due to fluctuations in interest rates, the market
value of such securities may vary during the period a shareholder owns shares of
the Fund. Certain government securities held by the Fund may have remaining
maturities exceeding thirteen months if such securities provide for adjustments
in their interest rates not less frequently than every thirteen months. To the
extent consistent with its investment objectives, the Fund may invest in
Treasury receipts and other "stripped" securities issued or guaranteed by the
U.S. Government, where the principal and interest components are traded
independently under the Separate Trading of Registered Interest and Principal of
Securities program ("STRIPS"). Under the STRIPS program, the principal and
interest components are individually numbered and separately issued by the U.S.
Treasury at the request of depository financial institutions, which then trade
the component parts independently. Currently, the Fund only invests in
"stripped" securities issued or guaranteed by the U.S. Government which are
registered under the STRIPS program. The principal and interest components may
exhibit greater price volatility than ordinary debt securities because of the
manner in which their principal and interest are returned to investors.
The Fund may purchase government securities from financial institutions,
such as banks and broker-dealers, subject to the seller's agreement to
repurchase them at an agreed upon time and price ("repurchase agreements"). The
securities subject to a repurchase agreement may bear maturities exceeding
thirteen months, provided the repurchase agreement itself matures in one year or
less. The Fund will not invest more than 10% of the value of its net assets in
repurchase agreements which do not provide for settlement within seven days. The
seller under a repurchase agreement will be required to maintain the value of
the securities subject to the agreement at not
5
<PAGE> 10
less than the repurchase price. Default by or bankruptcy of the seller would,
however, expose the Fund to possible loss because of adverse market action or
delay in connection with the disposition of the underlying obligations.
The Fund may borrow funds for temporary purposes by entering into reverse
repurchase agreements in accordance with the investment restrictions described
below. Pursuant to such agreements, the Fund would sell portfolio securities to
financial institutions and agree to repurchase them at an agreed upon date and
price. The Fund would consider entering into reverse repurchase agreements to
avoid otherwise selling securities during unfavorable market conditions in order
to meet redemptions. Reverse repurchase agreements involve the risk that the
market value of the portfolio securities sold by the Fund may decline below the
price of the securities the Fund is obligated to repurchase.
The Fund may purchase securities on a "when-issued" basis. When-issued
securities are securities purchased for delivery beyond the normal settlement
date at a stated price and yield. The Fund will generally not pay for such
securities or start earning interest on them until they are received. Securities
purchased on a when-issued basis are recorded as an asset and are subject to
changes in value based upon changes in the general level of interest rates. The
Fund expects that commitments to purchase when-issued securities will not exceed
25% of the value of its total assets absent unusual market conditions. The Fund
does not intend to purchase when-issued securities for speculative purposes but
only in furtherance of its investment objective.
The Fund may also lend its portfolio securities to financial institutions
in accordance with the investment restrictions described below. Such loans would
involve risks of delay in receiving additional collateral or in recovering the
securities loaned or even loss of rights in the collateral should the borrower
of the securities fail financially. However, loans will be made only to
borrowers deemed by the Fund's investment adviser to be of good standing and
only when, in the adviser's judgment, the income to be earned from the loans
justifies the attendant risks.
INVESTMENT LIMITATIONS
The Fund's investment objective and policies described above are not
fundamental and may be changed by the Company's Board of Trustees without a vote
of shareholders. If there is a change in the investment objective, shareholders
should consider whether the Fund remains an appropriate investment in light of
their then current financial position and needs. The Fund's investment
limitations summarized below may not be changed without the affirmative vote of
the holders of a majority of its outstanding shares. (A complete list of the
investment limitations that cannot be changed without a vote of shareholders is
contained in the Statement of Additional Information under "Investment
Objectives and Policies.")
The Fund may not:
1. Purchase securities other than U.S. Treasury bills, notes and
other obligations issued or guaranteed by the U.S. Government, its agencies
or instrumentalities, some of which may be subject to repurchase
agreements.
2. Borrow money except from banks for temporary purposes and then in
an amount not exceeding 10% of the value of the Fund's total assets, or
mortgage, pledge or hypothecate its assets except in connection with any
such borrowing and in amounts not in excess of the lesser of the dollar
amounts borrowed or 10% of the value of the Fund's total assets at the time
of such borrowing.
6
<PAGE> 11
3. Make loans except that the Fund may purchase or hold debt
obligations in accordance with its investment objective and policies, may
enter into repurchase agreements for securities and may lend portfolio
securities against collateral consisting of cash or securities which are
consistent with the Fund's permitted investments, which is equal at all
times to at least 100% of the value of the securities loaned. There is no
investment restriction on the amount of securities that may be loaned,
except that payments received on such loans, including amounts received
during the loan on account of interest on the securities loaned, may not
(together with all non-qualifying income) exceed 10% of the Fund's annual
gross income (without offset for realized capital gains) unless, in the
opinion of counsel to the Company, such amounts are qualifying income under
federal income tax provisions applicable to regulated investment companies.
PURCHASE AND REDEMPTION OF SHARES
PURCHASE PROCEDURES
Fund shares are sold at the net asset value per share next determined after
receipt of a purchase order by PFPC, the Fund's transfer agent. Purchase orders
for shares are accepted only on days on which both the New York Stock Exchange
and the Federal Reserve Bank of Philadelphia are open for business (a "Business
Day") and must be transmitted to PFPC in Wilmington, Delaware, by telephone
(800-441-7450; in Delaware: 302-791-5350) or through the Fund's computer access
program. Orders received before 12:00 noon, Eastern time, for which payment has
been received by PNC Bank, the Fund's custodian, will be executed at 12:00 noon.
Orders received after 12:00 noon and before 3:00 P.M., Eastern time (or orders
received earlier in the same day for which payment has not been received by
12:00 noon), will be executed at 4:00 P.M., Eastern time, if payment has been
received by PNC Bank by that time. Orders received at other times, and orders
for which payment has not been received by 4:00 P.M., Eastern time, will not be
accepted, and notice thereof will be given to the institution placing the order.
(Payment for orders which are not received or accepted will be returned after
prompt inquiry to the sending institution.) The Fund may in its discretion
reject any order for shares.
Payment for Fund shares may be made only in federal funds or other funds
immediately available to PNC Bank. The minimum initial investment by an
institution is $3 million for FedFund Shares and $5,000 for Dollar Shares;
however, broker-dealers and other institutional investors may set a higher
minimum for their customers. There is no minimum subsequent investment. The
Fund, at its discretion, may reduce the minimum initial investment for FedFund
Shares for specific institutions whose aggregate relationship with the Provident
Institutional Funds is substantially equivalent to this $3 million minimum and
warrants this reduction.
Conflict of interest restrictions may apply to an institution's receipt of
compensation paid by the Fund in connection with the investment of fiduciary
funds in Dollar Shares. (See also "Management of the Fund--Service
Organizations.") Institutions, including banks regulated by the Comptroller of
the Currency and investment advisers and other money managers subject to the
jurisdiction of the SEC, the Department of Labor or state securities
commissions, should consult their legal advisors before investing fiduciary
funds in Dollar Shares. (See also "Management of the Fund--Banking Laws.")
7
<PAGE> 12
REDEMPTION PROCEDURES
Redemption orders must be transmitted to PFPC in Wilmington, Delaware, in
the manner described under "Purchase Procedures." Shares are redeemed at the net
asset value per share next determined after PFPC's receipt of the redemption
order. While the Fund intends to use its best efforts to maintain its net asset
value per share at $1.00, the proceeds paid to a shareholder upon redemption may
be more or less than the amount invested depending upon a share's net asset
value at the time of redemption.
Payment for redeemed shares for which a redemption order is received by
PFPC by 3:00 P.M., Eastern time, on a Business Day is normally made in federal
funds wired to the redeeming shareholder on the same day. Payment for redemption
orders which are received between 3:00 P.M. and 4:00 P.M., Eastern time, or on a
day when PNC Bank is closed, is normally wired in federal funds on the next day
following redemption that PNC Bank is open for business.
The Fund shall have the right to redeem shares in any account if the value
of the account is less than $1,000 after sixty-days' prior written notice to the
shareholder. Any such redemption shall be effected at the net asset value per
share next determined after the redemption order is entered. If during the
sixty-day period the shareholder increases the value of its account to $1,000 or
more, no such redemption shall take place. Moreover, if a shareholder's FedFund
Shares account falls below an average of $100,000 in any particular calendar
month the account may be charged an account maintenance fee with respect to that
month. In addition, the Fund may also redeem shares involuntarily or suspend the
right of redemption under certain special circumstances described in the
Statement of Additional Information under "Additional Purchase and Redemption
Information."
OTHER MATTERS
The Fund's net asset value per share for purposes of pricing purchase and
redemption orders is determined by PIMC as of 12:00 noon and 4:00 P.M., Eastern
time, on each day on which both the Federal Reserve Bank of Philadelphia and the
New York Stock Exchange are open for business. Currently, one or both of these
institutions are closed on the customary national business holidays of New
Year's Day, Martin Luther King, Jr. Day, Presidents' Day, Good Friday, Memorial
Day (observed), Independence Day, Labor Day, Columbus Day (observed), Veteran's
Day, Thanksgiving Day and Christmas Day. The net asset value per share of each
class of the Fund is calculated by adding the value of all securities and other
assets belonging to the Fund, subtracting liabilities attributable to each
class, and dividing the result by the total number of the outstanding shares of
each class. In computing net asset value, the Fund uses the amortized cost
method of valuation as described in the Statement of Additional Information
under "Additional Purchase and Redemption Information." The Fund's net asset
value per share for purposes of pricing purchase and redemption orders is
determined independently of the net asset values of the shares of the Company's
other investment portfolios.
Fund shares are sold and redeemed without charge by the Fund. Institutional
investors purchasing or holding Fund shares for their customer accounts may
charge customer fees for cash management and other services provided in
connection with their accounts. A customer should, therefore, consider the terms
of its account with an institution before purchasing Fund shares. An institution
purchasing or redeeming Fund shares on behalf of its customers is responsible
for transmitting orders to the Fund in accordance with its customer agreements.
8
<PAGE> 13
MANAGEMENT OF THE FUND
BOARD OF TRUSTEES
The business and affairs of the Fund are managed under the direction of the
Company's Board of Trustees. The trustees of the Company are as follows:
Philip E. Coldwell is an economic consultant and a former Member of
the Board of Governors of the Federal Reserve System.
Robert R. Fortune is a financial consultant and former Chairman,
President and Chief Executive Officer of Associated Electric & Gas
Insurance Services Limited.
Rodney D. Johnson is President of Fairmount Capital Advisors, Inc.
G. Willing Pepper, Chairman of the Board and President of the Company,
is a retired President of Scott Paper Company.
Mr. Pepper is considered by the Company to be an "interested person" of the
Company as defined in the 1940 Act.
The other officers of the Company are as follows:
Edward J. Roach is Vice President and Treasurer of the Company.
W. Bruce McConnel, III, Secretary of the Company, is a partner of the
law firm of Drinker Biddle & Reath, Philadelphia, Pennsylvania.
INVESTMENT ADVISER AND SUB-ADVISER
PIMC, a wholly-owned subsidiary of PNC Bank, serves as the Fund's
investment adviser. PIMC was organized in 1977 by PNC Bank to perform advisory
services for investment companies and has its principal offices at 400 Bellevue
Parkway, Wilmington, Delaware 19809. PNC Bank serves as the Fund's sub-adviser.
PNC Bank is one of the largest bank managers of investments for individuals in
the United States, and together with its predecessors has been in the business
of managing the investments of fiduciary and other accounts since 1847. PNC Bank
is a wholly-owned, indirect subsidiary of PNC Bank Corp., and has its principal
offices at Broad and Chestnut Streets, Philadelphia, Pennsylvania 19102. PNC
Bank Corp. is a multi-bank holding company. PIMC and PNC Bank also serve as
adviser and sub-adviser, respectively, to the Company's T-Fund, FedCash, T-Cash,
Federal Trust Fund and Treasury Trust Fund portfolios.
PNC Bank Corp., headquartered in Pittsburgh, Pennsylvania, is one of the
largest financial services organizations in the United States with banking
subsidiaries in Pennsylvania, New Jersey, Delaware, Ohio, Kentucky, Indiana,
Massachusetts and Florida. Its major businesses include corporate banking,
consumer banking, mortgage banking and asset management.
PNC Financial Services Group is PNC Bank Corp.'s mutual fund complex,
headquartered in Wilmington, Delaware. This group includes PIMC, PFPC, and PNC
Bank. In 1973, Provident National Bank (predecessor to PNC Bank) commenced
advising the first institutional money market mutual fund -- a U.S.
dollar-denominated constant net asset value fund -- offered in the United
States.
The PNC Financial Services Group is one of the largest U.S. bank managers
of mutual funds with assets currently under management in excess of $30 billion.
This group, through PFPC and PFPC International Ltd, is also a leading mutual
fund service provider having contractual
9
<PAGE> 14
relationships with approximately 370 mutual funds with 3.5 million shareholders
and in excess of $101 billion in assets, including some $2 billion in non-U.S.
assets. This group, through its PNC Institutional Investment Service, provides
investment research to some 250 financial institutions located in the United
States and abroad. PNC Bank provides custodial services for approximately $210
billion in assets, including $160 billion in mutual fund assets.
As adviser, PIMC manages the Fund's portfolio and is responsible for all
purchases and sales of the Fund's portfolio securities. PIMC also maintains
certain of the Fund's financial accounts and records and computes the Fund's net
asset value and net income. For the advisory services provided and expenses
assumed by it, PIMC is entitled to receive a fee, computed daily and payable
monthly, based on the Fund's average net assets. PIMC and the administrators may
from time to time reduce the advisory and administration fees otherwise payable
to them or may reimburse the Fund for its operating expenses. Any fees waived or
expenses reimbursed by PIMC and the administrators with respect to a particular
fiscal year are not recoverable. For the fiscal year ended October 31, 1995, the
Fund paid investment advisory fees aggregating .07% of its average net assets.
As sub-adviser, PNC Bank provides research, credit analysis and
recommendations with respect to the Fund's investments, and supplies PIMC with
certain computer facilities, personnel and other services. For its sub-advisory
services, PNC Bank is entitled to receive from PIMC an amount equal to 75% of
the advisory fee paid by the Fund to PIMC (subject to adjustment in certain
circumstances). The sub-advisory fees paid by PIMC to PNC Bank have no effect on
the advisory fees payable by the Fund to PIMC. PNC Bank also serves as the
Fund's custodian. The services provided by PNC Bank and PIMC and the fees
payable by the Fund for these services are described further in the Statement of
Additional Information under "Management of the Funds."
ADMINISTRATORS
PFPC, whose principal business address is 400 Bellevue Parkway, Wilmington,
Delaware 19809, and PDI whose principal business address is 259 Radnor-Chester
Road, Suite 120, Radnor, Pennsylvania 19087, serve as administrators. PFPC is an
indirect wholly-owned subsidiary of PNC Bank Corp. A majority of the outstanding
stock of PDI is owned by its officers. The administrative services provided by
the administrators, which are described more fully in the Statement of
Additional Information, include providing and supervising the operation of an
automated data processing system to process purchase and redemption orders;
assisting in maintaining the Fund's Wilmington, Delaware office; performing
administrative services in connection with the Fund's computer access program
maintained to facilitate shareholder access to the Fund; accumulating
information for and coordinating the preparation of reports to the Fund's
shareholders and the SEC; and maintaining the registration or qualification of
the Fund's shares for sale under state securities laws. PFPC and PDI are each
responsible for carrying out the duties undertaken pursuant to the
Administration Agreement with the Fund.
For their administrative services, the administrators are entitled jointly
to receive a fee computed daily and payable monthly. (For information regarding
the administrators' waivers and expense reimbursements, see "Investment Adviser
and Sub-Adviser" above.) The Fund also reimburses each administrator for its
reasonable out-of-pocket expenses incurred in connection with the Funds'
computer access program. For the fiscal year ended October 31, 1995, the Fund
paid administration fees aggregating .07% of its average net assets.
10
<PAGE> 15
PFPC also serves as transfer agent, registrar and dividend disbursing
agent. PFPC's address is P.O. Box 8950, Wilmington, Delaware 19885-9628. The
services provided by PFPC and PDI and the fees payable by the Fund for these
services are described further in the Statement of Additional Information under
"Management of the Funds."
DISTRIBUTOR
PDI serves as distributor of the Fund's shares. Its principal offices are
located at 259 Radnor-Chester Road, Suite 120, Radnor, Pennsylvania 19087. Fund
shares are sold on a continuous basis by the distributor as agent. The
distributor pays the cost of printing and distributing prospectuses to persons
who are not shareholders of the Fund (excluding preparation and printing
expenses necessary for continued registration of the Fund's shares) and of
printing and distributing all sales literature. No compensation is payable by
the Fund to the distributor for its distribution services.
SERVICE ORGANIZATIONS
Institutional investors, such as banks, savings and loan associations and
other financial institutions, including affiliates of PNC Bank Corp. ("Service
Organizations"), may purchase Dollar Shares. Dollar Shares are identical in all
respects to FedFund Shares except that they bear the service fees described
below and enjoy certain exclusive voting rights on matters relating to these
fees. The Fund will enter into an agreement with each Service Organization which
purchases Dollar Shares requiring it to provide support services to its
customers who are the beneficial owners of such shares in consideration of the
Fund's payment of .25% (on an annualized basis) of the average daily net asset
value of the Dollar Shares held by the Service Organization for the benefit of
customers. Such services, which are described more fully in the Statement of
Additional Information under "Management of the Funds--Service Organizations,"
include aggregating and processing purchase and redemption requests from
customers and placing net purchase and redemption orders with PFPC; processing
dividend payments from the Fund on behalf of customers; providing information
periodically to customers showing their positions in Dollar Shares; and
providing sub-accounting or the information necessary for sub-accounting with
respect to Dollar Shares beneficially owned by customers. Under the terms of the
agreements, Service Organizations are required to provide to their customers a
schedule of any fees that they may charge customers in connection with their
investments in Dollar Shares. FedFund Shares are sold to institutions that have
not entered into servicing agreements with the Fund in connection with their
investments.
EXPENSES
Except as noted above and in the Statement of Additional Information, the
Fund's service contractors bear all expenses in connection with the performance
of their services. Similarly, the Fund bears the expenses incurred in its
operations. For the fiscal year ended October 31, 1995, the Fund's total
expenses with respect to FedFund Shares and Dollar Shares were .18% and .43%
(net of fee waivers of .11% and .11%, respectively) of the average net assets of
the FedFund Shares and the FedFund Dollar Shares, respectively. With regard to
fees paid exclusively by Dollar Shares, see "Service Organizations" above.
BANKING LAWS
Banking laws and regulations presently prohibit a bank holding company
registered under the Federal Bank Holding Company Act of 1956 or any bank or
non-bank affiliate thereof from
11
<PAGE> 16
sponsoring, organizing or controlling a registered, open-end investment company
engaged continuously in the issuance of its shares, and prohibit banks generally
from issuing, underwriting, selling or distributing securities such as Fund
shares. Such banking laws and regulations do not prohibit such a holding company
or affiliate or banks generally from acting as investment adviser, transfer
agent or custodian to such an investment company, or from purchasing shares of
such a company for or upon the order of customers. PNC Bank, PIMC and PFPC, as
well as some Service Organizations, are subject to such banking laws and
regulations, but believe they may perform the services for the Fund contemplated
by their respective agreements, this Prospectus and the Statement of Additional
Information without violating applicable banking laws or regulations.
Should future legislative, judicial or administrative action prohibit or
restrict the activities of bank Service Organizations in connection with the
provision of support services to their customers, the Fund might be required to
alter or discontinue its arrangements with Service Organizations and change its
method of operations with respect to Dollar Shares. It is not anticipated,
however, that any change in the Fund's method of operations would affect its net
asset value per share or result in a financial loss to any customer.
DIVIDENDS
Shareholders of the Fund are entitled to dividends and distributions
arising only from the net investment income and capital gains, if any, earned on
investments held by the Fund. The Fund's net investment income is declared daily
as a dividend to its shareholders of record at the close of business on the day
of declaration. Shares begin accruing dividends on the day the purchase order
for the shares is executed and continue to accrue dividends through the day
before such shares are redeemed. Dividends are paid monthly by check, or by wire
transfer if requested in writing by the shareholder, within five business days
after the end of the month or within five business days after a redemption of
all of a shareholder's shares of a particular class. The Fund does not expect to
realize net long-term capital gains.
Dividends are determined in the same manner for each class of shares of the
Fund. Dollar Shares bear all the expense of fees paid to Service Organizations
and as a result, at any given time, the net yield on Dollar Shares will be
approximately .25% lower than the net yield on FedFund Shares.
Institutional shareholders may elect to have their dividends reinvested in
additional full and fractional shares of the same class of shares with respect
to which such dividends are declared at the net asset value of such shares on
the payment date. Reinvested dividends receive the same tax treatment as
dividends paid in cash. Such election, or any revocation thereof, must be made
in writing to PFPC at P.O. Box 8950, Wilmington, Delaware 19885-9628, and will
become effective after its receipt by PFPC with respect to dividends paid.
PFPC, as transfer agent, will send each Fund shareholder or its authorized
representative an annual statement designating the amount, if any, of any
dividends and distributions made during each year and their federal tax
qualification.
TAXES
The Fund qualified in its last taxable year and intends to qualify in
future years as a "regulated investment company" under the Internal Revenue Code
of 1986, as amended (the
12
<PAGE> 17
"Code"). A regulated investment company is generally exempt from federal income
tax on amounts distributed to its shareholders.
Qualification as a regulated investment company under the Code for a
taxable year requires, among other things, that the Fund distribute to its
shareholders at least 90% of its investment company taxable income for such
year. In general, the Fund's investment company taxable income will be its
taxable income (including interest and short-term capital gains, if any),
subject to certain adjustments and excluding the excess of any net long-term
capital gain for the taxable year over the net short-term capital loss, if any,
for such year. The Fund intends to distribute substantially all of its
investment company taxable income each year. Such distributions will be taxable
as ordinary income to the Fund's shareholders that are not currently exempt from
federal income taxes, whether such income is received in cash or reinvested in
additional shares. (Federal income taxes for distributions to an IRA or a
qualified retirement plan are deferred under the Code.) It is anticipated that
none of the Fund's distributions will be eligible for the dividends received
deduction for corporations. The Fund does not expect to realize long-term
capital gains and, therefore, does not contemplate payment of any "capital gain
dividends," as described in the Code.
Dividends declared in October, November or December of any year payable to
shareholders of record on a specified date in such months will be deemed to have
been received by the shareholders and paid by the Fund on December 31 of such
year, in the event such dividends are actually paid during January of the
following year.
The foregoing discussion is only a brief summary of some of the important
federal tax considerations generally affecting the Fund and its shareholders. As
indicated above, IRAs receive special tax treatment. No attempt is made to
present a detailed explanation of the federal, state or local income tax
treatment of the Fund or its shareholders, and this discussion is not intended
as a substitute for careful tax planning. Accordingly, potential investors in
the Fund should consult their tax advisors with specific reference to their own
tax situations.
YIELDS
From time to time, in advertisements or in reports to shareholders,
"yields" and "effective yields" for FedFund Shares and Dollar Shares may be
quoted. Yield quotations are computed separately for FedFund Shares and Dollar
Shares. The "yield" for a particular class or sub-class of Fund shares refers to
the income generated by an investment in such shares over a specified period
(such as a seven-day period). This income is then "annualized"; that is, the
amount of income generated by the investment during that period is assumed to be
generated for each such period over a 52-week or one-year period and is shown as
a percentage of the investment. The "effective-yield" is calculated similarly
but, when annualized, the income earned by an investment in a particular class
or sub-class is assumed to be reinvested. The "effective yield" will be slightly
higher than the "yield" because of the compounding effect of this assumed
reinvestment.
The Fund's yields may be compared to those of other mutual funds with
similar objectives, to stock or other relevant indices, or to rankings prepared
by independent services or other financial or industry publications that monitor
the performance of mutual funds. For example, such data are reported in national
financial publications such as IBC/Donoghue's Money Fund Report(R), The
13
<PAGE> 18
Wall Street Journal, and The New York Times, reports prepared by Lipper
Analytical Services, Inc., and publications of a local or regional nature.
The Fund's yield figures for FedFund Shares and FedFund Dollar Shares
represent the Fund's past performance, will fluctuate, and should not be
considered as representative of future results. The yield of any investment is
generally a function of portfolio quality and maturity, type of investment and
operating expenses. Any fees charged by Service Organizations or other
institutional investors directly to their customers in connection with
investments in Fund shares are not reflected in the Fund's yields; and, such
fees, if charged, would reduce the actual return received by customers on their
investments. The methods used to compute the Fund's yields are described in more
detail in the Statement of Additional Information. Investors may call 800-821-
6006 (FedFund Shares code: 30; FedFund Dollar Shares code: 31) to obtain current
yield information.
DESCRIPTION OF SHARES AND MISCELLANEOUS
The Company is a Pennsylvania business trust established on May 14, 1975.
Effective March 2, 1987, the Company's name was changed from Trust for
Short-Term Federal Securities to Trust for Federal Securities. The Company
commenced operations of the Fund in October, 1975.
The Company's Declaration of Trust authorizes the Board of Trustees to
issue an unlimited number of full and fractional shares of beneficial interest
in the Company and to classify or reclassify any unissued shares into one or
more additional classes of shares. Pursuant to such authority, the Board of
Trustees has authorized the issuance of twelve classes of shares designated as
FedFund, FedFund Dollar, T-Fund, T-Fund Dollar, FedCash, FedCash Dollar, T-Cash,
T-Cash Dollar, Federal Trust, Federal Trust Dollar, Treasury Trust and Treasury
Trust Dollar. The Declaration of Trust further authorizes the trustees to
classify or reclassify any class of shares into one or more sub-classes.
THIS PROSPECTUS AND THE STATEMENT OF ADDITIONAL INFORMATION INCORPORATED
HEREIN RELATE PRIMARILY TO THE FUND AND DESCRIBE ONLY THE INVESTMENT OBJECTIVE
AND POLICIES, OPERATIONS, CONTRACTS AND OTHER MATTERS RELATING TO THE FUND.
INVESTORS WISHING TO OBTAIN SIMILAR INFORMATION REGARDING THE COMPANY'S T-FUND,
FEDCASH, T-CASH, FEDERAL TRUST FUND, AND TREASURY TRUST FUND PORTFOLIOS MAY
OBTAIN SEPARATE PROSPECTUSES DESCRIBING THOSE PORTFOLIOS BY CALLING THE
DISTRIBUTOR AT 800-998-7633.
The Company does not presently intend to hold annual meetings of
shareholders except as required by the 1940 Act or other applicable law. The
Company will call a meeting of shareholders for the purpose of voting upon the
question of removal of a member of the Board of Trustees upon written request of
shareholders owning at least 10% of the outstanding shares of the Company
entitled to vote.
Each Fund Share represents an equal proportionate interest in the assets
belonging to the Fund. Each share is without par value and has no preemptive or
conversion rights. When issued for payment as described in this Prospectus,
shares will be fully paid and non-assessable.
Holders of the Company's FedFund Shares and FedFund Dollar Shares will vote
in the aggregate and not by class or sub-class on all matters, except where
otherwise required by law and except that only Dollar Shares will be entitled to
vote on matters submitted to a vote of
14
<PAGE> 19
shareholders pertaining to the Fund's arrangements with Service Organizations.
Further, shareholders of all of the Company's portfolios will vote in the
aggregate and not by portfolio except as otherwise required by law or when the
Board of Trustees determines that the matter to be voted upon affects only the
interests of the shareholders of a particular portfolio. (See the Statement of
Additional Information under "Additional Description Concerning Fund Shares" for
examples where the 1940 Act requires voting by portfolio.) Shareholders of the
Company are entitled to one vote for each full share held (irrespective of
class, sub-class, or portfolio) and fractional votes for fractional shares held.
Voting rights are not cumulative and, accordingly, the holders of more than 50%
of the aggregate shares of the Company may elect all of the trustees.
For information concerning the redemption of Fund shares and possible
restrictions on their transferability, see "Purchase and Redemption of Shares."
As stated above, the Company is organized as a trust under the laws of the
Commonwealth of Pennsylvania. Shareholders of such a trust may, under certain
circumstances, be held personally liable (as if they were partners) for the
obligations of the trust. The Company's Declaration of Trust provides for
indemnification out of the trust property of any shareholder of the Fund held
personally liable solely by reason of being or having been a shareholder and not
because of any acts or omissions or some other reason.
15
<PAGE> 20
NO PERSON HAS BEEN AUTHORIZED
TO GIVE ANY INFORMATION OR TO
MAKE ANY REPRESENTATIONS NOT
CONTAINED IN THIS PROSPECTUS,
OR IN THE FUND'S STATEMENT OF
ADDITIONAL INFORMATION
INCORPORATED HEREIN BY
REFERENCE, IN CONNECTION WITH
THE OFFERING MADE BY THIS
PROSPECTUS AND, IF GIVEN OR
MADE, SUCH INFORMATION OR
REPRESENTATIONS MUST NOT BE
RELIED UPON AS HAVING BEEN
AUTHORIZED BY THE COMPANY OR
ITS DISTRIBUTOR. THIS
PROSPECTUS DOES NOT
CONSTITUTE AN OFFERING BY THE
COMPANY OR BY THE DISTRIBUTOR
IN ANY JURISDICTION IN WHICH
SUCH OFFERING MAY NOT
LAWFULLY BE MADE.
---------------------------------------------------------------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
------
<S> <C>
Background and Expense
Information................... 2
Financial Highlights............ 3
Investment Objective and
Policies...................... 5
Purchase and Redemption of
Shares........................ 7
Management of the Fund.......... 9
Dividends....................... 12
Taxes........................... 12
Yields.......................... 13
Description of Shares and
Miscellaneous................. 14
</TABLE>
PIF-P-003
FEDFUND
AN INVESTMENT PORTFOLIO
OFFERED BY
TRUST FOR FEDERAL SECURITIES
[PROVIDENT INSTITUTIONAL FUNDS LOGO]
Prospectus
February 28, 1996
<PAGE> 21
TRUST FOR FEDERAL SECURITIES
(T-Fund Portfolio)
Cross Reference Sheet
<TABLE>
<CAPTION>
Form N-1A Item Prospectus Caption
-------------- ------------------
<S> <C> <C>
1. Cover Page . . . . . . . . . . . . . . . . . Cover Page
2. Synopsis . . . . . . . . . . . . . . . . . Background and
Expense Information
3. Condensed Financial Information . . . . . . Financial Highlights;
Yields
4. General Description of
Registrant . . . . . . . . . . . . . . . . Cover Page; Financial
Highlights; Investment
Objective and Policies
5. Management of the Fund . . . . . . . . . . . Management of the Fund;
Dividends
6. Capital Stock and Other
Securities . . . . . . . . . . . . . . . . Cover Page; Financial
Highlights; Dividends;
Taxes; Description of
Shares and
Miscellaneous
7. Purchase of Securities Being
Offered . . . . . . . . . . . . . . . Management of the Fund;
Purchase and Redemption
of Shares
8. Redemption or Repurchase . . . . . . . . . . Purchase and Redemption
of Shares
9. Pending Legal Proceedings . . . . . . . . . Inapplicable
</TABLE>
<PAGE> 22
T-Fund
An Investment Portfolio Offered By
Trust for Federal Securities
<TABLE>
<S> <C>
Bellevue Park Corporate Center For purchase and redemption orders only call:
400 Bellevue Parkway 800-441-7450 (in Delaware: 302-791-5350).
Suite 100 For yield information call: 800-821-6006
Wilmington, DE 19809 (T-Fund shares code: 60; T-Fund Dollar shares
code: 61).
For other information call: 800-821-7432.
</TABLE>
Trust for Federal Securities (the "Company") is a no-load, diversified,
open-end investment company that currently offers shares in six separate
investment portfolios. The shares described in this Prospectus represent
interests in the T-Fund portfolio (the "Fund"), a money market portfolio.
The Fund's investment objective is to seek current income with liquidity
and security of principal. The Fund invests in a portfolio consisting of U.S.
Treasury bills, notes and direct obligations of the U.S. Treasury and repurchase
agreements relating to direct Treasury obligations.
Fund shares may not be purchased by individuals directly, but institutional
investors may purchase shares for accounts maintained by individuals. In
addition to T-Fund Shares, investors may purchase T-Fund "Dollar Shares" which
accrue daily dividends in the same manner as T-Fund Shares but bear all fees
payable by the Fund to institutional investors for certain services they provide
to the beneficial owners of such Shares. (See "Management of the Fund--Service
Organizations.")
PNC Institutional Management Corporation ("PIMC") and PNC Bank, National
Association ("PNC Bank") serve as the Fund's adviser and sub-adviser,
respectively. PFPC Inc. ("PFPC") and Provident Distributors, Inc. ("PDI") serve
as the Fund's administrators. PDI also serves as the Fund's distributor.
SHARES OF THE FUND ARE NOT DEPOSITS OR OBLIGATIONS OF OR GUARANTEED,
ENDORSED, OR OTHERWISE SUPPORTED BY PNC BANK CORP. OR ITS AFFILIATES, OR
THE U.S. GOVERNMENT, AND ARE NOT FEDERALLY INSURED BY THE FEDERAL
DEPOSIT INSURANCE CORPORATION, THE FEDERAL RESERVE BOARD OR ANY
OTHER AGENCY. AN INVESTMENT IN THE FUND INVOLVES INVESTMENT
RISKS, INCLUDING THE POSSIBLE LOSS OF PRINCIPAL. THERE
CAN BE NO ASSURANCE THAT IT WILL BE ABLE TO
MAINTAIN ITS NET ASSET VALUE OF $1.00 PER
SHARE.
This Prospectus briefly sets forth certain information about the Fund that
investors should know before investing. Investors are advised to read this
Prospectus and retain it for future reference. Additional information about the
Fund, contained in a Statement of Additional Information currently dated
February 28, 1996, has been filed with the Securities and Exchange Commission
and is available to investors without charge by calling the Fund at
800-821-7432. The Statement of Additional Information, as amended from time to
time, is incorporated in its entirety by reference into this Prospectus.
------------------------
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.
------------------------
February 28, 1996
<PAGE> 23
BACKGROUND AND EXPENSE INFORMATION
Two classes of shares are offered by this Prospectus: T-Fund Shares and
T-Fund Dollar Shares. Shares of each class represent equal, pro rata interests
in the Fund and accrue daily dividends in the same manner except that the Dollar
shares bear fees payable by the Fund (at the rate of .25% per annum) to
institutional investors for services they provide to the beneficial owners of
such shares. (See "Management of the Fund -- Service Organizations.")
EXPENSE SUMMARY
<TABLE>
<CAPTION>
T-FUND
T-FUND DOLLAR
SHARES SHARES
------------ ------------
<S> <C> <C> <C> <C>
ANNUAL FUND OPERATING EXPENSES
- ----------------------------------------------------------------
(as a percentage of average net assets)
Management Fees (net of waivers)........................... .07 % .07 %
Other Expenses............................................. .13 % .38 %
Administration Fees (net of waivers).................. .07 % .07 %
Shareholder Servicing Fees............................ 0 % .25 %
Miscellaneous......................................... .04 % .04 %
---- ----
Total Fund Operating Expenses (net of waivers)............. .20 % .45 %
=== ===
</TABLE>
- ------------
<TABLE>
<CAPTION>
EXAMPLE 1 YEAR 3 YEARS 5 YEARS 10 YEARS
- ---------------------------------------------------- ------ ------- ------- --------
<S> <C> <C> <C> <C>
You would pay the following expenses on a $1,000
investment, assuming (1) a 5% annual return and
(2) redemption at the end of each time period with
respect to the following shares:
T-Fund Shares: $2 $ 6 $11 $ 26
T-Fund Dollar Shares: $5 $14 $25 $ 57
</TABLE>
THE FOREGOING SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR FUTURE
EXPENSES OR RATE OF RETURN. ACTUAL EXPENSES AND RATE OF RETURN MAY BE GREATER OR
LESSER THAN THOSE SHOWN.
The purpose of the foregoing table is to assist an investor in
understanding the various costs and expenses that an investor in the Fund will
bear directly or indirectly. The table is based on expenses incurred by the
T-Fund Shares and Dollar Shares during the last fiscal year, restated to reflect
the expenses which each class of shares expects to incur during the current
fiscal year. In addition, institutional investors may charge fees for providing
administrative services in connection with their customers' investment in Dollar
Shares. Absent fee waivers, Management and Administration fees for T-Fund Shares
and Dollar Shares each would have been .13% and Total Fund Operating Expenses
would have been .29% and .54%, respectively. (For more complete descriptions of
the various costs and expenses, see "Management of the Fund" in this Prospectus
and the Statement of Additional Information and the financial statements and
related notes contained in the Statement of Additional Information.) The
investment adviser and administrators may from time to time waive the advisory
and administration fees otherwise payable to them or may reimburse the fund for
its operating expenses. The foregoing table has not been audited by the Fund's
independent accountants.
2
<PAGE> 24
FINANCIAL HIGHLIGHTS
The following financial highlights for T-Fund Shares have been derived from
the financial statements of the Fund for the fiscal year ended October 31, 1995,
and for each of the nine preceding fiscal years, and for T-Fund Dollar Shares
for the fiscal year ended October 31, 1995 and for each of the nine preceding
fiscal years and the fiscal period ended October 31, 1986 (commencement of Fund
operations). The financial highlights for the fiscal years set forth below have
been audited by Coopers & Lybrand L.L.P. independent accountants whose report on
the financial statements and financial highlights (for the most recent five
years) of the Fund is included in the Statement of Additional Information. The
tables should be read in conjunction with the financial statements and related
notes included in the Statement of Additional Information. Further information
about the performance of the Fund is available in the annual report to
shareholders, which may be obtained without charge by calling 800-821-7432.
TRUST FOR FEDERAL SECURITIES
Financial Highlights
(For a Share Outstanding Throughout Each Period)
T-FUND SHARES
<TABLE>
<CAPTION>
YEAR ENDED OCTOBER 31,
------------------------------------------------------------------------------
1995 1994 1993 1992 1991
---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Period... $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
----------- ---------- ---------- ---------- ----------
Income From Investment Operations:
Net Investment Income................ .0565 .0368 .0303 .0392 .0626
----------- ---------- ---------- ---------- ----------
Total From Investment Operations..... .0565 .0368 .0303 .0392 .0626
----------- ---------- ---------- ---------- ----------
Less Distributions:
Dividends to Shareholders from:
Net Investment Income................ (.0565) (.0368) (.0303) (.0392) (.0626)
----------- ---------- ---------- ---------- ----------
Total Distributions.................. (.0565) (.0368) (.0303) (.0392) (.0626)
----------- ---------- ---------- ---------- ----------
Net Asset Value, End of Period......... $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
========== ========= ========= ========= =========
Total Return........................... 5.80% 3.75% 3.07% 3.99% 6.44%
Ratios/Supplemental Data
Net Assets, End of Period (in 000s).. $1,211,220 $1,035,172 $1,361,624 $1,327,743 $1,592,750
Ratio of Expenses to Average Net
Assets............................. .18%(1) .18%(1) .20%(1) .28% .30%
Ratio of Net Investment Income to
Average Net Assets................. 5.66% 3.65% 3.03% 3.93% 6.26%
<CAPTION>
YEAR ENDED OCTOBER 31,
------------------------------------------------------------------------------
1990 1989 1988 1987 1986
---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Period... $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
---------- ---------- ---------- ---------- ----------
Income From Investment Operations:
Net Investment Income................ .0799 .0880 .0692 .0606 .0676
---------- ---------- ---------- ---------- ----------
Total From Investment Operations..... .0799 .0880 .0692 .0606 .0676
---------- ---------- ---------- ---------- ----------
Less Distributions:
Dividends to Shareholders from:
Net Investment Income................ (.0799) (.0880) (.0692) (.0606) (.0676)
---------- ---------- ---------- ---------- ----------
Total Distributions.................. (.0799) (.0880) (.0692) (.0606) (.0676)
---------- ---------- ---------- ---------- ----------
Net Asset Value, End of Period......... $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
========= ========= ========= ========= =========
Total Return........................... 8.29% 9.17% 7.14% 6.23% 6.97%
Ratios/Supplemental Data
Net Assets, End of Period (in 000s).. $1,497,476 $1,422,788 $1,793,479 $1,737,258 $1,680,120
Ratio of Expenses to Average Net
Assets............................. .30%(1) .30%(1) .30%(1) .30%(1) .33%
Ratio of Net Investment Income to
Average Net Assets................. 7.99% 8.80% 6.91% 6.05% 6.72%
</TABLE>
- ------------
(1) Without the waiver of advisory and administration fees, the ratio of
expenses to average daily net assets would have been .29%, .29%, .28%, .34%,
.35%, .33%, and .33%, respectively, for each of the years ended October 31,
1995, 1994, 1993, 1990, 1989, 1988 and 1987, respectively, for T-Fund
Shares.
3
<PAGE> 25
TRUST FOR FEDERAL SECURITIES
Financial Highlights
(For a Share Outstanding Throughout Each Period)
T-FUND DOLLAR SHARES
<TABLE>
<CAPTION>
T-FUND DOLLAR SHARES
YEAR ENDED OCTOBER 31,
-------------------------------------------------------------------
1995 1994 1993 1992 1991
------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Period................ $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
------- ------- ------- ------- -------
Income From Investment Operations:
Net Investment Income.............................. .0540 .0343 .0278 .0367 .0601
------- ------- ------- ------- -------
Total From Investment Operations................... .0540 .0343 .0278 .0367 .0601
------- ------- ------- ------- -------
Less Distributions:
Dividends to Shareholders from:
Net Investment Income.............................. (.0540) (.0343) (.0278) (.0367) (.0601)
------- ------- ------- ------- -------
Total Distributions................................ (.0540) (.0343) (.0278) (.0367) (.0601)
------- ------- ------- ------- -------
Net Asset Value, End of Period...................... $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
======== ======== ======== ======== ========
Total Return....................................... 5.55% 3.50% 2.82% 3.74% 6.19%
Ratios/Supplemental Data
Net Assets, End of Period
(in 000s)........................................ $82,502 $22,195 $13,328 $ 4,915 $40,372
Ratio of Expenses to Average Net Assets............ .43%(1) .43%(1) .45% .53% .55%
Ratio of Net Investment Income to Average Net
Assets........................................... 5.41% 3.40% 2.78% 3.68% 6.01%
<CAPTION>
T-FUND DOLLAR SHARES
YEAR ENDED OCTOBER 31, JANUARY 6, 1986
------------------------------------------------------ TO
1990 1989 1988 1987 OCTOBER 31, 1986
---------- ------- ------- ------- -----------------
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Period............... $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
---------- ------- ------- ------- -------
Income From Investment Operations:
Net Investment Income............................. .0774 .0855 .0667 .0581 .0520
---------- ------- ------- ------- -------
Total From Investment Operations.................. .0774 .0855 .0667 .0581 .0520
---------- ------- ------- ------- -------
Less Distributions:
Dividends to Shareholders from:
Net Investment Income............................. (.0774) (.0855) (.0667) (.0581) (.0520)
---------- ------- ------- ------- -------
Total Distributions............................... (.0774) (.0855) (.0667) (.0581) (.0520)
---------- ------- ------- ------- -------
Net Asset Value, End of Period..................... $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
======== ======== ======== ======== ==========
Total Return...................................... 8.04% 8.92% 6.89% 5.98% 5.32%
Ratios/Supplemental Data
Net Assets, End of Period
(in 000s)....................................... $ 27,116 $42,439 $52,083 $30,686 $ 4,259
Ratio of Expenses to Average Net Assets........... .55%(1) .55%(1) .55%(1) .55%(1) .58%(2)
Ratio of Net Investment Income to Average Net
Assets.......................................... 7.74% 8.55% 6.66% 5.80% 6.27%(2)
</TABLE>
- ---------------
(1) Without the waiver of advisory and administration fees, the ratios of
expenses to average daily net assets would have been .54%, .54%, .53%,
.59%, .60%, .58% and .58%, respectively, for each of the years ended
October 31, 1995, 1994, 1993, 1990, 1989, 1988 and 1987 for T-Fund Dollar
Shares.
(2) Annualized.
4
<PAGE> 26
INVESTMENT OBJECTIVE AND POLICIES
The Fund's investment objective is to seek current income with liquidity
and security of principal. The Fund invests solely in direct obligations of the
U.S. Treasury, such as Treasury bills and notes and repurchase agreements
relating to direct Treasury obligations. Portfolio obligations held by the Fund
have remaining maturities of 397 days (thirteen months) or less (with certain
exceptions), subject to the quality, diversification, and other requirements of
Rule 2a-7 under the Investment Company Act of 1940, as amended (the "1940 Act")
and other rules of the Securities and Exchange Commission (the "SEC").
Securities issued or guaranteed by the U.S. Government have historically
involved little risk of loss of principal if held to maturity. However, due to
fluctuations in interest rates, the market value of such securities may vary
during the period a shareholder owns shares of the Fund. To the extent
consistent with its investment objectives, the Fund may invest in Treasury
receipts and other "stripped" securities issued or guaranteed by the U.S.
Government, where the principal and interest components are traded independently
under the Separate Trading of Registered Interest and Principal of Securities
program ("STRIPS"). Under the STRIPS program, the principal and interest
components are individually numbered and separately issued by the U.S. Treasury
at the request of depository financial institutions, which then trade the
component parts independently. Currently, the Fund only invests in "stripped"
securities issued or guaranteed by the U.S. Government which are registered
under the STRIPS program. The principal and interest components may exhibit
greater price volatility than ordinary debt securities because of the manner in
which their principal and interest are returned to investors.
The Fund may purchase government securities from primary dealers of the
Federal Reserve Bank of New York, subject to the seller's agreement to
repurchase them at an agreed upon time and price ("repurchase agreements"). The
securities subject to a repurchase agreement may bear maturities exceeding
thirteen months, provided the repurchase agreement itself matures in one year or
less. The Fund will not invest more than 10% of the value of its net assets in
repurchase agreements which do not provide for settlement within seven days. The
seller under a repurchase agreement will be required to maintain the value of
the underlying securities subject to the agreement at not less than 102% of the
repurchase price. Default by or bankruptcy of the seller would, however, expose
the Fund to possible loss because of adverse market action or delay in
connection with the disposition of the underlying obligations.
The Fund may purchase securities on a "when-issued" basis. When-issued
securities are securities purchased for delivery beyond the normal settlement
date at a stated price and yield. The Fund will generally not pay for such
securities or start earning interest on them until they are received. Securities
purchased on a when-issued basis are recorded as an asset and are subject to
changes in value based upon changes in the general level of interest rates. The
Fund expects that commitments to purchase when-issued securities will not exceed
25% of the value of its total assets absent unusual market conditions. The Fund
does not intend to purchase when-issued securities for speculative purposes or
as a means of leverage, but only in furtherance of its investment objective.
INVESTMENT LIMITATIONS
The Fund's investment objective and policies described above are not
fundamental and may be changed by the Company's Board of Trustees without a vote
of shareholders. If there is a
5
<PAGE> 27
change in the investment objective, shareholders should consider whether the
Fund remains an appropriate investment in light of their then current financial
position and needs. The Fund's investment limitations summarized below may not
be changed without the affirmative vote of the holders of a majority of its
outstanding shares. (A complete list of the investment limitations that cannot
be changed without a vote of shareholders is contained in the Statement of
Additional Information under "Investment Objectives and Policies.")
The Fund may not:
1. Purchase securities other than direct obligations of the U.S. Treasury
such as Treasury bills and notes, some of which may be subject to repurchase
agreements.
2. Borrow money except from banks for temporary purposes and then in an
amount not exceeding 10% of the value of the Fund's total assets, or mortgage,
pledge or hypothecate its assets except in connection with any such borrowing
and in amounts not in excess of the lesser of the dollar amounts borrowed or 10%
of the value of the Fund's total assets at the time of such borrowing.
3. Make loans except that the Fund may purchase or hold debt obligations in
accordance with its investment objective and policies, may enter into repurchase
agreements for securities.
PURCHASE AND REDEMPTION OF SHARES
PURCHASE PROCEDURES
Fund shares are sold at the net asset value per share next determined after
receipt of a purchase order by PFPC, the Fund's transfer agent. Purchase orders
for shares are accepted only on days on which both the New York Stock Exchange
and the Federal Reserve Bank of Philadelphia, are open for business (a "Business
Day") and must be transmitted to PFPC in Wilmington, Delaware, by telephone
(800-441-7450; in Delaware: 302-791-5350) or through the Fund's computer access
program. Orders received before 12:00 noon, Eastern time, for which payment has
been received by PNC Bank the Fund's custodian will be executed at 12:00 noon.
Orders received after 12:00 noon and before 3:00 P.M., Eastern time (or orders
received earlier in the same day for which payment has not been received by
12:00 noon), will be executed at 4:00 P.M., Eastern time, if payment has been
received by PNC Bank by that time. Orders received at other times, and orders
for which payment has not been received by 4:00 P.M., Eastern time, will not be
accepted, and notice thereof will be given to the institution placing the order.
(Payment for orders which are not received or accepted will be returned after
prompt inquiry to the sending institution.) The Fund may in its discretion
reject any order for shares.
Payment for Fund shares may be made only in federal funds or other funds
immediately available to PNC Bank. The minimum initial investment by an
institution is $3 million for T-Fund Shares and $5,000 for Dollar Shares;
however, broker-dealers and other institutional investors may set a higher
minimum for their customers. There is no minimum subsequent investment. The
Fund, at its discretion, may reduce the minimum initial investment for T-Fund
Shares for specific institutions whose aggregate relationship with the Provident
Institutional Funds is substantially equivalent to this $3 million minimum and
warrants this reduction.
6
<PAGE> 28
Conflict of interest restrictions may apply to an institution's receipt of
compensation paid by the Fund in connection with the investment of fiduciary
funds in Dollar Shares. (See also "Management of the Fund -- Service
Organizations.") Institutions, including banks regulated by the Comptroller of
the Currency and investment advisers and other money managers subject to the
jurisdiction of the SEC, the Department of Labor or state securities
commissions, should consult their legal advisors before investing fiduciary
funds in Dollar Shares. (See also "Management of the Fund -- Banking Laws.")
REDEMPTION PROCEDURES
Redemption orders must be transmitted to PFPC in Wilmington, Delaware, in
the manner described under "Purchase Procedures." Shares are redeemed at the net
asset value per share next determined after PFPC's receipt of the redemption
order. While the Fund intends to use its best efforts to maintain its net asset
value per share at $1.00, the proceeds paid to a shareholder upon redemption may
be more or less than the amount invested depending upon a share's net asset
value at the time of redemption.
Payment for redeemed shares for which a redemption order is received by
PFPC by 3:00 P.M., Eastern time, on a Business Day is normally made in federal
funds wired to the redeeming shareholder on the same business day. Payment for
redemption orders which are received between 3:00 P.M. and 4:00 P.M., Eastern
time, or on a day when PNC Bank is closed, is normally wired in federal funds on
the next day following redemption that PNC Bank is open for business.
The Fund shall have the right to redeem shares in any account if the value
of the account is less than $1,000 after sixty-days' prior written notice to the
shareholder. Any such redemption shall be effected at the net asset value per
share next determined after the redemption order is entered. If during the
sixty-day period the shareholder increases the value of its account to $1,000 or
more, no such redemption shall take place. Moreover, if a shareholder's T-Fund
Shares account falls below an average of $100,000 in any particular calendar
month, the account may be charged an account maintenance fee with respect to
that month. In addition, the Fund may also redeem shares involuntarily or
suspend the right of redemption under certain special circumstances described in
the Statement of Additional Information under "Additional Purchase and
Redemption Information."
OTHER MATTERS
The Fund's net asset value per share for purposes of pricing purchase and
redemption orders is determined by PIMC as of 12:00 noon and 4:00 P.M., Eastern
time, on each day on which both the Federal Reserve Bank of Philadelphia and the
New York Stock Exchange are open for business. Currently, one or both of these
institutions are closed on the customary national business holidays of New
Year's Day, Martin Luther King, Jr. Day, Presidents' Day, Good Friday, Memorial
Day (observed), Independence Day, Labor Day, Columbus Day (observed), Veteran's
Day, Thanksgiving Day and Christmas Day. The net asset value per share of each
class of the Fund is calculated by adding the value of all securities and other
assets belonging to the Fund, subtracting liabilities attributable to each
class, and dividing the result by the total number of the outstanding shares of
each class. In computing net asset value, the Fund uses the amortized cost
method of valuation as described in the Statement of Additional Information
under "Additional
7
<PAGE> 29
Purchase and Redemption Information." The Fund's net asset value per share for
purposes of pricing purchase and redemption orders is determined independently
of the net asset values of the shares of the Company's other investment
portfolios.
Fund shares are sold and redeemed without charge by the Fund. Institutional
investors purchasing or holding Fund shares for their customer accounts may
charge customer fees for cash management and other services provided in
connection with their accounts. A customer should, therefore, consider the terms
of its account with an institution before purchasing Fund shares. An institution
purchasing or redeeming Fund shares on behalf of its customers is responsible
for transmitting orders to the Fund in accordance with its customer agreements.
MANAGEMENT OF THE FUND
BOARD OF TRUSTEES
The business and affairs of the Fund are managed under the direction of the
Company's Board of Trustees. The trustees of the Company are as follows:
Philip E. Coldwell is an economic consultant and a former Member of
the Board of Governors of the Federal Reserve System.
Robert R. Fortune is a financial consultant and former Chairman,
President and Chief Executive Officer of Associated Electric & Gas
Insurance Services Limited.
Rodney D. Johnson is President of Fairmount Capital Advisors, Inc.
G. Willing Pepper, Chairman of the Board and President of the Company,
is a retired President of Scott Paper Company.
Mr. Pepper is considered by the Company to be an "interested person" of the
Company as defined in the 1940 Act.
The other officers of the Company are as follows:
Edward J. Roach is Vice President and Treasurer of the Company.
W. Bruce McConnel, III, Secretary of the Company, is a partner of the
law firm of Drinker Biddle & Reath, Philadelphia, Pennsylvania.
INVESTMENT ADVISER AND SUB-ADVISER
PIMC, a wholly-owned subsidiary of PNC Bank, serves as the Fund's
investment adviser. PIMC was organized in 1977 by PNC Bank to perform advisory
services for investment companies and has its principal offices at 400 Bellevue
Parkway, Wilmington, Delaware 19809. PNC Bank serves as the Fund's sub-adviser.
PNC Bank is one of the largest bank managers of investments for individuals in
the United States, and together with its predecessors has been in the business
of managing the investments of fiduciary and other accounts since 1847. PNC Bank
is a wholly-owned, indirect subsidiary of PNC Bank Corp. and has its principal
offices at Broad and Chestnut Streets, Philadelphia, Pennsylvania 19102. PNC
Bank Corp. is a multi-bank holding company. PIMC and PNC Bank also serve as
adviser and sub-adviser, respectively, to the Company's FedFund, FedCash,
T-Cash, Federal Trust Fund and Treasury Trust Fund portfolios.
8
<PAGE> 30
PNC Bank Corp., headquartered in Pittsburgh, Pennsylvania, is one of the
largest financial services organizations in the United States with banking
subsidiaries in Pennsylvania, New Jersey, Delaware, Ohio, Kentucky, Indiana,
Massachusetts and Florida. Its major businesses include corporate banking,
consumer banking, mortgage banking and asset management.
PNC Financial Services Group is PNC Bank Corp.'s mutual fund complex,
headquartered in Wilmington, Delaware. This group includes PIMC, PFPC and PNC
Bank. In 1973, Provident National Bank (predecessor to PNC Bank) commenced
advising the first institutional money market mutual fund -- a U.S.
dollar-denominated constant net asset value fund -- offered in the United
States.
The PNC Financial Services Group is one of the largest U.S. bank managers
of mutual funds with assets currently under management in excess of $30 billion.
This group, through PFPC and PFPC International Ltd, is also a leading mutual
fund service provider having contractual relationships with approximately 370
mutual funds with 3.5 million shareholders and in excess of $101 billion in
assets, including some $2 billion in non-U.S. assets. This group, through its
PNC Institutional Investment Service, provides investment research to some 250
financial institutions located in the United States and abroad. PNC Bank
provides custodial services for approximately $210 billion in assets, including
$160 billion in mutual fund assets.
As adviser, PIMC manages the Fund's portfolio and is responsible for all
purchases and sales of the Fund's portfolio securities. PIMC also maintains
certain of the Fund's financial accounts and records and computes the Fund's net
asset value and net income. For the advisory services provided and expenses
assumed by it, PIMC is entitled to receive a fee, computed daily and payable
monthly, based on the Fund's average net assets. PIMC and the administrators may
from time to time reduce the advisory and administration fees otherwise payable
to them or may reimburse the Fund for its operating expenses. Any fees waived by
PIMC with respect to a particular fiscal year are not recoverable. For the
fiscal year ended October 31, 1995, the Fund paid investment advisory fees
aggregating .07% of its average net assets.
As sub-adviser, PNC Bank provides research, credit analysis and
recommendations with respect to the Fund's investments, and supplies PIMC with
certain computer facilities, personnel and other services. For its sub-advisory
services, PNC Bank is entitled to receive from PIMC an amount equal to 75% of
the advisory fee paid by the Fund to PIMC (subject to adjustment in certain
circumstances). The sub-advisory fees paid by PIMC to PNC Bank have no effect on
the advisory fees payable by the Fund to PIMC. PNC Bank also serves as the
Fund's custodian. The services provided by PNC Bank and PIMC and the fees
payable by the Fund for these services are described further in the Statement of
Additional Information under "Management of the Funds."
ADMINISTRATOR
PFPC, whose principal business address is 400 Bellevue Parkway, Wilmington,
Delaware 19809, and PDI whose principal business address is 259 Radnor-Chester
Road, Suite 120, Radnor, Pennsylvania 19087, serve as administrators. PFPC is an
indirect wholly-owned subsidiary of PNC Bank Corp. A majority of the outstanding
stock of PDI is owned by its officers. The administrative services provided by
the administrators, which are described more fully in the Statement of
Additional Information, include providing and supervising the operation of an
automated data processing system to process purchase and redemption orders;
assisting in maintaining the Fund's Wilmington, Delaware office; performing
administrative services in connection with the Fund's
9
<PAGE> 31
computer access program maintained to facilitate shareholder access to the Fund;
accumulating information for and coordinating the preparation of reports to the
Fund's shareholders and the SEC; and maintaining the registration or
qualification of the Fund's shares for sale under state securities laws. PFPC
and PDI are each responsible for carrying out the duties undertaken pursuant to
the Administration Agreement with the Fund.
For their administrative services, the administrators are entitled jointly
to receive a fee computed daily and payable monthly. (For information regarding
the administrators' waivers and expense reimbursements, see "Investment Adviser
and Sub-Adviser" above.) The Fund also reimburses each administrator for its
reasonable out-of-pocket expenses incurred in connection with the Funds'
computer access program. For the fiscal year ended October 31, 1995, the Fund
paid administration fees aggregating .07% of its average net assets.
PFPC also serves as transfer agent, registrar and dividend disbursing
agent. PFPC's address is P.O. Box 8950, Wilmington, Delaware 19885-9628. The
services provided by PFPC and PDI and the fees payable by the Fund for these
services are described further in the Statement of Additional Information under
"Management of the Funds."
DISTRIBUTOR
PDI serves as distributor of the Fund's shares. Its principal offices are
located at 259 Radnor-Chester Road, Suite 120, Radnor, Pennsylvania 19087. Fund
shares are sold on a continuous basis by the distributor as agent. The
distributor pays the cost of printing and distributing prospectuses to persons
who are not shareholders of the Fund (excluding preparation and printing
expenses necessary for the continued registration of the Fund's shares) and of
printing and distributing all sales literature. No compensation is payable by
the Fund to the distributor for its distribution services.
SERVICE ORGANIZATIONS
Institutional investors, such as banks, savings and loan associations and
other financial institutions, including affiliates of PNC Bank Corp. ("Service
Organizations"), may purchase Dollar Shares. Dollar Shares are identical in all
respects to T-Fund Shares except that they bear the service fees described below
and enjoy certain exclusive voting rights on matters relating to these fees. The
Fund will enter into an agreement with each Service Organization which purchases
Dollar Shares requiring it to provide support services to its customers who are
the beneficial owners of such shares in consideration of the Fund's payment of
.25% (on an annualized basis) of the average daily net asset value of the Dollar
Shares held by the Service Organization for the benefit of customers. Such
services, which are described more fully in the Statement of Additional
Information under "Management of the Funds--Service Organizations," include
aggregating and processing purchase and redemption requests from customers and
placing net purchase and redemption orders with PFPC; processing dividend
payments from the Fund on behalf of customers; providing information
periodically to customers showing their positions in Dollar Shares; and
providing sub-accounting or the information necessary for sub-accounting with
respect to Dollar Shares beneficially owned by customers. Under the terms of the
agreements, Service Organizations are required to provide to their customers a
schedule of any fees that they may charge customers in connection with their
investments in Dollar Shares.
10
<PAGE> 32
T-Fund Shares are sold to institutions that have not entered into servicing
agreements with the Fund in connection with their investments.
EXPENSES
Except as noted above and in the Statement of Additional Information, the
Fund's service contractors bear all expenses in connection with the performance
of their services. Similarly, the Fund bears the expenses incurred in its
operations. For the fiscal year ended October 31, 1995, the Fund's total
expenses with respect to T-Fund Shares and Dollar Shares were .18% and .43% net
of waivers of .11% and .11%, respectively of the average net assets of the
T-Fund Shares and the T-Fund Dollar Shares respectively. With regard to fees
paid exclusively by Dollar Shares, see "Service Organizations" above.
BANKING LAWS
Banking laws and regulations presently prohibit a bank holding company
registered under the Federal Bank Holding Company Act of 1956 or any bank or
non-bank affiliate thereof from sponsoring, organizing or controlling a
registered, open-end investment company engaged continuously in the issuance of
its shares, and prohibit banks generally from issuing, underwriting, selling or
distributing securities such as Fund shares. Such banking laws and regulations
do not prohibit such a holding company or affiliate or banks generally from
acting as investment adviser, transfer agent or custodian to such an investment
company, or from purchasing shares of such a company for or upon the order of
customers. PNC Bank, PIMC and PFPC, as well as some Service Organizations, are
subject to such banking laws and regulations, but believe they may perform the
services for the Fund contemplated by their respective agreements, this
Prospectus and the Statement of Additional Information without violating
applicable banking laws or regulations.
Should future legislative, judicial or administrative action prohibit or
restrict the activities of bank Service Organizations in connection with the
provision of support services to their customers, the Fund might be required to
alter or discontinue its arrangements with Service Organizations and change its
method of operations with respect to Dollar Shares. It is not anticipated,
however, that any change in the Fund's method of operations would affect its net
asset value per share or result in a financial loss to any customer.
DIVIDENDS
Shareholders of the Fund are entitled to dividends and distributions
arising only from the net investment income and capital gains, if any, earned on
investments held by the Fund. The Fund's net investment income is declared daily
as a dividend to its shareholders of record at the close of business on the day
of declaration. Shares begin accruing dividends on the day the purchase order
for the shares is executed and continue to accrue dividends through the day
before such shares are redeemed. Dividends are paid monthly by check, or by wire
transfer if requested in writing by the shareholder, within five business days
after the end of the month or within five business days after a redemption of
all of a shareholder's shares of a particular class. The Fund does not expect to
realize net long-term capital gains.
Dividends are determined in the same manner for each class of shares of the
Fund. Dollar Shares bear all the expense of fees paid to Service Organizations
and as a result, at any given time,
11
<PAGE> 33
the net yield on Dollar Shares will be approximately .25% lower than the net
yield on T-Fund Shares.
Institutional shareholders may elect to have their dividends reinvested in
additional full and fractional shares of the same class of shares with respect
to which such dividends are declared at the net asset value of such shares on
the payment date. Reinvested dividends receive the same tax treatment as
dividends paid in cash. Such election, or any revocation thereof, must be made
in writing to PFPC at P.O. Box 8950, Wilmington, Delaware 19885-9628, and will
become effective after its receipt by PFPC with respect to dividends paid.
PFPC, as transfer agent, will send each Fund shareholder or its authorized
representative an annual statement designating the amount, if any, of any
dividends and distributions made during each year and their federal tax
qualification.
TAXES
The Fund qualified in its last taxable year and intends to qualify in
future years as a "regulated investment company" under the Internal Revenue Code
of 1986, as amended (the "Code"). A regulated investment company is generally
exempt from federal income tax on amounts distributed to its shareholders.
Qualification as a regulated investment company under the Code for a
taxable year requires, among other things, that the Fund distribute to its
shareholders at least 90% of its investment company taxable income for such
year. In general, the Fund's investment company taxable income will be its
taxable income (including interest and short-term capital gains, if any),
subject to certain adjustments and excluding the excess of any net long-term
capital gain for the taxable year over the net short-term capital loss, if any,
for such year. The Fund intends to distribute substantially all of its
investment company taxable income each year. Such distributions will be taxable
as ordinary income to the Fund's shareholders that are not currently exempt from
federal income taxes, whether such income is received in cash or reinvested in
additional shares. (Federal income taxes for distributions to an IRA or a
qualified retirement plan are deferred under the Code.) It is anticipated that
none of the Fund's distributions will be eligible for the dividends received
deduction for corporations. The Fund does not expect to realize long-term
capital gains and, therefore, does not contemplate payment of any "capital gain
dividends," as described in the Code.
Dividends declared in October, November or December of any year payable to
shareholders of record on a specified date in such months will be deemed to have
been received by the shareholders and paid by the Fund on December 31 of such
year, in the event such dividends are actually paid during January of the
following year.
The foregoing discussion is only a brief summary of some of the important
federal tax considerations generally affecting the Fund and its shareholders. As
indicated above, IRAs receive special tax treatment. No attempt is made to
present a detailed explanation of the federal, state or local income tax
treatment of the Fund or its shareholders, and this discussion is not intended
as a substitute for careful tax planning. Accordingly, potential investors in
the Fund should consult their tax advisors with specific reference to their own
tax situations.
12
<PAGE> 34
YIELDS
From time to time, in advertisements or reports to Shareholders, "yields"
and "effective yields" for T-Fund Shares and Dollar Shares may be quoted. Yield
quotations are computed separately for T-Fund Shares and Dollar Shares. The
"yield" for a particular class or sub-class of Fund shares refers to the income
generated by an investment in such shares over a specified period (such as a
seven-day period). This income is then "annualized"; that is, the amount of
income generated by the investment during that period is assumed to be generated
for each such period over a 52-week or one year period and is shown as a
percentage of the investment. The "effective yield" is calculated similarly but,
when annualized, the income earned by an investment in a particular class or
sub-class of Fund shares is assumed to be reinvested. The "effective yield" will
be slightly higher than the "yield" because of the compounding effect of this
assumed reinvestment.
The Fund's yields may be compared to those of other mutual funds with
similar objectives, to stock or other relevant indices, or to rankings prepared
by independent services or other financial or industry publications that monitor
the performance of mutual funds. For example, such data are reported in national
financial publications such as IBC/Donoghue's Money Fund Report(R), The Wall
Street Journal, and The New York Times, reports prepared by Lipper Analytical
Services, Inc., and publications of a local or regional nature.
The Fund's yield figures for T-Fund Shares and Dollar Shares represent the
Fund's past performance, will fluctuate, and should not be considered as
representative of future results. The yield of any investment is generally a
function of portfolio quality and maturity, type of investment and operating
expenses. Any fees charged by Service Organizations or other institutional
investors directly to their customers in connection with investments in Fund
shares are not reflected in the Fund's yield; and, such fees, if charged, would
reduce the actual return received by customers on their investments. The methods
used to compute the Fund's yields are described in more detail in the Statement
of Additional Information. Investors may call 800-821-6006 (T-Fund Shares code
60: T-Fund Dollar Shares code: 61) to obtain current yield information.
DESCRIPTION OF SHARES AND MISCELLANEOUS
The Company is a Pennsylvania business trust established on May 14, 1975.
Effective March 2, 1987, the Company's name was changed from Trust for
Short-Term Federal Securities to Trust for Federal Securities. The Company
commenced operations of the Fund in March, 1980.
The Company's Declaration of Trust authorizes the Board of Trustees to
issue an unlimited number of full and fractional shares of beneficial interest
in the Company and to classify or reclassify any unissued shares into one or
more additional classes of shares. Pursuant to such authority, the Board of
Trustees has authorized the issuance of twelve classes of shares designated as
FedFund, FedFund Dollar, T-Fund, T-Fund Dollar, FedCash, FedCash Dollar, T-Cash,
T-Cash Dollar, Federal Trust, Federal Trust Dollar, Treasury Trust and Treasury
Trust Dollar. The Declaration of Trust further authorizes the trustees to
classify or reclassify any class of shares into one or more sub-classes.
13
<PAGE> 35
THIS PROSPECTUS AND THE STATEMENT OF ADDITIONAL INFORMATION INCORPORATED
HEREIN RELATE PRIMARILY TO THE FUND AND DESCRIBE ONLY THE INVESTMENT OBJECTIVE
AND POLICIES, OPERATIONS, CONTRACTS AND OTHER MATTERS RELATING TO THE FUND.
INVESTORS WISHING TO OBTAIN SIMILAR INFORMATION REGARDING THE COMPANY'S FEDFUND,
FEDCASH, T-CASH, FEDERAL TRUST FUND AND TREASURY TRUST FUND PORTFOLIOS MAY
OBTAIN SEPARATE PROSPECTUSES DESCRIBING THOSE PORTFOLIOS BY CALLING THE
DISTRIBUTOR AT 800-998-7633.
The Company does not presently intend to hold annual meetings of
shareholders except as required by the 1940 Act or other applicable law. The
Company will call a meeting of shareholders for the purpose of voting upon the
question of removal of a member of the Board of Trustees upon written request of
shareholders owning at least 10% of the outstanding shares of the Company
entitled to vote.
Each Fund Share represents an equal proportionate interest in the assets
belonging to the Fund. Each share is without par value and has no preemptive or
conversion rights. When issued for payment as described in this Prospectus,
shares will be fully paid and non-assessable.
Holders of the Company's T-Fund Shares and Dollar Shares will vote in the
aggregate and not by class or sub-class on all matters, except where otherwise
required by law and except that only Dollar Shares will be entitled to vote on
matters submitted to a vote of shareholders pertaining to the Fund's
arrangements with Service Organizations. Further, shareholders of all of the
Company's portfolios will vote in the aggregate and not by portfolio except as
otherwise required by law or when the Board of Trustees determines that the
matter to be voted upon affects only the interests of the shareholders of a
particular portfolio. (See the Statement of Additional Information under
"Additional Description Concerning Fund Shares" for examples where the 1940 Act
requires voting by portfolio.) Shareholders of the Company are entitled to one
vote for each full share held (irrespective of class, sub-class, or portfolio)
and fractional votes for fractional shares held. Voting rights are not
cumulative and, accordingly, the holders of more than 50% of the aggregate
shares of the Company may elect all of the trustees.
For information concerning the redemption of Fund shares and possible
restrictions on their transferability, see "Purchase and Redemption of Shares."
As stated above, the Company is organized as a trust under the laws of the
Commonwealth of Pennsylvania. Shareholders of such a trust may, under certain
circumstances, be held personally liable (as if they were partners) for the
obligations of the trust. The Company's Declaration of Trust provides for
indemnification out of the trust property of any shareholder of the Fund held
personally liable solely by reason of being or having been a shareholder and not
because of any acts or omissions or some other reason.
14
<PAGE> 36
NO PERSON HAS BEEN AUTHORIZED
TO GIVE ANY INFORMATION OR TO
MAKE ANY REPRESENTATIONS NOT
CONTAINED IN THIS PROSPECTUS,
OR IN THE FUND'S STATEMENT OF
ADDITIONAL INFORMATION
INCORPORATED HEREIN BY
REFERENCE, IN CONNECTION WITH
THE OFFERING MADE BY THIS
PROSPECTUS AND, IF GIVEN OR
MADE, SUCH INFORMATION OR
REPRESENTATIONS MUST NOT BE
RELIED UPON AS HAVING BEEN
AUTHORIZED BY THE COMPANY OR
ITS DISTRIBUTOR. THIS
PROSPECTUS DOES NOT
CONSTITUTE AN OFFERING BY THE
COMPANY OR BY THE DISTRIBUTOR
IN ANY JURISDICTION IN WHICH
SUCH OFFERING MAY NOT
LAWFULLY BE MADE.
---------------------------------------------------------------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
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<S> <C>
Background and Expense
Information................... 2
Financial Highlights............ 3
Investment Objective and
Policies...................... 5
Purchase and Redemption of
Shares........................ 6
Management of the Fund.......... 8
Dividends....................... 11
Taxes........................... 12
Yields.......................... 13
Description of Shares and
Miscellaneous................. 13
</TABLE>
PIF-P-006
T-FUND
AN INVESTMENT PORTFOLIO
OFFERED BY
TRUST FOR FEDERAL SECURITIES
[PROVIDENT INSTITUTIONAL FUNDS LOGO]
Prospectus
February 28, 1996
<PAGE> 37
FEDFUND AND T-FUND
Investment Portfolios Offered By
Trust for Federal Securities
Statement of Additional Information
February __, 1996
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
THE COMPANY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
INVESTMENT OBJECTIVES AND POLICIES . . . . . . . . . . . . . . . . . . . 2
ADDITIONAL PURCHASE AND REDEMPTION INFORMATION . . . . . . . . . . . . . 6
MANAGEMENT OF THE FUNDS . . . . . . . . . . . . . . . . . . . . . . . . . 9
DIVIDENDS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
ADDITIONAL YIELD INFORMATION . . . . . . . . . . . . . . . . . . . . . . 22
ADDITIONAL DESCRIPTION CONCERNING FUND SHARES . . . . . . . . . . . . . . 24
COUNSEL . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
AUDITORS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
MISCELLANEOUS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
FINANCIAL STATEMENTS . . . . . . . . . . . . . . . . . . . . . . . . . . FS-1
</TABLE>
This Statement of Additional Information is meant to be read in
conjunction with the Prospectuses for FedFund and T-Fund dated February __,
1996 and is incorporated by reference in its entirety into those Prospectuses.
Because this Statement of Additional Information is not itself a prospectus, no
investment in shares of FedFund or T-Fund should be made solely upon the
information contained herein. Copies of the Prospectuses for FedFund and
T-Fund may be obtained by calling 800-821-7432. Capitalized terms used but not
defined herein have the same meanings as in the Prospectuses.
<PAGE> 38
THE COMPANY
Trust for Federal Securities (Trust for Short-Term Federal Securities
prior to March 2, 1987) is a no-load, diversified, open-end investment company
designed primarily as a vehicle by which institutional investors can invest
cash reserves in a choice of portfolios consisting of government securities.
Trust for Federal Securities (the "Company") consists of six separate
investment portfolios--FedFund, T-Fund, FedCash, T-Cash, Federal Trust Fund and
Treasury Trust Fund. This Statement of Additional Information relates
primarily to the Company's FedFund and T-Fund portfolios (the "Funds").
The securities held by FedFund consist of obligations issued or
guaranteed by the U.S. Government, its agencies or instrumentalities and
repurchase agreements relating to such obligations. Securities held by T-Fund
are limited to U.S. Treasury bills, notes and other direct obligations of the
U.S. Treasury and repurchase agreements relating to direct Treasury
obligations. Although both Funds have the same investment adviser and have
comparable investment objectives, their yields normally will differ due to
their differing cash flows and differences in the specific portfolio securities
held.
THIS STATEMENT OF ADDITIONAL INFORMATION AND THE FUNDS' PROSPECTUSES
RELATE PRIMARILY TO THE FUNDS AND DESCRIBE ONLY THE INVESTMENT OBJECTIVE AND
POLICIES, OPERATIONS, CONTRACTS, AND OTHER MATTERS RELATING TO THE FUNDS.
INVESTORS WISHING TO OBTAIN SIMILAR INFORMATION REGARDING THE COMPANY'S
FEDCASH, T-CASH, FEDERAL TRUST FUND OR TREASURY TRUST FUND PORTFOLIOS MAY
OBTAIN SEPARATE PROSPECTUSES DESCRIBING THOSE PORTFOLIOS BY CALLING THE
DISTRIBUTOR AT 800-998-7633.
INVESTMENT OBJECTIVES AND POLICIES
As stated in the Funds' Prospectuses, the investment objective of
each Fund is to seek current income with liquidity and security of principal.
The following policies supplement the description in the Prospectuses of the
investment objectives and policies of the Funds.
PORTFOLIO TRANSACTIONS
Subject to the general control of the Company's Board of Trustees,
PNC Institutional Management Corporation ("PIMC"), the Funds' investment
adviser, is responsible for, makes decisions with respect to and places orders
for all purchases and sales of portfolio securities for the Funds. Purchases
and sales of portfolio securities are usually principal transactions
-2-
<PAGE> 39
without brokerage commissions. In making portfolio investments, PIMC seeks to
obtain the best net price and the most favorable execution of orders. To the
extent that the execution and price offered by more than one dealer are
comparable, PIMC may, in its discretion, effect transactions in portfolio
securities with dealers who provide the Company with research advice or other
services. Although the Funds will not seek profits through short-term trading,
PIMC may, on behalf of the Funds, dispose of any portfolio security prior to
its maturity if it believes such disposition is advisable.
Investment decisions for the Funds are made independently from those
for other investment company portfolios or accounts advised or managed by PIMC.
Such other portfolios may invest in the same securities as the Funds. When
purchases or sales of the same security are made at substantially the same time
on behalf of such other portfolios, transactions are averaged as to price, and
available investments allocated as to amount, in a manner which PIMC believes
to be equitable to each portfolio, including either Fund. In some instances,
this investment procedure may adversely affect the price paid or received by a
Fund or the size of the position obtained for a Fund. To the extent permitted
by law, PIMC may aggregate the securities to be sold or purchased for a Fund
with those to be sold or purchased for such other investment company portfolios
in order to obtain best execution.
Portfolio securities will not be purchased from or sold to and the
Funds will not enter into repurchase agreements or reverse repurchase
agreements with PIMC, PNC Bank, National Association ("PNC Bank"), PFPC Inc.
("PFPC"), Provident Distributors, Inc. ("PDI") or any affiliated person (as
such term is defined in the Investment Company Act of 1940 (the "1940 Act"))
of any of them, except to the extent permitted by the Securities and Exchange
Commission (the "SEC"). Furthermore, with respect to such transactions,
securities and repurchase agreements, the Funds will not give preference to
Service Organizations with whom the Funds enter into agreements concerning the
provision of support services to customers who beneficially own FedFund Dollar
shares or T-Fund Dollar shares ("Dollar shares"). (See the Prospectuses,
"Management of the Fund--Service Organizations.")
The Funds do not intend to seek profits through short-term trading.
The Funds' annual portfolio turnover rates will be relatively high but the
Funds' portfolio turnover is not expected to have a material effect on its net
incomes. The portfolio turnover rate for each of the Funds is expected to be
zero for regulatory reporting purposes.
-3-
<PAGE> 40
ADDITIONAL INFORMATION ON INVESTMENT PRACTICES
The repurchase price under the repurchase agreements described in the
Funds' Prospectuses generally equals the price paid by a Fund plus interest
negotiated on the basis of current short-term rates (which may be more or less
than the rate on the securities underlying the repurchase agreement).
Securities subject to repurchase agreements will be held by the Funds'
custodian, sub-custodian or in the Federal Reserve/Treasury book-entry system.
Repurchase agreements are considered to be loans by the Funds under the 1940
Act.
Whenever FedFund enters into reverse repurchase agreements as
described in its Prospectus, they will place in a segregated custodial
account liquid assets having a value equal to the repurchase price (including
accrued interest) and will subsequently monitor the account to ensure such
equivalent value is maintained. Reverse repurchase agreements are considered
to be borrowings by the Funds under the 1940 Act.
As stated in the Funds' Prospectuses, the Funds may purchase
securities on a "when-issued" basis (i.e., for delivery beyond the normal
settlement date at a stated price and yield). When a Fund agrees to purchase
when-issued securities, its custodian will set aside cash or liquid portfolio
securities equal to the amount of the commitment in a separate account.
Normally, the custodian will set aside portfolio securities to satisfy a
purchase commitment, and in such a case such Fund may be required subsequently
to place additional assets in the separate account in order to ensure that the
value of the account remains equal to the amount of such Fund's commitment. It
may be expected that a Fund's net assets will fluctuate to a greater degree
when it sets aside portfolio securities to cover such purchase commitments than
when it sets aside cash. Because the Funds will set aside cash or liquid
assets to satisfy their respective purchase commitments in the manner
described, such a Fund's liquidity and ability to manage its portfolio might be
affected in the event its commitments to purchase when-issued securities ever
exceeded 25% of the value of its assets. Neither Fund intends to purchase
when-issued securities for speculative purposes but only in furtherance of its
investment objectives. The Funds reserve the right to sell the securities
before the settlement date if it is deemed advisable.
When a Fund engages in when-issued transactions, it relies on the
seller to consummate the trade. Failure of the seller to do so may result in a
Fund's incurring a loss or missing an opportunity to obtain a price considered
to be advantageous.
-4-
<PAGE> 41
With respect to loans by FedFund of its portfolio securities as
described in its Prospectus, FedFund would continue to accrue interest on
loaned securities and would also earn income on loans. Any cash collateral
received by FedFund in connection with such loans would be invested in
short-term U.S. government obligations to the extent permitted by FedFund's
investment limitations, below.
Neither Fund will invest more than 10% of the value of its assets in
investments which are not readily marketable at the time of purchase of a not
readily marketable security. Securities for purposes of this limitation do not
include securities which have been determined to be liquid by the Fund's Board
of Trustees based upon the trading markets for such securities.
INVESTMENT LIMITATIONS
The Funds' Prospectuses summarize certain investment limitations that
may not be changed without the affirmative vote of the holders of a "majority
of the outstanding shares" of the respective Fund (as defined below under
"Miscellaneous"). Below is a complete list of the Funds' investment
limitations that may not be changed without such a vote of shareholders.
1. FedFund may not purchase securities other than U.S. Treasury
bills, notes and other obligations issued or guaranteed by the U.S.
Government, its agencies or instrumentalities, some of which may be subject to
repurchase agreements. There is no limit on the amount of FedFund's assets
which may be invested in the securities of any one issuer of such obligations.
2. T-Fund may not purchase securities other than direct obligations
of the U.S. Treasury such as Treasury bills and notes, some of which may be
subject to repurchase agreements. There is no limit on the amount of T-Fund's
assets which may be invested in securities of any one issuer of such
obligations.
FedFund and T-Fund may not:
3. Borrow money except from banks for temporary purposes and then in
an amount not exceeding 10% of the value of the particular Fund's total assets,
or mortgage, pledge or hypothecate its assets except in connection with any
such borrowing and in amounts not in excess of the lesser of the dollar amounts
borrowed or 10% of the value of the particular Fund's total assets at the time
of such borrowing. (This borrowing provision is not for investment leverage,
but solely to facilitate management of each Fund by enabling the Company to
-5-
<PAGE> 42
meet redemption requests where the liquidation of portfolio securities is
deemed to be inconvenient or disadvantageous.) Borrowing may take the form of
a sale of portfolio securities accompanied by a simultaneous agreement as to
their repurchase. Interest paid on borrowed funds will not be available for
investment.
4. Act as an underwriter.
5. Make loans except that the Funds may purchase or hold debt
obligations in accordance with their respective investment objective and
policies, may enter into repurchase agreements for securities. The FedFund, but
not the T-Fund, may lend portfolio securities against collateral consisting of
cash or securities which are consistent with the lending Fund's permitted
investments, which is equal at all times to at least 100% of the value of the
securities loaned. There is no investment restriction on the amount of
securities that may be loaned, except that payments received on such loans,
including amounts received during the loan on account of interest on the
securities loaned, may not (together with all non-qualifying income) exceed 10%
of the Fund's annual gross income (without offset for realized capital gains)
unless, in the opinion of counsel to the Company, such amounts are qualifying
income under federal income tax provisions applicable to regulated investment
companies.
ADDITIONAL PURCHASE AND REDEMPTION INFORMATION
IN GENERAL
Information on how to purchase and redeem a Fund's shares is included
in its Prospectus. The issuance of shares is recorded on the books of the
Funds, and share certificates are not issued unless expressly requested in
writing. Certificates are not issued for fractional shares.
The regulations of the Comptroller of the Currency provide that funds
held in a fiduciary capacity by a national bank approved by the Comptroller to
exercise fiduciary powers must be invested in accordance with the instrument
establishing the fiduciary relationship and local law. The Company believes
that the purchase of FedFund shares and T-Fund shares by such national banks
acting on behalf of their fiduciary accounts is not contrary to applicable
regulations if consistent with the particular account and proper under the law
governing the administration of the account.
-6-
<PAGE> 43
Prior to effecting a redemption of shares represented by
certificates, PFPC, the Funds' transfer agent, must have received such
certificates at its principal office. All such certificates must be endorsed
by the redeeming shareholder or accompanied by a signed stock power, in each
instance with the signature guaranteed by a commercial bank, a member of a
major stock exchange or other eligible guarantor institution, unless other
arrangements satisfactory to the Funds have previously been made. The Funds
may require any additional information reasonably necessary to evidence that a
redemption has been duly authorized.
Under the 1940 Act, the Funds may suspend the right of redemption or
postpone the date of payment upon redemption for any period during which the
New York Stock Exchange is closed, other than customary weekend and holiday
closings, or during which trading on said Exchange is restricted, or during
which (as determined by the SEC by rule or regulation) an emergency exists as a
result of which disposal or valuation of portfolio securities is not reasonably
practicable, or for such other periods as the SEC may permit. (The Funds may
also suspend or postpone the recordation of the transfer of their shares upon
the occurrence of any of the foregoing conditions.)
In addition, the Funds may redeem shares involuntarily in certain
other instances if the Board of Trustees determines that failure to redeem may
have material adverse consequences to a Fund's shareholders in general. Each
Fund is obligated to redeem shares solely in cash up to $250,000 or 1% of the
Fund's net asset value, whichever is less, for any one shareholder within a
90-day period. Any redemption beyond this amount will also be in cash unless
the Board of Trustees determines that conditions exist which make payment of
redemption proceeds wholly in cash unwise or undesirable. In such a case, the
Fund may make payment wholly or partly in securities or other property, valued
in the same way as the Fund determines net asset value. (See "Net Asset Value"
below for an example of when such redemption or form of payment might be
appropriate.) Redemption in kind is not as liquid as a cash redemption.
Shareholders who receive a redemption in kind may incur transaction costs if
they sell such
-7-
<PAGE> 44
securities or property, and may receive less than the redemption value of such
securities or property upon sale, particularly where such securities are sold
prior to maturity.
Any institution purchasing shares on behalf of separate accounts will
be required to hold the shares in a single nominee name (a "Master Account").
Institutions investing in more than one of the Company's portfolios or classes
of shares must maintain a separate Master Account for each portfolio and class
of shares. Sub-accounts may be established by name or number either when the
Master Account is opened or later.
NET ASSET VALUE
As stated in each Fund's Prospectus, each Fund's net asset value per
share is calculated by adding the value of all of the Fund's portfolio
securities and other assets belonging to that Fund, subtracting the liabilities
charged to that Fund, and dividing the result by the total number of that
Fund's shares outstanding (by class). "Assets belonging to" a Fund consist of
the consideration received upon the issuance of shares together with all
income, earnings, profits and proceeds derived from the investment thereof,
including any proceeds from the sale, exchange or liquidation of such
investments, any funds or payments derived from any reinvestment of such
proceeds, and a portion of any general assets of the Company not belonging to a
particular portfolio. Assets belonging to a particular Fund are charged with
the direct liabilities of that Fund and with a share of the general liabilities
of the Company allocated in proportion to the relative net assets of such Fund
and the Company's other portfolios. Determinations made in good faith and in
accordance with generally accepted accounting principles by the Board of
Trustees as to the allocations of any assets or liabilities with respect to a
Fund are conclusive.
As stated in the Funds' Prospectuses, in computing the net asset
value of shares of the Funds for purposes of sales and redemptions, the Funds
use the amortized cost method of valuation. Under this method, the Funds value
each of their portfolio securities at cost on the date of purchase and
thereafter assume a constant proportionate amortization of any discount or
premium until maturity of the security. As a result, the value of a portfolio
security for purposes of determining net asset value normally does not change
in response to fluctuating interest rates. While the amortized cost method
provides certainty in portfolio valuation, it may result in valuations for the
Funds' securities which are higher or lower than the market value of such
securities.
-8-
<PAGE> 45
In connection with their use of amortized cost valuation, each of the
Funds limits the dollar-weighted average maturity of its portfolio to not more
than 90 days and does not purchase any instrument with a remaining maturity of
more than thirteen months (with certain exceptions). In determining the
average weighted portfolio maturity of each Fund, a variable rate obligation
that is issued or guaranteed by the U.S. Government, or an agency or
instrumentality thereof, is deemed to have a maturity equal to the period
remaining until the obligation's next interest rate adjustment. The Company's
Board of Trustees has also established procedures, pursuant to rules
promulgated by the SEC, that are intended to stabilize the net asset value per
share of each Fund for purposes of sales and redemptions at $1.00. Such
procedures include the determination at such intervals as the Board deems
appropriate, of the extent, if any, to which each Fund's net asset value per
share calculated by using available market quotations or a matrix believed to
provide reliable values deviates from $1.00 per share. In the event such
deviation exceeds 1/2 of 1% with respect to either Fund, the Board will
promptly consider what action, if any, should be initiated. If the Board
believes that the amount of any deviation from the $1.00 amortized cost price
per share of a Fund may result in material dilution or other unfair results to
investors or existing shareholders, it will take such steps as it considers
appropriate to eliminate or reduce to the extent reasonably practicable any
such dilution or unfair results. These steps may include selling portfolio
instruments prior to maturity; shortening the Fund's average portfolio
maturity; withholding or reducing dividends; redeeming shares in kind; or
utilizing a net asset value per share determined by using available market
quotations.
MANAGEMENT OF THE FUNDS
TRUSTEES AND OFFICERS
The Company's trustees and executive officers, their addresses,
principal occupations during the past five years and other affiliations are
provided below. In addition to the information set forth below, the trustees
serve in the following capacities:
Each trustee of the Company serves as a director of Temporary
Investment Fund, Inc. ("Temp") and as a trustee of Municipal Fund for Temporary
Investment ("Muni"). In addition, Messrs. Fortune and Pepper are directors of
Independence Square Income Securities, Inc. ("ISIS") and Managing General
Partners of Chestnut Street Exchange Fund ("Chestnut"); Messrs. Pepper and
Johnson are directors of Municipal Fund for
-9-
<PAGE> 46
California Investors, Inc. ("Cal Muni"); and Mr. Johnson is a director of
Municipal Fund for New York Investors, Inc. ("New York Muni") and a director of
the International Dollar Reserve Fund ("IDR").
Each of the Company's officers, with the exception of Mr. McConnel,
holds like offices with Temp and Muni. In addition, Mr. McConnel is
Secretary of Temp. Mr. Roach is Treasurer of Chestnut, President and
Treasurer of The RBB Fund, Inc. and New York Muni, and Vice President and
Treasurer of ISIS and Cal Muni; and Mr. Pepper is President and Chairman of
the Board of Muni and Cal Muni; and Mr. Fortune is President and Chairman
of the Board of ISIS and Chestnut.
<TABLE>
<CAPTION>
Principal Occupations
Position with the During Past 5 Years
Name and Address Company and Other Affiliations
- ---------------- --------------- ----------------------
<S> <C> <C>
PHILIP E. COLDWELL(3),(4) Trustee Economic Consultant;
Coldwell Financial Chairman, Coldwell
Consultants Financial Consultants,
3330 Southwestern Blvd. Member of the Board of
Dallas, Texas 75225 Governors of the
Federal Reserve
System, 1974 to 1980;
President, Federal
Reserve Bank of
Dallas, 1968 to 1974;
Director, Maxus Energy
Corporation (energy
products) (1989
-1993); Director,
Diamond Shamrock Corp.
(energy and chemical
products) until 1987.
ROBERT R. FORTUNE(2),(3),(4) Trustee Financial Consultant;
2920 Ritter Lane Chairman, President
Allentown, PA 18104 and Chief Executive
Officer of Associated
Electric & Gas
Insurance Services
Limited, 1984-1993;
Member of the
Financial Executives
Institute and American
Institute of Certified
Public Accountants;
Director, Prudential
Utility Fund, Inc. and
Prudential Structured
Maturity Fund, Inc.
</TABLE>
-10-
<PAGE> 47
<TABLE>
<CAPTION>
Principal Occupations
Position with the During the Past 5 Years
Name and Address Company and Other Affiliations
- ---------------- ----------------- ---------------------
<S> <C> <C>
RODNEY D. JOHNSON Trustee President, Fairmount
Fairmount Capital Capital Advisors, Inc.
Advisors, Inc. (financial advising)
1435 Walnut Street since 1987; Treasurer,
Drexel Building North Philadelphia
Philadelphia, PA 19102 Health System
(formerly Girard
Medical Center), 1988
to 1992; Member, Board
of Education, School
District of
Philadelphia, 1983 to
1988; Treasurer,
Cascade Aphasia
Center, 1984 to 1988.
G. WILLING PEPPER(1),(2) Chairman of Retired; Chairman of
128 Springton Lake Road the Board, the Board, The
Media, PA 19063 President and Institute for Cancer
Trustee Research until 1979;
Director, Philadelphia
National Bank until
1978; President, Scott
Paper Company, 1971 to
1973; Chairman of the
Board, Specialty
Composites Corp. until
May 1984.
EDWARD J. ROACH President Certified Public
Bellevue Park Corporate and Treasurer Accountant; Partner of
Center the accounting firm of
400 Bellevue Parkway Main Hurdman until
Suite 100 1981; Vice Chairman of
Wilmington, DE 19809 the Board, Fox Chase
Cancer Center; Trustee
Emeritus, Pennsylvania
School for the Deaf;
Trustee, Immaculata
College, 1983-1984;
Director, The Bradford
Funds, Inc.
W. BRUCE McCONNEL, III Secretary Partner of the law
1345 Chestnut Street firm of Drinker Biddle
Philadelphia, PA & Reath Philadelphia,
19107-3496 Pennsylvania.
</TABLE>
- -----------------------
(1) This trustee is considered by the Company to be an "interested person"
of the Company as defined in the 1940 Act.
(2) Executive Committee Member.
(3) Audit Committee Member.
(4) Nominating Committee Member.
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<PAGE> 48
During intervals between meetings of the Board, the Executive
Committee may exercise the authority of the Board of Trustees in the management
of the Company's business to the extent permitted by law.
Each of the investment companies named above receives various
advisory and other services from PIMC and PNC. Of the above-mentioned funds,
PDI provides distribution services to Temp, Muni, Cal Muni and New York Muni.
Of the above-mentioned funds, the administrators provide administration
services to Temp, Muni, Cal Muni and New York Muni.
For the fiscal year ended October 31, 1995, the Company paid a total
of $100,887 to its officers and trustees in all capacities of which $53,147 was
allocated to the Funds. In addition, the Company contributed $2,715 during its
last fiscal year to its retirement plan for employees (which included Mr.
Roach) of which $1,452 was allocated to the Funds. Drinker Biddle & Reath, of
which Mr. McConnel is a partner, receives legal fees as counsel to the
Company. No employee of PDI, PIMC, PFPC or PNC Bank receives any compensation
from the Company for acting as an officer or trustee of the Company. The
trustees and officers of the Company as a group beneficially own less than 1%
of the shares of the Company's FedFund, T-Fund, FedCash, T-Cash, Federal Trust
Fund and Treasury Trust Fund portfolios.
By virtue of the responsibilities assumed by PDI, PIMC, PFPC and PNC
Bank under their respective agreements with the Company, the Company itself
requires only one part-time employee in addition to its officers.
The table below sets forth the compensation actually received from
the Fund Complex of which the Fund is a part by the trustees for the fiscal
year ended October 31, 1995:
-12-
<PAGE> 49
<TABLE>
<CAPTION>
Total
Pension or Compensation
Retirement from Registrant
Aggregate Benefits Accrued Estimated Annual and Fund
Compensation as Part of Fund Benefits Upon Complex(1) Paid to
Name of Person, Position from Registrant Expenses Retirement Trustees
<S> <C> <C> <C> <C>
Philip E. Coldwell, Trustee $ 10,800.00 0 N/A (3)(2)$ 43,600.00
Robert R. Fortune, Trustee 10,800.00 0 N/A (5)(2) 63,600.00
Rodney D. Johnson, Trustee 10,800.00 0 N/A (5)(2) 55,850.00
G. Willing Pepper, Trustee and Chairman 19,100.00 0 N/A (6)(2) 96,250.00
David R. Wilmerding, Jr.,(3) Trustee 12,466.68 0 N/A (5)(2) 60,600.04
Anthony M. Santomero,(4) Trustee 10,800.00 0 N/A (4)(2) 49,900.00
---------- ---------
$74,766.68 $369,800.04
</TABLE>
- --------------------
1. A Fund Complex means two or more investment companies that hold themselves
out to investors as related companies for purposes of investment and
investor services, or have a common investment adviser or have an
investment adviser that is an affiliated person of the investment adviser
of any of the other investment companies.
2. Total number of such other investment companies trustee serves on within
the Fund Complex.
3. Mr. Wilmeiding resigned as trustee of the Company on January 4, 1996.
4. Mr. Santomero resigned as trustee of the Company on January 4, 1996.
-13-
<PAGE> 50
INVESTMENT ADVISER AND SUB-ADVISER
The advisory and sub-advisory services provided by PIMC and PNC Bank
are described in the Funds' Prospectuses. For the advisory services provided
and expenses assumed by it, PIMC is entitled to receive a fee, computed daily
and payable monthly, based on the combined average net assets of the Funds as
follows:
<TABLE>
<CAPTION>
Annual Fee The Funds' Combined
---------- Average Net Assets
-------------------
<S> <C>
.175% . . . . . . . . . of the first $1 billion
.150% . . . . . . . . . of the next $1 billion
.125% . . . . . . . . . of the next $1 billion
.100% . . . . . . . . . of the next $1 billion
.095% . . . . . . . . . of the next $1 billion
.090% . . . . . . . . . of the next $1 billion
.085% . . . . . . . . . of the next $1 billion
.080% . . . . . . . . of amounts in excess of $7 billion.
</TABLE>
The advisory fee is allocated between these Funds in proportion to their
relative net assets.
PIMC and the administrators have each agreed that if, in any fiscal
year, the expenses borne by a Fund exceed the applicable expense limitations
imposed by the securities regulations of any state in which shares of the
particular Fund are registered or qualified for sale to the public, they will
each reimburse such Fund for one-half of any excess to the extent required by
such regulations. Unless otherwise required by law, such reimbursement would
be accrued and paid on the same basis that the advisory and administration fees
are accrued and paid by such Fund. To the Funds' knowledge, of the expense
limitations in effect on the date of this Statement of Additional Information,
none is more restrictive than two and one-half percent (2-1/2%) of the first
$30 million of a Fund's average annual net assets, two percent (2%) of the next
$70 million of the average annual net assets and one and one-half percent
(1-1/2%) of the remaining average annual net assets.
For the fiscal years ended October 31, 1993, 1994 and 1995, the
Company paid fees (net of waivers) for advisory services aggregating
$1,488,938, $924,760 and $1,136,719 with respect to FedFund, and $1,081,025,
$819,525 and $911,096 with respect to T-Fund, respectively. For the same
fiscal years, PIMC voluntarily waived advisory fees aggregating $630,847,
$807,814 and $855,806 with respect to FedFund, and, $526,120, $655,034 and
$709,383 with respect to T-Fund, respectively. Any fees waived by PIMC are not
recoverable. PIMC and PNC Bank also serve as the adviser and sub-adviser,
respectively, to the
-14-
<PAGE> 51
Company's FedCash, T-Cash, Federal Trust Fund and Treasury Trust Fund
portfolios.
BANKING LAWS
Certain banking laws and regulations with respect to investment
companies are discussed in the Funds' Prospectuses. PIMC, PNC Bank and PFPC
believe that they may perform the services for the Funds contemplated by their
respective agreements, Prospectuses and this Statement of Additional
Information without violation of applicable banking laws or regulations. It
should be noted, however, that future changes in legal requirements relating to
the permissible activities of banks and their affiliates, as well as further
interpretations of present requirements, could prevent PIMC and PFPC from
continuing to perform such services for the Funds and PNC Bank from continuing
to perform such services for PIMC and the Funds. If PIMC, PFPC, or PNC Bank
were prohibited from continuing to perform such services, it is expected that
the Company's Board of Trustees would recommend that the Funds enter into new
agreements with other qualified firms. Any new advisory agreement would be
subject to shareholder approval.
In addition, state securities laws on this issue may differ from the
interpretations of federal law expressed herein and banks and financial
institutions may be required to register as dealers pursuant to state law.
ADMINISTRATOR
As the Funds' administrators, PFPC and PDI have agreed to provide the
following services: (i) assist generally in supervising the Funds' operations,
including providing a Wilmington, Delaware order-taking facility with toll-free
IN-WATS telephone lines, providing for the preparing, supervising and mailing
of purchase and redemption order confirmations to shareholders of record,
providing and supervising the operation of an automated data processing system
to process purchase and redemption orders, maintaining a back-up procedure to
reconstruct lost purchase and redemption data, providing information concerning
the Funds to their shareholders of record, handling shareholder problems,
supervising the services of employees, provided by PDI, whose principal
responsibility and function is to preserve and strengthen shareholder
relations, and monitoring the arrangements pertaining to the Funds' agreements
with Service Organizations; (ii) assure that persons are available to receive
and transmit purchase and redemption orders; (iii) participate in the periodic
updating of the Funds' Prospectuses and Registration Statements; (iv) assist in
maintaining the Funds' Wilmington, Delaware office; (v) perform administrative
services in connection with the Fund's computer access program maintained to
-15-
<PAGE> 52
facilitate shareholder access to the Funds; (vi) accumulate information for and
coordinate the preparation of reports to the Funds' shareholders and the SEC;
(vii) maintain the registration or qualification of the Funds' shares for sale
under state securities laws; (viii) prepare or review, and provide advice with
respect to, all sales literature (advertisements, brochures and shareholder
communications) for each of the Funds and any class or sub-class thereof; and
(ix) assist in the monitoring of regulatory and legislative developments which
may affect the Company, participate in counseling and assisting the Company in
relation to routine regulatory examinations and investigations, and work with
the Company's counsel in connection with regulatory matters and litigation.
For their administrative services, the administrators are entitled
jointly to receive fees from the six Funds referred to above determined and
allocated in the same manner as PIMC's advisory fee set forth above. As stated
in their Prospectuses, each administrator is also reimbursed for its reasonable
out-of-pocket expenses incurred in connection with the Fund's computer access
program. For the period from October 1, 1992 through January 17, 1993 the
Company paid fees (net of waivers) to its former administrator, The Boston
Company Advisors totalling $99,699 with respect to FedFund and $65,982 with
respect to T-Fund. Administration fees payable by FedFund and T-Fund of $2,554
and $494, respectively, were voluntarily waived by Boston Advisors during this
period. For the period from January 18, 1993 through October 31, 1993, the
Company paid fees (net of waivers) for administrative services to PFPC and PDI
(formerly called MFD Group, Inc.), its administrators, aggregating $1,488,938
with respect to FedFund and $1,081,025 with respect to T-Fund. For the same
period, administration fees of $630,847 with respect to FedFund and $526,120
with respect to T-Fund were voluntarily waived. For the fiscal year ended
October 31, 1994, the Company paid fees (net of waivers) for administration
fees aggregating $924,760 with respect to FedFund and $807,814 with respect to
T-Fund. For the same fiscal year, PFPC and PDI voluntarily waived
administration fees aggregating $819,525 with respect to FedFund and $655,034
with respect to T-Fund, respectively. For the Fiscal year ended October 31,
1995, the Company paid fees (not of waivers) for administration fees
aggregating $1,136,718 with respect to FedFund and $911,096 with respect to
T-Fund. For the same fiscal year, PFPC and PDI voluntarily waived
administration fees aggregating $855,806 with respect to FedFund and $709,383
with respect to T-Fund.
PFPC, a wholly owned, indirect subsidiary of PNC Bank provides
administrative or and/or sub-administrative services to investment companies
which are distributed by PDI. PFPC and PDI also serve as co-administrators of
the Company's FedCash, T-Cash, Federal Trust Fund and Treasury Trust Fund
portfolios.
-16-
<PAGE> 53
DISTRIBUTOR
PDI acts as the distributor of the Funds' shares. Each Fund's shares
are sold on a continuous basis by the distributor as agent, although it is not
obliged to sell any particular amount of shares. PDI will prepare or review,
provide advice with respect to, and file with the federal and state agencies or
other organization as required by federal, state, or other applicable laws and
regulations, all sales literature (advertisements, brochures and shareholder
communications) for each of the Funds and any class or sub-class thereof. The
distributor pays the cost of printing and distributing prospectuses to persons
who are not shareholders of the Funds (excluding preparation and printing
expenses necessary for the continued registration of Fund shares) and of
preparing, printing and distributing all sales literature. No compensation is
payable by the Funds to the distributor for its distribution services. PDI
also serves as the distributor for the Company's FedCash, T-Cash, Federal
Trust Fund and Treasury Trust Fund portfolios. PDI is a Delaware corporation,
with its principal place of business located at 259 Radnor-Chester Road, Suite
120, Radnor, Pennsylvania l9087.
CUSTODIAN AND TRANSFER AGENT
Pursuant to a Custodian Agreement, PNC Bank serves as the Funds'
custodian. Under the Agreement, PNC Bank has agreed to provide the following
services: (i) maintain a separate account or accounts in the name of the
Funds; (ii) hold and disburse portfolio securities on account of the Funds;
(iii) collect and make disbursements of money on behalf of the Funds; (iv)
collect and receive all income and other payments and distributions on account
of the Funds' portfolio securities; and (v) make periodic reports to the Board
of Trustees concerning the Funds' operations. The Custodian Agreement permits
PNC Bank, on 30 days' notice, to assign its rights and delegate its duties
thereunder to any other affiliate of PNC Bank or PNC Bank Corp., provided that
PNC Bank remains responsible for the performance of the delegate under the
Custodian Agreement.
The Funds reimburse PNC Bank for its direct and indirect costs and
expenses incurred in rendering custodial services. Under the Custodian
Agreement, each Fund pays PNC Bank an annual fee equal to $.25 for each $1,000
of such Fund's average daily gross assets, which fee declines as such Fund's
average daily gross assets increase. In addition, each Fund pays the custodian
a fee for each purchase, sale or delivery of a security, interest collection or
claim item, and reimburses PFPC for out-of-pocket expenses incurred on behalf
of the Fund. For
-17-
<PAGE> 54
the fiscal years ended October 31, 1993, 1994 and 1995 FedFund paid fees for
custodian services aggregating $254,450, $220,443 and $238,805, respectively.
For the same fiscal years, T-Fund paid fees for custodian services aggregating,
$216,000, $202,087 and $212,601 respectively. PNC Bank also serves as
custodian for the Company's FedCash, T-Cash, Federal Trust Fund and Treasury
Trust Fund portfolios. PNC Bank's principal business address is Broad and
Chestnut Streets, Philadelphia, Pennsylvania 19102.
PFPC also serves as the Funds' transfer agent, registrar and dividend
disbursing agent pursuant to a Transfer Agency Agreement. Under the Agreement,
PFPC has agreed to provide the following services: (i) maintain a separate
account or accounts in the name of the Funds; (ii) issue, transfer and redeem
shares of the Funds; (iii) disburse dividends and distributions, in the manner
described in each Fund's Prospectus, to shareholders of the Fund; (iv) transmit
all communications by the Funds to their shareholders or their authorized
representatives, including reports to shareholders, distribution and dividend
notices and proxy materials for meetings of shareholders; (v) prepare and file
with the appropriate taxing authorities reports or notices relating to
dividends and distributions made by the Funds; (vi) respond to correspondence
by shareholders, security brokers and others relating to its duties; (vii)
maintain shareholder accounts; and (viii) make periodic reports to the
Company's Board of Trustees concerning the Funds' operations. The Transfer
Agency Agreement permits PFPC, on 30-days' notice, to assign its rights and
duties thereunder to any other affiliate of PNC Bank or PNC Bank Corp.,
provided that PFPC remains responsible for the performance of the delegate
under the Transfer Agency Agreement.
Under the Transfer Agency Agreement, each Fund pays PFPC fees at an
annual rate of $12.00 per account and sub-account maintained by PFPC plus $1.00
for each purchase or redemption transaction by an account (other than a
purchase transaction made in connection with the automatic reinvestment of
dividends). Payments to PFPC for sub-accounting services provided by others
are limited to the amount which PFPC pays to others for such services. In
addition, the Funds reimburse PFPC for out-of-pocket expenses related to such
services. For the fiscal years ended October 31, 1993, 1994 and 1995 FedFund
paid fees for transfer agency services aggregating, $147,259, $189,439 and
$99,287 respectively. For the same fiscal years, T-Fund paid fees for transfer
agency services aggregating, $98,116, $81,291 and $65,092 respectively. PFPC
also serves as transfer agent, registrar and dividend disbursing agent for the
Company's FedCash, T-Cash, Federal Trust Fund and Treasury Trust Fund.
-18-
<PAGE> 55
SERVICE ORGANIZATIONS
As stated in the Funds' Prospectuses, the Funds will enter into an
agreement with each Service Organization which purchases Dollar shares
requiring it to provide support services to its customers who beneficially own
Dollar shares in consideration of the Funds' payment of .25% (on an annualized
basis) of the average daily net asset value of the Dollar shares held by the
Service Organization for the benefit of customers. Such services include: (i)
aggregating and processing purchase and redemption requests from customers and
placing net purchase and redemption orders with the transfer agent; (ii)
providing customers with a service that invests the assets of their accounts in
Dollar shares; (iii) processing dividend payments from the Funds on behalf of
customers; (iv) providing information periodically to customers showing their
positions in Dollar shares; (v) arranging for bank wires; (vi) responding to
customer inquiries relating to the services performed by the Service
Organization; (vii) providing sub-accounting with respect to Dollar shares
beneficially owned by customers or the information necessary for
sub-accounting; (viii) forwarding shareholder communications from the Funds
(such as proxies, shareholder reports, annual and semi-annual financial
statements and dividend, distribution and tax notices) to customers, if
required by law; and (ix) other similar services if requested by the Funds.
For the fiscal year ended October 31, 1995, the Company paid $256,849 in
servicing fees to an affiliate of the Company's adviser (representing 50.2% of
the aggregate servicing fees) of which $70,358 and $186,491 was allocated to
FedFund and T-Fund, respectively, pursuant to service agreements in effect
during such period.
Each Fund's agreements with Service Organizations are governed by a
Shareholder Services Plan (the "Plan") that has been adopted by the Company's
Board of Trustees pursuant to an exemptive order granted by the SEC in
connection with the creation of the Dollar shares. Pursuant to each Plan, the
Board of Trustees reviews, at least quarterly, a written report of the amounts
expended under the Fund's agreements with Service Organizations and the
purposes for which the expenditures were made. In addition, the Funds'
arrangements with Service Organizations must be approved annually by a majority
of the Company's trustees, including a majority of the trustees who are not
"interested persons" of the Company as defined in the 1940 Act and have no
direct or indirect financial interest in such arrangements.
The Board of Trustees has approved the Funds' arrangements with
Service Organizations based on information provided by the Funds' service
contractors that there is a reasonable likelihood that the arrangements will
benefit the
-19-
<PAGE> 56
Funds and their shareholders by affording the Funds greater flexibility in
connection with the servicing of the accounts of the beneficial owners of their
shares in an efficient manner. Any material amendment to the Funds'
arrangements with Service Organizations must be approved by a majority of the
Company's Board of Trustees (including a majority of the non-interested
Trustees). So long as the Funds' arrangements with Service Organizations are
in effect, the selection and nomination of the members of the Company's Board
of Trustees who are not "interested persons" (as defined in the 1940 Act) of
the Company will be committed to the discretion of such non-interested
trustees.
EXPENSES
The Funds' expenses include taxes, interest, fees and salaries of the
Company's trustees and officers, SEC fees, state securities qualification fees,
Standard & Poor's rating fees (cost incurred by T-Fund only), Moody's rating
fees, costs of preparing and printing prospectuses for regulatory purposes and
for distribution to shareholders, advisory and administration fees, charges of
the custodian, transfer agent and dividend disbursing agent, Service
Organization fees, certain insurance premiums, outside auditing and legal
expenses, costs of the Funds' computer access program, costs of shareholder
reports and shareholder meetings and any extraordinary expenses. The Funds
also pay for brokerage fees and commissions (if any) in connection with the
purchase of portfolio securities.
ADDITIONAL INFORMATION CONCERNING TAXES
The following summarizes certain additional tax considerations
generally affecting each Fund and its shareholders that are not described in
each Fund's Prospectus. No attempt is made to present a detailed explanation
of the tax treatment of the Funds or their shareholders or possible legislative
changes, and the discussion here and in each Fund's Prospectus is not intended
as a substitute for careful tax planning. Investors should consult their tax
advisors with specific reference to their own tax situations.
Each Fund of the Company is treated as a separate corporate entity
under the Code and intends to qualify each year as a regulated investment
company under the Code. In order to so qualify for a taxable year, each Fund
must satisfy the distribution requirement described in its Prospectus, derive
at least 90% of its gross income for the year from certain qualifying sources,
comply with certain diversification requirements and derive less than 30% of
its gross income from
-20-
<PAGE> 57
the sale or other disposition of securities and certain other investments held
for less than three months. Interest (including original issue discount and
accrued market discount) received by a Fund upon maturity or disposition of a
security held for less than three months will not be treated as gross income
derived from the sale or other disposition of such security within the meaning
of this requirement. However, any other income that is attributable to
realized market appreciation will be treated as gross income from the sale or
other disposition of securities for this purpose.
A 4% nondeductible excise tax is imposed on regulated investment
companies that fail to distribute currently an amount equal to specified
percentages of their ordinary taxable income and capital gain net income
(excess of capital gains over capital losses). Each Fund intends to make
sufficient distributions or deemed distributions of its ordinary taxable income
and any capital gain net income each calendar year to avoid liability for this
excise tax.
If for any taxable year a Fund does not qualify for tax treatment as
a regulated investment company, all of its taxable income will be subject to
federal income tax at regular corporate rates, without any deduction for
distributions to Fund shareholders. In such event, dividend distributions
would be taxable as ordinary income to Fund shareholders to the extent of that
Fund's current and accumulated earnings and profits and would be eligible for
the dividends received deduction in the case of corporate shareholders.
Each Fund will be required in certain cases to withhold and remit to
the U.S. Treasury 31% of taxable dividends or gross sale proceeds paid to any
shareholder who has failed to provide a correct tax identification number in
the manner required, who is subject to withholding by the Internal Revenue
Service for failure to properly include on his return payments of taxable
interest or dividends, or who has failed to certify to the Fund when required
to do so that he is not subject to backup withholding or that he is an "exempt
recipient."
Depending upon the extent of the Funds' activities in states and
localities in which their offices are maintained, in which their agents or
independent contractors are located or in which they are otherwise deemed to be
conducting business, the Funds may be subject to the tax laws of such states or
localities. In addition, in those states and localities which have income tax
laws, the treatment of the Funds and their shareholders under such laws may
differ from their treatment under federal income tax laws. Shareholders are
advised to consult their tax advisors concerning the application of state and
local taxes.
-21-
<PAGE> 58
The foregoing discussion is based on federal tax laws and regulations
which are in effect on the date of this Statement of Additional Information;
such laws and regulations may be changed by legislative or administrative
action.
DIVIDENDS
Net income of each of the Funds for dividend purposes consists of (i)
interest accrued and original issue discount earned on the Fund's assets, (ii)
plus the amortization of market discount and minus the amortization of market
premium on such assets, (iii) less accrued expenses directly attributable to
the Fund and the general expenses (e.g., legal, accounting and trustees' fees)
of the Company prorated to the Fund on the basis of its relative net assets.
In addition, Dollar shares bear exclusively the expense of fees paid to Service
Organizations. (See "Management of the Funds--Service Organizations.")
As stated, the Company uses its best efforts to maintain the net
asset value per share of FedFund and T-Fund at $1.00. As a result of a
significant expense or realized or unrealized loss incurred by either Fund, it
is possible that the Fund's net asset value per share may fall below $1.00.
ADDITIONAL YIELD INFORMATION
The "yields" and "effective yields" are calculated separately for
each class of shares of each Fund and in accordance with the formulas
prescribed by the SEC. The seven-day yield for each class of shares is
calculated by determining the net change in the value of a hypothetical
pre-existing account in the particular Fund which has a balance of one share of
the class involved at the beginning of the period, dividing the net change by
the value of the account at the beginning of the period to obtain the base
period return, and multiplying the base period return by 365/7. The net change
in the value of an account in a Fund includes the value of additional shares
purchased with dividends from the original share and dividends declared on the
original share and any such additional shares, net of all fees charged to all
shareholder accounts in proportion to the length of the base period and the
Fund's average account size, but does not include gains and losses or
unrealized appreciation and depreciation. In addition, an effective annualized
yield quotation may be computed on a compounded basis with respect to each
class of its shares by adding 1 to the base period return for the class
involved (calculated as described above), raising that sum to a power equal to
365/7, and subtracting 1 from the result. Similarly, based on the
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calculations described above, the Funds' 30-day (or one-month) yields and
effective yields may also be calculated.
For the seven-day period ended October 31, 1995, the yields on
FedFund shares and T-Fund shares were 5.66% and 5.67%, respectively, and the
compounded effective yields on FedFund shares and T-Fund shares were 5.82% and
5.83%, respectively; the yields on FedFund Dollar shares and T-Fund Dollar
shares were 5.41% and 5.42%, respectively, and the compounded effective yields
on FedFund Dollar shares and T-Fund Dollar shares were 5.56% and 5.57%,
respectively. During this seven-day period, the Funds' adviser and
administrator voluntarily waived a portion of its advisory and administration
fees payable by the Funds. Without these waivers, for the same period the
yields on FedFund shares and T-Fund shares would have been 5.55% and 5.56%,
respectively, and the compounded effective yields on FedFund shares and T-Fund
shares would have been 5.70% and 5.71%, respectively, the yield on FedFund
Dollar Shares and T-Fund Dollar Shares would have been 5.30% and 5.31%,
respectively, and the compounded effective yields on FedFund Dollar Shares and
T-Fund Dollar Shares would have been 5.44% and 5.45%, respectively.
For the 30-day period ended October 31, 1995, the yields on FedFund
shares and T-Fund shares were 5.64% and 5.65%, respectively, and the compounded
effective yields on FedFund shares and T-Fund shares were 5.80% and 5.81%,
respectively; the yields on FedFund Dollar shares and T-Fund Dollar shares were
5.39% and 5.40%, respectively, and the compounded effective yields on FedFund
Dollar shares and T-Fund Dollar shares were 5.53% and 5.55%, respectively.
During this 30-day period, the Funds' adviser and administrator voluntarily
waived a portion of the advisory and administration fees payable by the Funds.
Without these waivers, for the same period the yields on FedFund shares and
T-Fund shares would have been 5.53% and 5.54%, respectively, and the compounded
effective yields on FedFund shares and T-Fund shares would have been 5.68% and
5.69%, respectively, the yield on FedFund Dollar Shares and T-Fund Dollar
Shares would have been 5.28% and 5.29%, respectively, and the compounded
effective yields on FedFund Dollar Shares and T-Fund Dollar Shares would have
been 5.42% and 5.43%, respectively.
From time to time, in advertisements or in reports to shareholders,
the performance of the Funds may be quoted and compared to that of other money
market funds or accounts with similar investment objectives and to stock or
other relevant indices. For example, the yields of the Funds may be compared
to the Donoghue's Money Fund Average, which is an average compiled by
IBC/Donoghue's MONEY FUND REPORT(R) of Holliston, MA 01746, a widely recognized
independent publication that monitors the
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<PAGE> 60
performance of money market funds, or to the average yields reported by the
Bank Rate Monitor from money market deposit accounts offered by the 50 leading
banks and thrift institutions in the top five standard metropolitan statistical
areas.
THE FUNDS' YIELDS WILL FLUCTUATE, AND ANY QUOTATION OF YIELD SHOULD
NOT BE CONSIDERED AS REPRESENTATIVE OF THE FUTURE PERFORMANCE OF THE FUNDS.
Since yields fluctuate, yield data cannot necessarily be used to compare an
investment in the Funds' shares with bank deposits, savings accounts, and
similar investment alternatives which often provide an agreed or guaranteed
fixed yield for a stated period of time. Shareholders should remember that
performance and yield are generally functions of the kind and quality of the
investments held in a Fund, portfolio maturity, operating expenses net of
waivers and expense reimbursements, and market conditions. Any fees charged by
Service Organizations or other institutional investors with respect to customer
accounts in investing in shares of the Funds will not be included in
calculations of yield and performance; such fees, if charged, would reduce the
actual performance and yield from that quoted.
ADDITIONAL DESCRIPTION CONCERNING FUND SHARES
The Company does not presently intend to hold annual meetings of
shareholders except as required by the 1940 Act or other applicable law. Upon
the written request of shareholders owning at least twenty percent of the
Company's shares, the Company will call for a meeting of shareholders to
consider the removal of one or more trustees and other certain matters. To the
extent required by law, the Company will assist in shareholder communication in
such matters.
As stated in the Prospectuses for the Funds, holders of the Company's
FedFund and FedFund Dollar shares will vote in the aggregate and not by class
on all matters, except where otherwise required by law and except that only
FedFund Dollar shares will be entitled to vote on matters submitted to a vote
of shareholders pertaining to the Fund's arrangements with Service
Organizations. (See "Management of the Funds--Service Organizations.") Holders
of the Company's T-Fund and T-Fund Dollar shares will also vote in the
aggregate and not by class except as described above. Further, shareholders of
all of the Company's portfolios will vote in the aggregate and not by portfolio
except as otherwise required by law or when the Board of Trustees determines
that the matter to be voted upon affects only the interests of the shareholders
of a particular portfolio. Rule 18f-2 under the 1940 Act provides that any
matter required to be submitted by the provisions of such Act or applicable
state law, or otherwise, to the holders of the outstanding securities
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of an investment company such as the Company shall not be deemed to have been
effectively acted upon unless approved by the holders of a majority of the
outstanding shares of each portfolio affected by the matter. Rule 18f-2
further provides that a portfolio shall be deemed to be affected by a matter
unless it is clear that the interests of each portfolio in the matter are
identical or that the matter does not affect any interest of the portfolio.
Under the Rule the approval of an investment advisory agreement or any change
in a fundamental investment policy would be effectively acted upon with respect
to a portfolio only if approved by the holders of a majority of the outstanding
voting securities of such portfolio. However, the Rule also provides that the
ratification of the selection of independent accountants, the approval of
principal underwriting contracts and the election of trustees are not subject
to the separate voting requirements and may be effectively acted upon by
shareholders of the investment company voting without regard to portfolio.
COUNSEL
Drinker Biddle & Reath, Philadelphia National Bank Building, 1345
Chestnut Street, Philadelphia, Pennsylvania 19107-3496, of which W. Bruce
McConnel, III, Secretary of the Company, is a partner, serves as counsel to the
Company and will pass upon the legality of the shares offered hereby.
AUDITORS
The financial statements of the Funds which appear in this Statement
of Additional Information and the information included in the Financial
Highlights section which appears in the Funds' Prospectuses have been audited
by Coopers & Lybrand L.L.P., independent accountants, whose report thereon
appears elsewhere herein, and have been included herein and in the Funds'
Prospectuses in reliance upon the report of said firm of accountants given upon
their authority as experts in accounting and auditing. Coopers & Lybrand
L.L.P. has offices at 2400 Eleven Penn Center, Philadelphia, Pennsylvania
19103.
MISCELLANEOUS
SHAREHOLDER VOTE
As used in this Statement of Additional Information and the
Prospectuses for the Funds, a "majority of the outstanding shares" of a Fund or
of any other portfolio means, with respect to the approval of an investment
advisory agreement, a distribution plan or a change in a fundamental investment
policy,
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<PAGE> 62
the vote of the lesser of (1) 67% of the shares of such Fund (irrespective of
class) or of the portfolio represented at a meeting at which the holders of
more than 50% of the outstanding shares of such Fund or portfolio are present
in person or by proxy, or (2) more than 50% of the outstanding shares of such
Fund (irrespective of class) or of the portfolio.
CERTAIN RECORD HOLDERS
On January 10, 1996, the name, address and percentage of ownership of each
institutional investor that owned of record 5% or more of the outstanding
shares of the Company's FedFund and T-Fund portfolio were as follows:
<TABLE>
<S> <C>
FedFund
-------
Mercantile Bank N.A. 6.45%
Trust Securities Unit
P.O. Box 387 Main Post Office
St. Louis, MO 63166
Havris Trust & Savings Bank 7.85%
200 W. Monroe, 12th Floor
Chicago, IL 60690
Reinvested Earnings 9.52%
State Street Bank & Trust Co.
2 International Place, 31st Floor
Boston, MA 02110
T-Fund
------
The Chase Manhattan Bank NA 7.42%
GSS As Agent
2 Chase Plaza, 4th Floor
New York, NY 10081
PNC Mortgage Securities Corp 7.57%
Attn: Trust Department
700 Deerpath Drive
Vernon Hills, IL 60061
CTC Illinois Trust Co. 9.43%
209 W. Jackson Boulevard
Suite 700
Chicago, IL 60606
</TABLE>
SHAREHOLDER AND TRUSTEE LIABILITY
The Company is organized as a "business trust" under the laws of the
Commonwealth of Pennsylvania. Shareholders of
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<PAGE> 63
such a trust may, under certain circumstances, be held personally liable (as if
they were partners) for the obligations of the trust. The Declaration of Trust
of the Company provides that shareholders of the Funds shall not be subject to
any personal liability for the acts or obligations of the Company and that
every note, bond, contract, order or other undertaking made by the Company
shall contain a provision to the effect that the shareholders are not
personally liable thereunder. The Declaration of Trust provides for
indemnification out of the trust property of any shareholder held personally
liable solely by reason of being or having been a shareholder and not because
of any acts or omissions or some other reason. The Declaration of Trust also
provides that the Company shall, upon request, assume the defense of any claim
made against any shareholder for any act or obligation of the Company and
satisfy any judgment thereon. Thus, the risk of a shareholder's incurring
financial loss beyond its investment on account of shareholder liability is
limited to circumstances in which the Company itself would be unable to meet
its obligations.
The Company's Declaration of Trust provides further that no trustee,
officer or agent of the Company shall be personally liable for or on account of
any contract, debt, tort, claim, damage, judgment or decree arising out of or
connected with the administration or preservation of the trust estate or the
conduct of any business of the Company, nor shall any trustee be personally
liable to any person for any action or failure to act except by reason of bad
faith, willful misfeasance, gross negligence in the performance of any duties
or by reason of reckless disregard of the obligations and duties as trustee.
It also provides that all persons having any claim against the trustees or the
Company shall look solely to the trust property for payment. With the
exceptions stated, the Declaration of Trust provides that a trustee is entitled
to be indemnified against all liabilities and expenses reasonably incurred by
him or her in connection with the defense or disposition of any proceeding in
which the trustee may be involved or with which the trustee may be threatened
by reason of being or having been a trustee, and that the trustees have the
power, but not the duty, to indemnify officers and employees of the Company
unless such person would not be entitled to indemnification had he or she been
a trustee.
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<PAGE> 64
APPENDIX A
COMMERCIAL PAPER RATINGS
A Standard & Poor's commercial paper rating is a current
assessment of the likelihood of timely payment of debt considered short-term in
the relevant market. The following summarizes the rating categories used by
Standard and Poor's for commercial paper:
"A-1" - Issue's degree of safety regarding timely payment is
strong. Those issues determined to possess extremely strong safety
characteristics are denoted "A-1+."
"A-2" - Issue's capacity for timely payment is satisfactory.
However, the relative degree of safety is not as high as for issues designated
"A-1."
"A-3" - Issue has an adequate capacity for timely payment. It
is, however, somewhat more vulnerable to the adverse effects of changes and
circumstances than an obligation carrying a higher designation.
"B" - Issue has only a speculative capacity for timely
payment.
"C" - Issue has a doubtful capacity for payment.
"D" - Issue is in payment default.
Moody's commercial paper ratings are opinions of the ability
of issuers to repay punctually promissory obligations not having an original
maturity in excess of 9 months. The following summarizes the rating categories
used by Moody's for commercial paper:
"Prime-1" - Issuer or related supporting institutions are
considered to have a superior capacity for repayment of short-term promissory
obligations. Prime-1 repayment capacity will normally be evidenced by the
following characteristics: leading market positions in well established
industries; high rates of return on funds employed; conservative capitalization
structures with moderate reliance on debt and ample asset protection; broad
margins in earning coverage of fixed financial
A-1
<PAGE> 65
charges and high internal cash generation; and well established access to a
range of financial markets and assured sources of alternate liquidity.
"Prime-2" - Issuer or related supporting institutions are
considered to have a strong capacity for repayment of short-term promissory
obligations. This will normally be evidenced by many of the characteristics
cited above but to a lesser degree. Earnings trends and coverage ratios, while
sound, will be more subject to variation. Capitalization characteristics,
while still appropriate, may be more affected by external conditions. Ample
alternative liquidity is maintained.
"Prime-3" - Issuer or related supporting institutions have an
acceptable capacity for repayment of short-term promissory obligations. The
effects of industry characteristics and market composition may be more
pronounced. Variability in earnings and profitability may result in changes in
the level of debt protection measurements and the requirement for relatively
high financial leverage. Adequate alternate liquidity is maintained.
"Not Prime" - Issuer does not fall within any of the Prime
rating categories.
The three rating categories of Duff & Phelps for investment
grade commercial paper and short-term debt are "D-1," "D-2" and "D-3." Duff &
Phelps employs three designations, "D-1+," "D-1" and "D-1-," within the highest
rating category. The following summarizes the rating categories used by Duff &
Phelps for commercial paper:
"D-1+" - Debt possesses highest certainty of timely payment.
Short-term liquidity, including internal operating factors and/or access to
alternative sources of funds, is outstanding, and safety is just below
risk-free U.S. Treasury short-term obligations.
"D-1" - Debt possesses very high certainty of timely payment.
Liquidity factors are excellent and supported by good fundamental protection
factors. Risk factors are minor.
"D-1-" - Debt possesses high certainty of timely payment.
Liquidity factors are strong and supported by good fundamental protection
factors. Risk factors are very small.
"D-2" - Debt possesses good certainty of timely payment.
Liquidity factors and company fundamentals are sound. Although ongoing funding
needs may enlarge total financing requirements, access to capital markets is
good. Risk factors are small.
A-2
<PAGE> 66
"D-3" - Debt possesses satisfactory liquidity, and other
protection factors qualify issue as investment grade. Risk factors are larger
and subject to more variation. Nevertheless, timely payment is expected.
"D-4" - Debt possesses speculative investment characteristics.
Liquidity is not sufficient to ensure against disruption in debt service.
Operating factors and market access may be subject to a high degree of
variation.
"D-5" - Issuer has failed to meet scheduled principal and/or
interest payments.
Fitch short-term ratings apply to debt obligations that are
payable on demand or have original maturities of up to three years. The
following summarizes the rating categories used by Fitch for short-term
obligations:
"F-1+" - Securities possess exceptionally strong credit
quality. Issues assigned this rating are regarded as having the strongest
degree of assurance for timely payment.
"F-1" - Securities possess very strong credit quality. Issues
assigned this rating reflect an assurance of timely payment only slightly less
in degree than issues rated "F-1+."
"F-2" - Securities possess good credit quality. Issues
assigned this rating have a satisfactory degree of assurance for timely
payment, but the margin of safety is not as great as the "F-1+" and "F-1"
categories.
"F-3" - Securities possess fair credit quality. Issues
assigned this rating have characteristics suggesting that the degree of
assurance for timely payment is adequate; however, near-term adverse changes
could cause these securities to be rated below investment grade.
"F-S" - Securities possess weak credit quality. Issues
assigned this rating have characteristics suggesting a minimal degree of
assurance for timely payment and are vulnerable to near-term adverse changes in
financial and economic conditions.
"D" - Securities are in actual or imminent payment default.
Fitch may also use the symbol "LOC" with its short-term
ratings to indicate that the rating is based upon a letter of credit issued by
a commercial bank.
A-3
<PAGE> 67
Thomson BankWatch short-term ratings assess the likelihood of
an untimely or incomplete payment of principal or interest of unsubordinated
instruments having a maturity of one year or less which is issued by United
States commercial banks, thrifts and non-bank banks; non-United States banks;
and broker-dealers. The following summarizes the ratings used by Thomson
BankWatch:
"TBW-1" - This designation represents Thomson BankWatch's
highest rating category and indicates a very high degree of likelihood that
principal and interest will be paid on a timely basis.
"TBW-2" - This designation indicates that while the degree of
safety regarding timely payment of principal and interest is strong, the
relative degree of safety is not as high as for issues rated "TBW-1."
"TBW-3" - This designation represents the lowest investment
grade category and indicates that while the debt is more susceptible to adverse
developments (both internal and external) than obligations with higher ratings,
capacity to service principal and interest in a timely fashion is considered
adequate.
"TBW-4" - This designation indicates that the debt is regarded
as non-investment grade and therefore speculative.
IBCA assesses the investment quality of unsecured debt with an
original maturity of less than one year which is issued by bank holding
companies and their principal bank subsidiaries. The following summarizes the
rating categories used by IBCA for short-term debt ratings:
"A1+" - Obligations supported by the highest capacity for
timely repayment.
"A1" - Obligations are supported by a strong capacity for
timely repayment.
"A2" - Obligations are supported by a satisfactory capacity
for timely repayment, although such capacity may be susceptible to adverse
changes in business, economic or financial conditions.
"A3" - Obligations are supported by a satisfactory capacity
for timely repayment. Such capacity is more susceptible to adverse changes in
business, economic or financial conditions than for obligations in higher
categories.
A-4
<PAGE> 68
"B" - Obligations for which the capacity for timely repayment
is susceptible to adverse changes in business, economic or financial
conditions.
"C" - Obligations for which there is an inadequate capacity to
ensure timely repayment.
"D" - Obligations which have a high risk of default or which
are currently in default.
CORPORATE AND MUNICIPAL LONG-TERM DEBT RATINGS
The following summarizes the ratings used by Standard & Poor's
for corporate and municipal debt:
"AAA" - This designation represents the highest rating
assigned by Standard & Poor's to a debt obligation and indicates an extremely
strong capacity to pay interest and repay principal.
"AA" - Debt is considered to have a very strong capacity to
pay interest and repay principal and differs from AAA issues only in small
degree.
"A" - Debt is considered to have a strong capacity to pay
interest and repay principal although such issues are somewhat more susceptible
to the adverse effects of changes in circumstances and economic conditions than
debt in higher-rated categories.
"BBB" - Debt is regarded as having an adequate capacity to pay
interest and repay principal. Whereas such issues normally exhibit adequate
protection parameters, adverse economic conditions or changing circumstances
are more likely to lead to a weakened capacity to pay interest and repay
principal for debt in this category than in higher-rated categories.
"BB," "B," "CCC," "CC" and "C" - Debt is regarded, on balance,
as predominantly speculative with respect to capacity to pay interest and repay
principal in accordance with the terms of the obligation. "BB" indicates the
lowest degree of speculation and "C" the highest degree of speculation. While
such debt will likely have some quality and protective characteristics, these
are outweighed by large uncertainties or major risk exposures to adverse
conditions.
"BB" - Debt has less near-term vulnerability to default than
other speculative issues. However, it faces major ongoing uncertainties or
exposure to adverse business, financial or economic conditions which could lead
to inadequate capacity to meet timely interest and principal payments. The
"BB" rating
A-5
<PAGE> 69
category is also used for debt subordinated to senior debt that is assigned an
actual or implied "BBB-" rating.
"B" - Debt has a greater vulnerability to default but
currently has the capacity to meet interest payments and principal repayments.
Adverse business, financial or economic conditions will likely impair capacity
or willingness to pay interest and repay principal. The "B" rating category is
also used for debt subordinated to senior debt that is assigned an actual or
implied "BB" or "BB-" rating.
"CCC" - Debt has a currently identifiable vulnerability to
default, and is dependent upon favorable business, financial and economic
conditions to meet timely payment of interest and repayment of principal. In
the event of adverse business, financial or economic conditions, it is not
likely to have the capacity to pay interest and repay principal. The "CCC"
rating category is also used for debt subordinated to senior debt that is
assigned an actual or implied "B" or "B-" rating.
"CC" - This rating is typically applied to debt subordinated
to senior debt that is assigned an actual or implied "CCC" rating.
"C" - This rating is typically applied to debt subordinated to
senior debt which is assigned an actual or implied "CCC-" debt rating. The "C"
rating may be used to cover a situation where a bankruptcy petition has been
filed, but debt service payments are continued.
"CI" - This rating is reserved for income bonds on which no
interest is being paid.
"D" - Debt is in payment default. This rating is used when
interest payments or principal payments are not made on the date due, even if
the applicable grace period has not expired, unless S & P believes such
payments will be made during such grace period. "D" rating is also used upon
the filing of a bankruptcy petition if debt service payments are jeopardized.
PLUS (+) OR MINUS (-) - The ratings from "AA" through "CCC"
may be modified by the addition of a plus or minus sign to show relative
standing within the major rating categories.
"r" - This rating is attached to highlight derivative, hybrid,
and certain other obligations that S & P believes may experience high
volatility or high variability in expected returns due to non-credit risks.
Examples of such obligations are: securities whose principal or interest return
is indexed to equities, commodities, or currencies; certain swaps and options;
and interest only and principal only mortgage securities.
A-6
<PAGE> 70
The following summarizes the ratings used by Moody's for corporate and
municipal long-term debt:
"Aaa" - Bonds are judged to be of the best quality. They
carry the smallest degree of investment risk and are generally referred to as
"gilt edged." Interest payments are protected by a large or by an
exceptionally stable margin and principal is secure. While the various
protective elements are likely to change, such changes as can be visualized are
most unlikely to impair the fundamentally strong position of such issues.
"Aa" - Bonds 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 in
"Aaa" securities.
"A" - Bonds possess many favorable investment attributes and
are to be considered as upper medium-grade obligations. Factors giving
security to principal and interest are considered adequate but elements may be
present which suggest a susceptibility to impairment sometime in the future.
"Baa" - Bonds 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," "B," "Caa," "Ca," and "C" - Bonds that possess one of
these ratings provide questionable protection of interest and principal ("Ba"
indicates some speculative elements; "B" indicates a general lack of
characteristics of desirable investment; "Caa" represents a poor standing; "Ca"
represents obligations which are speculative in a high degree; and "C"
represents the lowest rated class of bonds). "Caa," "Ca" and "C" bonds may be
in default.
Con. (---) - Bonds for which the security depends upon the
completion of some act or the fulfillment of some condition are rated
conditionally. These are bonds secured by (a) earnings of projects under
construction, (b) earnings of projects unseasoned in operation experience, (c)
rentals which begin when facilities are completed, or (d) payments to which
some other limiting condition attaches. Parenthetical rating denotes
A-7
<PAGE> 71
probable credit stature upon completion of construction or elimination of basis
of condition.
Moody's applies numerical modifiers 1, 2 and 3 in each generic
classification from "Aa" to "B" in its bond rating system. The modifier 1
indicates that the issuer ranks in the higher end of its generic rating
category; the modifier 2 indicates a mid-range ranking; and the modifier 3
indicates that the issuer ranks at the lower end of its generic rating
category.
The following summarizes the long-term debt ratings used by
Duff & Phelps for corporate and municipal long-term debt:
"AAA" - Debt is considered to be of the highest credit
quality. The risk factors are negligible, being only slightly more than for
risk-free U.S. Treasury debt.
"AA" - Debt is considered of high credit quality. Protection
factors are strong. Risk is modest but may vary slightly from time to time
because of economic conditions.
"A" - Debt possesses protection factors which are average but
adequate. However, risk factors are more variable and greater in periods of
economic stress.
"BBB" - Debt possesses below average protection factors but
such protection factors are still considered sufficient for prudent investment.
Considerable variability in risk is present during economic cycles.
"BB," "B," "CCC," "DD," and "DP" - Debt that possesses one of
these ratings is considered to be below investment grade. Although below
investment grade, debt rated "BB" is deemed likely to meet obligations when
due. Debt rated "B" possesses the risk that obligations will not be met when
due. Debt rated "CCC" is well below investment grade and has considerable
uncertainty as to timely payment of principal, interest or preferred dividends.
Debt rated "DD" is a defaulted debt obligation, and the rating "DP" represents
preferred stock with dividend arrearages.
To provide more detailed indications of credit quality, the
"AA," "A," "BBB," "BB" and "B" ratings may be modified by the addition of a
plus (+) or minus (-) sign to show relative standing within these major
categories.
The following summarizes the highest four ratings used by
Fitch for corporate and municipal bonds:
"AAA" - Bonds considered to be investment grade and of the
highest credit quality. The obligor has an exceptionally
A-8
<PAGE> 72
strong ability to pay interest and repay principal, which is unlikely to be
affected by reasonably foreseeable events.
"AA" - Bonds considered to be investment grade and of very
high credit quality. The obligor's ability to pay interest and repay principal
is very strong, although not quite as strong as bonds rated "AAA." Because
bonds rated in the "AAA" and "AA" categories are not significantly vulnerable
to foreseeable future developments, short-term debt of these issuers is
generally rated "F-1+."
"A" - Bonds considered to be investment grade and of high
credit quality. The obligor's ability to pay interest and repay principal is
considered to be strong, but may be more vulnerable to adverse changes in
economic conditions and circumstances than bonds with higher ratings.
"BBB" - Bonds considered to be investment grade and of
satisfactory credit quality. The obligor's ability to pay interest and repay
principal is considered to be adequate. Adverse changes in economic conditions
and circumstances, however, are more likely to have an adverse impact on these
bonds, and therefore, impair timely payment. The likelihood that the ratings
of these bonds will fall below investment grade is higher than for bonds with
higher ratings.
"BB," "B," "CCC," "CC," "C," "DDD," "DD," and "D" - Bonds that
possess one of these ratings are considered by Fitch to be speculative
investments. The ratings "BB" to "C" represent Fitch's assessment of the
likelihood of timely payment of principal and interest in accordance with the
terms of obligation for bond issues not in default. For defaulted bonds, the
rating "DDD" to "D" is an assessment of the ultimate recovery value through
reorganization or liquidation.
To provide more detailed indications of credit quality, the
Fitch ratings from and including "AA" to "C" may be modified by the addition of
a plus (+) or minus (-) sign to show relative standing within these major
rating categories.
IBCA assesses the investment quality of unsecured debt with an
original maturity of more than one year which is issued by bank holding
companies and their principal bank subsidiaries. The following summarizes the
rating categories used by IBCA for long-term debt ratings:
"AAA" - Obligations for which there is the lowest expectation
of investment risk. Capacity for timely repayment of principal and interest is
substantial such that adverse changes in business, economic or financial
conditions are unlikely to increase investment risk substantially.
A-9
<PAGE> 73
"AA" - Obligations for which there is a very low expectation
of investment risk. Capacity for timely repayment of principal and interest is
substantial. Adverse changes in business, economic or financial conditions may
increase investment risk albeit not very significantly.
"A" - Obligations for which there is a low expectation of
investment risk. Capacity for timely repayment of principal and interest is
strong, although adverse changes in business, economic or financial conditions
may lead to increased investment risk.
"BBB" - Obligations for which there is currently a low
expectation of investment risk. Capacity for timely repayment of principal and
interest is adequate, although adverse changes in business, economic or
financial conditions are more likely to lead to increased investment risk than
for obligations in higher categories.
"BB," "B," "CCC," "CC," and "C" - Obligations are assigned one
of these ratings where it is considered that speculative characteristics are
present. "BB" represents the lowest degree of speculation and indicates a
possibility of investment risk developing. "C" represents the highest degree
of speculation and indicates that the obligations are currently in default.
IBCA may append a rating of plus (+) or minus (-) to a rating
to denote relative status within major rating categories.
Thomson BankWatch assesses the likelihood of an untimely
repayment of principal or interest over the term to maturity of long term debt
and preferred stock which are issued by United States commercial banks, thrifts
and non-bank banks; non-United States banks; and broker-dealers. The following
summarizes the rating categories used by Thomson BankWatch for long-term debt
ratings:
"AAA" - This designation represents the highest category
assigned by Thomson BankWatch to long-term debt and indicates that the ability
to repay principal and interest on a timely basis is extremely high.
"AA" - This designation indicates a very strong ability to
repay principal and interest on a timely basis with limited incremental risk
compared to issues rated in the highest category.
"A" - This designation indicates that the ability to repay
principal and interest is strong. Issues rated "A" could
A-10
<PAGE> 74
be more vulnerable to adverse developments (both internal and external) than
obligations with higher ratings.
"BBB" - This designation represents Thomson BankWatch's lowest
investment grade category and indicates an acceptable capacity to repay
principal and interest. Issues rated "BBB" are, however, more vulnerable to
adverse developments (both internal and external) than obligations with higher
ratings.
"BB," "B," "CCC," and "CC," - These designations are assigned
by Thomson BankWatch to non-investment grade long-term debt. Such issues are
regarded as having speculative characteristics regarding the likelihood of
timely payment of principal and interest. "BB" indicates the lowest degree of
speculation and "CC" the highest degree of speculation.
"D" - This designation indicates that the long-term debt is in
default.
PLUS (+) OR MINUS (-) - The ratings from "AAA" through "CC"
may include a plus or minus sign designation which indicates where within the
respective category the issue is placed.
MUNICIPAL NOTE RATINGS
A Standard and Poor's rating reflects the liquidity concerns
and market access risks unique to notes due in three years or less. The
following summarizes the ratings used by Standard & Poor's Ratings Group for
municipal notes:
"SP-1" - The issuers of these municipal notes exhibit very
strong or strong capacity to pay principal and interest. Those issues
determined to possess overwhelming safety characteristics are given a plus (+)
designation.
"SP-2" - The issuers of these municipal notes exhibit
satisfactory capacity to pay principal and interest.
"SP-3" - The issuers of these municipal notes exhibit
speculative capacity to pay principal and interest.
Moody's ratings for state and municipal notes and other
short-term loans are designated Moody's Investment Grade ("MIG") and variable
rate demand obligations are designated Variable Moody's Investment Grade
("VMIG"). Such ratings recognize the differences between short-term credit
risk and long-term risk. The following summarizes the ratings by Moody's
Investors Service, Inc. for short-term notes:
A-11
<PAGE> 75
"MIG-1"/"VMIG-1" - Loans bearing this designation are of the
best quality, enjoying strong protection by established cash flows, superior
liquidity support or demonstrated broad-based access to the market for
refinancing.
"MIG-2"/"VMIG-2" - Loans bearing this designation are of high
quality, with margins of protection ample although not so large as in the
preceding group.
"MIG-3"/"VMIG-3" - Loans bearing this designation are of
favorable quality, with all security elements accounted for but lacking the
undeniable strength of the preceding grades. Liquidity and cash flow
protection may be narrow and market access for refinancing is likely to be less
well established.
"MIG-4"/"VMIG-4" - Loans bearing this designation are of
adequate quality, carrying specific risk but having protection commonly
regarded as required of an investment security and not distinctly or
predominantly speculative.
"SG" - Loans bearing this designation are of speculative
quality and lack margins of protection.
Fitch and Duff & Phelps use the short-term ratings described
under Commercial Paper Ratings for municipal notes.
A-12
<PAGE> 76
TRUST FOR FEDERAL SECURITIES
(FedCash Portfolio)
Cross Reference Sheet
<TABLE>
<CAPTION>
Form N-1A Item Prospectus Caption
-------------- ------------------
<S> <C> <C>
1. Cover Page . . . . . . . . . . . . . . . . . Cover Page
2. Synopsis . . . . . . . . . . . . . . . . . Background and
Expense Information
3. Condensed Financial Information . . . . . . Financial Highlights;
Yields
4. General Description of
Registrant . . . . . . . . . . . . . . . . Cover Page; Financial
Highlights; Investment
Objective and Policies
5. Management of the Fund . . . . . . . . . . . Management of the Fund;
Dividends
6. Capital Stock and Other
Securities . . . . . . . . . . . . . . . . Cover Page; Financial
Highlights; Dividends;
Taxes; Description of
Shares and
Miscellaneous
7. Purchase of Securities Being
Offered . . . . . . . . . . . . . . . Management of the Fund;
Purchase and Redemption
of Shares
8. Redemption or Repurchase . . . . . . . . . . Purchase and Redemption
of Shares
9. Pending Legal Proceedings . . . . . . . . . Inapplicable
</TABLE>
<PAGE> 77
FedCash
An Investment Portfolio Offered By
Trust for Federal Securities
<TABLE>
<S> <C>
Bellevue Park Corporate Center For purchase and redemption orders only call:
400 Bellevue Parkway 800-441-7450 (in Delaware: 302-791-5350).
Suite 100 For yield information call: 800-821-6006
Wilmington, DE 19809 (FedCash shares code: 70; FedCash Dollar
shares code: 71).
For other information call: 800-821-7432.
</TABLE>
Trust for Federal Securities (the "Company") is a no-load, diversified,
open-end investment company that currently offers shares in six separate
investment portfolios. The shares described in this Prospectus represent
interests in the FedCash portfolio (the "Fund"), a money market portfolio.
The Fund's investment objective is to seek current income with liquidity
and security of principal. The Fund invests in a portfolio consisting of U.S.
Treasury bills, notes and other obligations issued or guaranteed by the U.S.
Government, its agencies or instrumentalities and repurchase agreements relating
to such obligations.
Fund shares may not be purchased by individuals directly, but institutional
investors may purchase shares for accounts maintained by individuals. In
addition to FedCash Shares, investors may purchase FedCash "Dollar Shares" which
accrue daily dividends in the same manner as FedCash Shares but bear all fees
payable by the Fund to institutional investors for certain services they provide
to the beneficial owners of such Shares. (See "Management of the Fund--Service
Organizations.")
PNC Institutional Management Corporation ("PIMC") and PNC Bank, National
Association ("PNC Bank") serve as the Fund's adviser and sub-adviser,
respectively. PFPC Inc. ("PFPC") and Provident Distributors Inc. ("PDI") serve
as the Fund's administrators. PDI also serves as the Fund's distributor.
------------------------
SHARES OF THE FUND ARE NOT DEPOSITS OR OBLIGATIONS OF OR GUARANTEED, ENDORSED,
OR OTHERWISE SUPPORTED BY PNC BANK CORP. OR ITS AFFILIATES, OR THE U.S.
GOVERNMENT, AND ARE NOT FEDERALLY INSURED BY THE FEDERAL DEPOSIT
INSURANCE CORPORATION, THE FEDERAL RESERVE BOARD OR ANY OTHER
AGENCY. AN INVESTMENT IN THE FUND INVOLVES INVESTMENT RISKS,
INCLUDING THE POSSIBLE LOSS OF PRINCIPAL. THERE CAN BE NO
ASSURANCE THAT IT WILL BE ABLE TO MAINTAIN ITS NET ASSET
VALUE OF $1.00 PER SHARE.
------------------------
This Prospectus briefly sets forth certain information about the Fund that
investors should know before investing. Investors are advised to read this
Prospectus and retain it for future reference. Additional information about the
Fund, contained in a Statement of Additional Information currently dated
February 28, 1996, has been filed with the Securities and Exchange Commission
and is available to investors without charge by calling the Fund at
800-821-7432. The Statement of Additional Information, as amended from time to
time, is incorporated in its entirety by reference into this Prospectus.
------------------------
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.
------------------------
February 28, 1996
<PAGE> 78
BACKGROUND AND EXPENSE INFORMATION
Two classes of shares are offered by this Prospectus: FedCash Shares and
FedCash Dollar Shares. Shares of each class represent equal, pro rata interests
in the Fund and accrue daily dividends in the same manner except that the Dollar
Shares bear fees payable by the Fund (at the rate of .25% per annum) to
institutional investors for services they provide to the beneficial owners of
such shares. (See "Management of the Fund--Service Organizations.")
EXPENSE SUMMARY
<TABLE>
<CAPTION>
FEDCASH
FEDCASH DOLLAR
SHARES SHARES
---------- ----------
<S> <C> <C> <C> <C>
ANNUAL FUND OPERATING EXPENSES
- ------------------------------------------------------------------
(as a percentage of average net assets)
Management Fees (net of waivers)............................. .07% .07%
Other Expenses............................................... .13% .38%
Administration Fees (net of waivers).................... .07% .07%
Shareholder Servicing Fees.............................. 0% .25%
Miscellaneous........................................... .04% .04%
--- ---
Total Fund Operating Expenses (net of waivers)............... .20% .45%
=== ===
</TABLE>
- ------------
<TABLE>
<CAPTION>
EXAMPLE 1 YEAR 3 YEARS 5 YEARS 10 YEARS
- -------------------------------------------------------- ------- -------- -------- ---------
<S> <C> <C> <C> <C>
You would pay the following expenses on a $1,000
investment, assuming (1) a 5% annual return and (2)
redemption at the end of each time period with respect
to the following shares:
FedCash Shares: $ 2 $ 6 $ 11 $26
FedCash Dollar Shares: $ 5 $ 14 $ 25 $57
</TABLE>
THE FOREGOING SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR FUTURE
EXPENSES OR RATE OF RETURN. ACTUAL EXPENSES AND RATE OF RETURN MAY BE GREATER OR
LESSER THAN THOSE SHOWN.
The purpose of the foregoing table is to assist an investor in
understanding the various costs and expenses that an investor in the Fund will
bear directly or indirectly. The table is based on expenses incurred by the
FedCash Shares and Dollar Shares during the last fiscal year, restated to
reflect the expenses which each class of shares expects to incur during the
current fiscal year. In addition, institutional investors may charge fees for
providing administrative services in connection with their customers' investment
in Dollar Shares. Absent fee waivers, Management and Administration fees for
FedCash Shares and Dollar Shares each would have been .13% and Total Fund
Operating Expenses would have been .30% and .55%, respectively. (For more
complete descriptions of the various costs and expenses, see "Management of the
Fund" in this Prospectus and the Statement of Additional Information and the
financial statements and related notes contained in the Statement of Additional
Information.) The investment adviser and administrators may from time to time
waive the advisory and administration fees otherwise payable to them or may
reimburse the Fund for its operating expenses. The foregoing table has not been
audited by the Fund's independent accountants.
2
<PAGE> 79
FINANCIAL HIGHLIGHTS
The following financial highlights for FedCash Shares have been derived
from the financial statements of the Fund for the fiscal year ended October 31,
1995 and for each of the three preceding fiscal years, and for the fiscal period
ended October 31, 1991 (commencement of operations), and for FedCash Dollar
Shares for the fiscal years ended October 31, 1995 and for each of the two
preceding fiscal years, and the fiscal period ended October 31, 1992
(commencement of operations). The financial highlights for the fiscal years set
forth below have been audited by Coopers & Lybrand L.L.P. independent
accountants whose report on the financial statements and financial highlights
(for the most recent five years) of the Fund is included in the Statement of
Additional Information. The tables should be read in conjunction with the
financial statements and related notes included in the Statement of Additional
Information. Further information about the performance of the Fund is available
in the annual report to shareholders, which may be obtained without charge by
calling 800-821-7432.
TRUST FOR FEDERAL SECURITIES
FINANCIAL HIGHLIGHTS
(FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)
FEDCASH SHARES
<TABLE>
<CAPTION>
YEAR ENDED OCTOBER 31, MAY 21, 1991(3)
----------------------------------------- TO
1995 1994 1993 1992 OCTOBER 31, 1991
-------- -------- -------- -------- ----------------
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Period............ $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
-------- -------- -------- -------- ----------------
Income From Investment Operations:
Net Investment Income......................... .0569 .0382 .0316 .0433 .0266
Net Realized Gains on Investments............. -- -- -- .0012 --
-------- -------- -------- -------- ----------------
Total From Investment Operations.............. .0569 .0382 .0316 .0445 .0266
-------- -------- -------- -------- ----------------
Less Distributions:
Dividends (From Net Investment Income)........ (.0569) (.0382) (.0316) (.0433) (.0266)
Distributions (From Capital Gains)............ -- -- -- (.0012) --
-------- -------- -------- -------- ----------------
Total Distributions........................... (.0569) (.0382) (.0316) (.0445) (.0266)
-------- -------- -------- -------- ----------------
Net Asset Value, End of Period.................. $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
========= ========= ========= ========= ================
Total Return.................................... 5.85% 3.89% 3.20% 4.54% 2.69%(4)
Ratios/Supplemental Data:
Net Assets, End of Period (in 000s)........... $356,602 $629,209 $447,942 $717,978 $290,558
Ratio of Expenses to Average Net Assets(1).... .18% .12% .10% .07% .00%(2)
Ratio of Net Investment Income to Average Net
Assets...................................... 5.67% 3.80% 3.16% 3.99% 5.80%(2)
</TABLE>
- ------------
(1) Without the waiver of advisory and administration fees and without expense
reimbursements, the ratio of expenses to average daily net assets for
FedCash Shares would have been .30%, .29%, .28% and .29%, respectively, for
each of the years ended October 31, 1995, 1994, 1993 and 1992, and .39%
(annualized) for the period ended October 31, 1991.
(2) Annualized.
(3) Commencement of operations.
(4) Total returns are not annualized for periods of less than one year.
3
<PAGE> 80
TRUST FOR FEDERAL SECURITIES
FINANCIAL HIGHLIGHTS
(FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)
FEDCASH DOLLAR SHARES
<TABLE>
<CAPTION>
YEAR ENDED OCTOBER 31, MAY 21, 1991(3)
----------------------------- TO
1995 1994 1993 OCTOBER 31, 1992
------- ------- ------- ----------------
<S> <C> <C> <C> <C>
Net Asset Value, Beginning of Period........................... $ 1.00 $ 1.00 $ 1.00 $ 1.00
------- ------- ------- -------
Income From Investment Operations:
Net Investment Income........................................ .0544 .0357 .0291 .0349
Net Realized Gains on Investments............................ -- -- -- .0012
------- ------- ------- -------
Total From Investment Operations............................. .0544 .0357 .0291 .0361
------- ------- ------- -------
Less Distributions:
Dividends (From Net Investment Income)....................... (.0544) (.0357) (.0291) (.0349)
Distributions (From Capital Gains)........................... -- -- -- (.0012)
------- ------- ------- -------
Total Distributions.......................................... (.0544) (0.357) (.0291) (.0361)
------- ------- ------- -------
Net Asset Value, End of Period................................. $ 1.00 $ 1.00 $ 1.00 $ 1.00
======= ======= ======= ===============
Total Returns.................................................. 5.60% 3.64% 2.95% 3.67%(4)
Ratios/Supplemental Data:
Net Assets, End of Period (in 000s).......................... $ 2,003 $22,737 $58,847 $ 53,813
Ratio of Expenses to Average Daily Net Assets(1)............. .43% .37% .35% .32%(2)
Ratio of Net Investment Income to Average Net Assets......... 5.42% 3.55% 2.91% 3.66%(2)
</TABLE>
- ------------
(1) Without the waiver of advisory and administration fees and without expense
reimbursements, the ratio of expenses to average daily net assets for
FedCash Dollar Shares would have been .55%, .54% and .53%, respectively, for
each of the years ended October 31, 1995, 1994 and 1993, and .54%
(annualized) for the period ended October 31, 1992.
(2) Annualized.
(3) First issuance of shares.
(4) Total returns are not annualized for periods of less than one year.
INVESTMENT OBJECTIVE AND POLICIES
The Fund's investment objective is to seek current income with liquidity
and security of principal. The Fund invests in obligations issued or guaranteed
by the U.S. Government, its agencies or instrumentalities (in addition to direct
Treasury obligations) and repurchase agreements relating to such obligations.
Portfolio obligations held by the Fund have remaining maturities of 397 days
(thirteen months) or less (with certain exceptions), subject to the quality,
diversification, and other requirements of Rule 2a-7 under the Investment
Company Act of 1940, as amended (the "1940 Act") and other rules of the
Securities and Exchange Commission (the "SEC").
The "agencies" or "instrumentalities" of the U.S. Government the
obligations of which may be purchased by FedCash include: the Central Bank for
Cooperatives, Export-Import Bank of the United States, Farmers Home
Administration, Federal Farm Credit Banks, Federal Financing Bank, Federal Home
Loan Banks, Federal Home Loan Mortgage Corporation, Federal Housing
Administration, Federal Intermediate Credit Banks, Federal Land Banks, Federal
National
4
<PAGE> 81
Mortgage Association, Financing Corporation General Services Administration,
Government National Mortgage Association, International Bank for Reconstruction
and Development, Maritime Administration, Private Export Funding Corp.,
Resolution Trust Company, Small Business Administration and Student Loan
Marketing Association. Obligations of certain agencies or instrumentalities of
the U.S. Government are backed by the full faith and credit of the United
States; others are backed by the right of the issuer to borrow from the U.S.
Treasury or are backed only by the credit of the agency or instrumentality
issuing the obligation.
Securities issued or guaranteed by the U.S. Government, its agencies and
instrumentalities have historically involved little risk of loss of principal if
held to maturity. However, due to fluctuations in interest rates, the market
value of such securities may vary during the period a shareholder owns shares of
the Fund. Certain government securities held by the Fund may have remaining
maturities exceeding thirteen months if such securities provide for adjustments
in their interest rates not less frequently than every thirteen months. To the
extent consistent with its investment objectives, the Fund may invest in
Treasury receipts and other "stripped" securities issued or guaranteed by the
U.S. Government, where the principal and interest components are traded
independently under the Separate Trading of Registered Interest and Principal of
Securities program ("STRIPS"). Under the STRIPS program, the principal and
interest components are individually numbered and separately issued by the U.S.
Treasury at the request of depository financial institutions, which then trade
the component parts independently. Currently, the Fund only invests in
"stripped" securities issued or guaranteed by the U.S. Government which are
registered under the STRIPS program. The principal and interest components may
exhibit greater price volatility than ordinary debt securities because of the
manner in which their principal and interest are returned to investors.
The Fund may purchase government securities from financial institutions,
such as banks and broker-dealers, subject to the seller's agreement to
repurchase them at an agreed upon time and price ("repurchase agreements"). The
securities subject to a repurchase agreement may bear maturities exceeding
thirteen months, provided the repurchase agreement itself matures in one year or
less. The Fund will not invest more than 10% of the value of its net assets in
repurchase agreements which do not provide for settlement within seven days. The
seller under a repurchase agreement will be required to maintain the value of
the securities subject to the agreement at not less than the repurchase price.
Default by or bankruptcy of the seller would, however, expose the Fund to
possible loss because of adverse market action or delay in connection with the
disposition of the underlying obligations.
The Fund may borrow funds for temporary purposes by entering into reverse
repurchase agreements in accordance with the investment restrictions described
below. Pursuant to such agreements, the Fund would sell portfolio securities to
financial institutions and agree to repurchase them at an agreed upon date and
price. The Fund would consider entering into reverse repurchase agreements to
avoid otherwise selling securities during unfavorable market conditions in order
to meet redemptions. Reverse repurchase agreements involve the risk that the
market value of the portfolio securities sold by the Fund may decline below the
price of the securities the Fund is obligated to repurchase.
The Fund may purchase securities on a "when-issued" basis. When-issued
securities are securities purchased for delivery beyond the normal settlement
date at a stated price and yield. The Fund will generally not pay for such
securities or start earning interest on them until they are received. Securities
purchased on a when-issued basis are recorded as an asset and are subject to
5
<PAGE> 82
changes in value based upon changes in the general level of interest rates. The
Fund expects that commitments to purchase when-issued securities will not exceed
25% of the value of its total assets absent unusual market conditions. The Fund
does not intend to purchase when-issued securities for speculative purposes but
only in furtherance of its investment objective.
The Fund may also lend its portfolio securities to financial institutions
in accordance with the investment restrictions described below. Such loans would
involve risks of delay in receiving additional collateral or in recovering the
securities loaned or even loss of rights in the collateral should the borrower
of the securities fail financially. However, loans will be made only to
borrowers deemed by the Fund's investment adviser to be of good standing and
only when, in the adviser's judgment, the income to be earned from the loans
justifies the attendant risks.
INVESTMENT LIMITATIONS
The Fund's investment objective and policies described above are not
fundamental and may be changed by the Company's Board of Trustees without a vote
of shareholders. If there is a change in the investment objective, shareholders
should consider whether the Fund remains an appropriate investment in light of
their then current financial position and needs. The Fund's investment
limitations summarized below may not be changed without the affirmative vote of
the holders of a majority of its outstanding shares. (A complete list of the
investment limitations that cannot be changed without a vote of shareholders is
contained in the Statement of Additional Information under "Investment
Objectives and Policies.")
The Fund may not:
1. Purchase securities other than U.S. Treasury bills, notes and other
obligations issued or guaranteed by the U.S. Government, its agencies or
instrumentalities, some of which may be subject to repurchase agreements.
2. Borrow money except from banks for temporary purposes and then in
an amount not exceeding 10% of the value of the Fund's total assets, or
mortgage, pledge or hypothecate its assets except in connection with any
such borrowing and in amounts not in excess of the lesser of the dollar
amounts borrowed or 10% of the value of the Fund's total assets at the time
of such borrowing.
3. Make loans except that the Fund may purchase or hold debt
obligations in accordance with its investment objective and policies, may
enter into repurchase agreements for securities and may lend portfolio
securities against collateral consisting of cash or securities which are
consistent with the Fund's permitted investments, which is equal at all
times to at least 100% of the value of the securities loaned. There is no
investment restriction on the amount of securities that may be loaned,
except that payments received on such loans, including amounts received
during the loan on account of interest on the securities loaned, may not
(together with all non-qualifying income) exceed 10% of the Fund's annual
gross income (without offset for realized capital gains) unless, in the
opinion of counsel to the Company, such amounts are qualifying income under
federal income tax provisions applicable to regulated investment companies.
6
<PAGE> 83
PURCHASE AND REDEMPTION OF SHARES
PURCHASE PROCEDURES
Fund shares are sold at the net asset value per share next determined after
receipt of a purchase order by PFPC, the Fund's transfer agent. Purchase orders
for shares are accepted only on days on which both the New York Stock Exchange
and the Federal Reserve Bank of Philadelphia are open for business (a "Business
Day") and must be transmitted to PFPC in Wilmington, Delaware, by telephone
(800-441-7450; in Delaware: 302-791-5350) or through the Fund's computer access
program. Orders received before 12:00 noon, Eastern time, for which payment has
been received by PNC Bank, the Fund's custodian, will be executed at 12:00 noon.
Orders received after 12:00 noon and before 3:00 P.M., Eastern time (or orders
received earlier in the same day for which payment has not been received by
12:00 noon), will be executed at 4:00 P.M., Eastern time, if payment has been
received by PNC Bank by that time. Orders received at other times, and orders
for which payment has not been received by 4:00 P.M., Eastern time, will not be
accepted, and notice thereof will be given to the institution placing the order.
(Payment for orders which are not received or accepted will be returned after
prompt inquiry to the sending institution.) The Fund may in its discretion
reject any order for shares.
Payment for Fund shares may be made only in federal funds or other funds
immediately available to PNC Bank. The minimum initial investment is $3 million
for FedCash Shares and $5,000 for Dollar Shares; Broker-dealers and other
institutional investors may set a higher minimum for their customers. There is
no minimum subsequent investment. The Fund, at its discretion, may reduce the
minimum initial investment for FedCash Shares for specific institutions whose
aggregate relationship with the Provident Institutional Funds is substantially
equivalent to this $3 million minimum and warrants this reduction.
Conflict of interest restrictions may apply to an institution's receipt of
compensation paid by the Fund in connection with the investment of fiduciary
funds in Dollar Shares. (See also "Management of the Fund--Service
Organizations.") Institutions, including banks regulated by the Comptroller of
the Currency and investment advisers and other money managers subject to the
jurisdiction of the SEC, the Department of Labor or state securities
commissions, should consult their legal advisors before investing fiduciary
funds in Dollar Shares. (See also "Management of the Fund--Banking Laws.")
REDEMPTION PROCEDURES
Redemption orders must be transmitted to PFPC in Wilmington, Delaware, in
the manner described under "Purchase Procedures." Shares are redeemed at the net
asset value per share next determined after PFPC's receipt of the redemption
order. While the Fund intends to use its best efforts to maintain its net asset
value per share at $1.00, the proceeds paid to a shareholder upon redemption may
be more or less than the amount invested depending upon a share's net asset
value at the time of redemption.
Payment for redeemed shares for which a redemption order is received by
PFPC by 3:00 P.M., Eastern time, on a Business Day is normally made in federal
funds wired to the redeeming shareholder on the same day. Payment for redemption
orders which are received between 3:00 P.M. and 4:00 P.M., Eastern time, or on a
day when PNC Bank is closed, is normally wired in federal funds on the next day
following redemption that PNC Bank is open for business.
7
<PAGE> 84
The Fund shall have the right to redeem shares in any account if the value
of the account is less than $1,000 after sixty-days' prior written notice to the
shareholder. Any such redemption shall be effected at the net asset value per
share next determined after the redemption order is entered. If during the
sixty-day period the shareholder increases the value of its account to $1,000 or
more, no such redemption shall take place. Moreover, if a shareholder's FedCash
Shares account falls below an average of $100,000 in any particular calendar
month, the account may be charged an account maintenance fee with respect to
that month. In addition, the Fund may also redeem shares involuntarily or
suspend the right of redemption under certain special circumstances described in
the Statement of Additional Information under "Additional Purchase and
Redemption Information."
OTHER MATTERS
The Fund's net asset value per share for purposes of pricing purchase and
redemption orders is determined by PIMC as of 12:00 noon and 4:00 P.M., Eastern
time, on each day on which both the Federal Reserve Bank of Philadelphia and the
New York Stock Exchange are open for business. Currently, one or both of these
institutions are closed on the customary national business holidays of New
Year's Day, Martin Luther King, Jr. Day, Presidents' Day, Good Friday, Memorial
Day (observed), Independence Day, Labor Day, Columbus Day (observed), Veteran's
Day, Thanksgiving Day and Christmas Day. The net asset value per share of each
class of the Fund is calculated by adding the value of all securities and other
assets belonging to the Fund, subtracting liabilities attributable to each
class, and dividing the result by the total number of the outstanding shares of
each class. In computing net asset value, the Fund uses the amortized cost
method of valuation as described in the Statement of Additional Information
under "Additional Purchase and Redemption Information." The Fund's net asset
value per share for purposes of pricing purchase and redemption orders is
determined independently of the net asset values of the shares of the Company's
other investment portfolios.
Fund shares are sold and redeemed without charge by the Fund. Institutional
investors purchasing or holding Fund shares for their customer accounts may
charge customer fees for cash management and other services provided in
connection with their accounts. A customer should, therefore, consider the terms
of its account with an institution before purchasing Fund shares. An institution
purchasing or redeeming Fund shares on behalf of its customers is responsible
for transmitting orders to the Fund in accordance with its customer agreements.
MANAGEMENT OF THE FUND
BOARD OF TRUSTEES
The business and affairs of the Fund are managed under the direction of the
Company's Board of Trustees. The trustees of the Company are as follows:
Philip E. Coldwell is an economic consultant and a former Member of
the Board of Governors of the Federal Reserve System.
Robert R. Fortune is a financial consultant and former Chairman,
President and Chief Executive Officer of Associated Electric & Gas
Insurance Services Limited.
Rodney D. Johnson is President of Fairmount Capital Advisors, Inc.
8
<PAGE> 85
G. Willing Pepper, Chairman of the Board and President of the Company,
is a retired President of Scott Paper Company.
Mr. Pepper is considered by the Company to be an "interested person" of the
Company as defined in the 1940 Act.
The other officers of the Company are as follows:
Edward J. Roach is Vice President and Treasurer of the Company.
W. Bruce McConnel, III, Secretary of the Company, is a partner of the
law firm of Drinker Biddle & Reath, Philadelphia, Pennsylvania.
INVESTMENT ADVISER AND SUB-ADVISER
PIMC, a wholly-owned subsidiary of PNC Bank, serves as the Fund's
investment adviser. PIMC was organized in 1977 by PNC Bank to perform advisory
services for investment companies, and has its principal offices at 400 Bellevue
Parkway, Wilmington, Delaware 19809. PNC Bank serves as the Fund's sub-adviser.
PNC Bank is one of the largest bank managers of investments for individuals in
the United States, and together with its predecessors has been in the business
of managing the investments of fiduciary and other accounts since 1847. PNC Bank
is a wholly-owned, indirect subsidiary of PNC Bank Corp. and has its principal
offices at Broad and Chestnut Streets, Philadelphia, Pennsylvania 19102. PNC
Bank Corp. is a multi-bank holding company. PIMC and PNC Bank also serve as
adviser and sub-adviser, respectively, to the Company's FedFund, T-Fund, T-Cash,
Federal Trust Fund and Treasury Trust Fund portfolios.
PNC Bank Corp., headquartered in Pittsburgh, Pennsylvania, is one of the
largest financial services organizations in the United States with banking
subsidiaries in Pennsylvania, New Jersey, Delaware, Ohio, Kentucky, Indiana,
Massachusetts and Florida. Its major businesses include corporate banking,
consumer banking, mortgage banking and asset management.
PNC Financial Services Group is PNC Bank Corp.'s mutual fund complex,
headquartered in Wilmington, Delaware. This group includes PIMC, PFPC and PNC
Bank. In 1973, Provident National Bank (predecessor to PNC Bank) commenced
advising the first institutional money market mutual fund -- a U.S.
dollar-denominated constant net asset value fund -- offered in the United
States.
The PNC Financial Services Group is one of largest U.S. bank managers of
mutual funds with assets currently under management in excess of $30 billion.
This group, through PFPC and PFPC International Ltd., is also a leading mutual
fund service provider having contractual relationships with approximately 370
mutual funds with 3.5 million shareholders and in excess of $101 billion in
assets, including some $2 billion in non-U.S. assets. This group, through its
PNC Institutional Investment Service, provides investment research to some 250
financial institutions located in the United States and abroad. PNC Bank
provides custodial services for approximately $210 billion in assets, including
$160 billion in mutual fund assets.
As adviser, PIMC manages the Fund's portfolio and is responsible for all
purchases and sales of the Fund's portfolio securities. PIMC also maintains
certain of the Fund's financial accounts and records and computes the Fund's net
asset value and net income. For the advisory services provided and expenses
assumed by it, PIMC is entitled to receive a fee, computed daily and payable
monthly, based on the Fund's average net assets. PIMC and the administrators may
from time to time reduce the advisory and administration fees otherwise payable
to them or may reimburse the Fund for its
9
<PAGE> 86
operating expenses. Any fees waived or expenses reimbursed by PIMC and the
administrators with respect to a particular fiscal year are not recoverable. For
the fiscal year ended October 31, 1995, the Fund paid advisory fees aggregating
.07% of the Fund's average net assets.
As sub-adviser, PNC Bank provides research, credit analysis and
recommendations with respect to the Fund's investments, and supplies PIMC with
certain computer facilities, personnel and other services. For its sub-advisory
services, PNC Bank is entitled to receive from PIMC an amount equal to 75% of
the advisory fee paid by the Fund to PIMC (subject to adjustment in certain
circumstances). The sub-advisory fees paid by PIMC to PNC Bank have no effect on
the advisory fees payable by the Fund to PIMC. PNC Bank also serves as the
Fund's custodian. The services provided by PNC Bank and PIMC and the fees
payable by the Fund for these services are described further in the Statement of
Additional Information under "Management of the Funds."
ADMINISTRATORS
PFPC, whose principal business address is 400 Bellevue Parkway, Wilmington,
Delaware 19809, and PDI whose principal business address is 259 Radnor-Chester
Road, Suite 120, Radnor, Pennsylvania 19087, serve as administrators. PFPC is an
indirect wholly-owned subsidiary of PNC Bank Corp. A majority of the outstanding
stock of PDI is owned by its officers. The administrative services provided by
the administrators, which are described more fully in the Statement of
Additional Information include providing and supervising the operation of an
automated data processing system to process purchase and redemption orders;
assisting in maintaining the Fund's Wilmington, Delaware office; performing
administration services in connection with the Fund's computer access program
maintained to facilitate shareholder access to the Fund; accumulating
information for and coordinating the preparation of reports to the Fund's
shareholders and the SEC; and maintaining the registration or qualification of
the Fund's shares for sale under state securities laws. PFPC and PDI are each
responsible for carrying out the duties undertaken pursuant to the
Administration Agreement with the Fund.
For their administrative services, the administrators are entitled jointly
to receive a fee computed daily and payable monthly. (For information regarding
the administrators' waivers and expense reimbursements, see "Investment Adviser
and Sub-Adviser" above.) The Fund also reimburses each administrator for its
reasonable out-of-pocket expenses incurred in connection with the Funds'
computer access program. For the fiscal year ended October 31, 1995, the Fund
paid administration fees aggregating .07% of its average net assets.
PFPC also serves as transfer agent, registrar and dividend disbursing
agent. PFPC's address is P.O. Box 8950, Wilmington, Delaware 19885-9628. The
services provided by PFPC and PDI and the fees payable by the Fund for these
services are described further in the Statement of Additional Information under
"Management of the Funds."
DISTRIBUTOR
PDI serves as distributor of the Fund's shares. Its principal offices are
located at 259 Radnor-Chester Road, Suite 120, Radnor, Pennsylvania 19087. Fund
shares are sold on a continuous basis by the distributor as agent. The
distributor pays the cost of printing and distributing prospectuses to persons
who are not shareholders of the Fund (excluding preparation and printing
expenses necessary for the continued registration of the Fund's shares) and of
printing and distributing all sales literature. No compensation is payable by
the Fund to the distributor for its distribution services.
10
<PAGE> 87
SERVICE ORGANIZATIONS
Institutional investors, such as banks, savings and loan associations and
other financial institutions, including affiliates of PNC Bank Corp. ("Service
Organizations"), may purchase Dollar Shares. Dollar Shares are identical in all
respects to the Company's FedCash Shares except that they bear the service fees
described below and enjoy certain exclusive voting rights on matters relating to
these fees. The Fund will enter into an agreement with each Service Organization
which purchases Dollar Shares requiring it to provide support services to its
customers who are the beneficial owners of such shares in consideration of the
Fund's payment of .25% (on an annualized basis) of the average daily net asset
value of the Dollar Shares held by the Service Organization for the benefit of
customers. Such services, which are described more fully in the Statement of
Additional Information under "Management of the Funds--Service Organizations,"
include aggregating and processing purchase and redemption requests from
customers and placing net purchase and redemption orders with PFPC; processing
dividend payments from the Fund on behalf of customers; providing information
periodically to customers showing their positions in Dollar Shares; and
providing sub-accounting or the information necessary for sub-accounting with
respect to Dollar Shares beneficially owned by customers. Under the terms of the
agreements, Service Organizations are required to provide to their customers a
schedule of any fees that they may charge customers in connection with their
investments in Dollar Shares. FedCash Shares are sold to institutions that have
not entered into servicing agreements with the Fund in connection with their
investments.
EXPENSES
Except as noted above and in the Statement of Additional Information, the
Fund's service contractors bear all expenses in connection with the performance
of their services. Similarly, the Fund bears the expenses incurred in its
operations. For the fiscal year ended October 31, 1995, the Fund's total
expenses with respect to FedCash Shares and Dollar Shares were .18% and .43%
(net of fee waivers of .12% and .12%, respectively) of the average net assets of
FedCash Shares and FedCash Dollar Shares, respectively. With regard to fees paid
exclusively by Dollar Shares, see "Service Organizations" above.
BANKING LAWS
Banking laws and regulations presently prohibit a bank holding company
registered under the Federal Bank Holding Company Act of 1956 or any bank or
non-bank affiliate thereof from sponsoring, organizing or controlling a
registered, open-end investment company engaged continuously in the issuance of
its shares, and prohibit banks generally from issuing, underwriting, selling or
distributing securities such as Fund shares. Such banking laws and regulations
do not prohibit such a holding company or affiliate or banks generally from
acting as investment adviser, transfer agent or custodian to such an investment
company, or from purchasing shares of such a company for or upon the order of
customers. PNC Bank, PIMC and PFPC, as well as some Service Organizations, are
subject to such banking laws and regulations, but believe they may perform the
services for the Fund contemplated by their respective agreements, this
Prospectus and the Statement of Additional Information without violating
applicable banking laws or regulations.
Should future legislative, judicial or administrative action prohibit or
restrict the activities of bank Service Organizations in connection with the
provision of support services to their customers, the Fund might be required to
alter or discontinue its arrangements with Service
11
<PAGE> 88
Organizations and change its method of operations with respect to Dollar shares.
It is not anticipated, however, that any change in the Fund's method of
operations would affect its net asset value per share or result in a financial
loss to any customer.
DIVIDENDS
Shareholders of the Fund are entitled to dividends and distributions
arising only from the net investment income and capital gains, if any, earned on
investments held by the Fund. The Fund's net investment income is declared daily
as a dividend to its shareholders of record at the close of business on the day
of declaration. Shares begin accruing dividends on the day the purchase order
for the shares is executed and continue to accrue dividends through, and
including, the day before such shares are redeemed. Dividends are paid monthly
by check, or by wire transfer if requested in writing by the shareholder, within
five business days after the end of the month or within five business days after
a redemption of all of a shareholder's shares of a particular class. The Fund
does not expect to realize net long-term capital gains.
Dividends are determined in the same manner for each class of shares of the
Fund. Dollar Shares bear all the expense of fees paid to Service Organizations
and as a result, at any given time, the net yield on Dollar Shares will be
approximately .25% lower than the net yield on FedCash Shares.
Institutional shareholders may elect to have their dividends reinvested in
additional full and fractional shares of the same class of shares with respect
to which such dividends are declared at the net asset value of such shares on
the payment date. Reinvested dividends receive the same tax treatment as
dividends paid in cash. Such election, or any revocation thereof, must be made
in writing to PFPC at P.O. Box 8950, Wilmington, Delaware 19885-9628, and will
become effective after its receipt by PFPC with respect to dividends paid.
PFPC, as transfer agent, will send each Fund shareholder or its authorized
representative an annual statement designating the amount, if any, of any
dividends and distributions made during each year and their federal tax
qualification.
TAXES
The Fund qualified in its last taxable year and intends to qualify in
future years as a "regulated investment company" under the Internal Revenue Code
of 1986, as amended (the "Code"). A regulated investment company is generally
exempt from federal income tax on amounts distributed to its shareholders.
Qualification as a regulated investment company under the Code for a
taxable year requires, among other things, that the Fund distribute to its
shareholders at least 90% of its investment company taxable income for such
year. In general, the Fund's investment company taxable income will be its
taxable income (including interest and short-term capital gains, if any),
subject to certain adjustments and excluding the excess of any net long-term
capital gain for the taxable year over the net short-term capital loss, if any,
for such year. The Fund intends to distribute substantially all of its
investment company taxable income each year. Such distributions will be taxable
as ordinary income to the Fund's shareholders that are not currently exempt from
federal income taxes, whether such income is received in cash or reinvested in
additional shares. (Federal income taxes for distributions to an IRA or a
qualified retirement plan are deferred under the Code.) It is anticipated that
none of the Fund's distributions will be eligible for the dividends received
deduction for corporations. The
12
<PAGE> 89
Fund does not expect to realize long-term capital gains and, therefore, does not
contemplate payment of any "capital gain dividends," as described in the Code.
Dividends declared in October, November or December of any year payable to
shareholders of record on a specified date in such months will be deemed to have
been received by the shareholders and paid by the Fund on December 31 of such
year, in the event such dividends are actually paid during January of the
following year.
The foregoing discussion is only a brief summary of some of the important
federal tax considerations generally affecting the Fund and its shareholders. As
indicated above, IRAs receive special tax treatment. No attempt is made to
present a detailed explanation of the federal, state or local income tax
treatment of the Fund or its shareholders, and this discussion is not intended
as a substitute for careful tax planning. Accordingly, potential investors in
the Fund should consult their tax advisors with specific reference to their own
tax situations.
YIELDS
From time to time in advertisements or in reports to Shareholders, the
"yields" and "effective yields" for FedCash Shares and Dollar Shares may be
quoted. Yield quotations are computed for FedCash Shares separately from those
for Dollar Shares. The "yield" for a particular class or sub-class of Fund
shares refers to the income generated by an investment in such shares over a
specified period (such as a seven-day period). This income is then "annualized";
that is, the amount of income generated by the investment during that period is
assumed to be generated for each such period over a 52-week or one-year period
and is shown as a percentage of the investment. The "effective-yield" is
calculated similarly but, when annualized, the income earned by an investment in
a particular class or sub-class is assumed to be reinvested. The "effective
yield" will be slightly higher than the "yield" because of the compounding
effect of this assumed reinvestment.
The Fund's yields may be compared to those of other mutual funds with
similar objectives, to stock or other relevant indices, or to rankings prepared
by independent services or other financial or industry publications that monitor
the performance of mutual funds. For example, such data are reported in national
financial publications such as IBC/Donoghue's Money Fund Report(R), The Wall
Street Journal, and The New York Times, reports prepared by Lipper Analytical
Services, Inc., and publications of a local or regional nature.
The Fund's yield figures for FedCash Shares and FedCash Dollar Shares
represent the Fund's past performance, will fluctuate, and should not be
considered as representative of future results. The yield of any investment is
generally a function of portfolio quality and maturity, type of investment and
operating expenses. Any fees charged by Service Organizations or other
institutional investors directly to their customers in connection with
investments in Fund shares are not reflected in the Fund's yields; and, such
fees, if charged, would reduce the actual return received by customers on their
investments. The methods used to compute the Fund's yields are described in more
detail in the Statement of Additional Information. Investors may call
800-821-6006 (FedCash Shares code: 70; FedCash Dollar Shares code: 71) to obtain
current yield information.
DESCRIPTION OF SHARES AND MISCELLANEOUS
The Company is a Pennsylvania business trust established on May 14, 1975.
Effective March 2, 1987, the Company's name was changed from Trust for
Short-Term Federal Securities to Trust for Federal Securities. The Company
commenced operations of the Fund in May, 1991.
13
<PAGE> 90
The Company's Declaration of Trust authorizes the Board of Trustees to
issue an unlimited number of full and fractional shares of beneficial interest
in the Company and to classify or reclassify any unissued shares into one or
more additional classes of shares. Pursuant to such authority, the Board of
Trustees has authorized the issuance of twelve classes of shares designated as
FedFund, FedFund Dollar, T-Fund, T-Fund Dollar, FedCash, FedCash Dollar, T-Cash,
T-Cash Dollar, Federal Trust, Federal Trust Dollar, Treasury Trust and Treasury
Trust Dollar. The Declaration of Trust further authorizes the trustees to
classify or reclassify any class of shares into one or more sub-classes.
THIS PROSPECTUS AND THE STATEMENT OF ADDITIONAL INFORMATION INCORPORATED
HEREIN RELATE PRIMARILY TO THE FUND AND DESCRIBE ONLY THE INVESTMENT OBJECTIVE
AND POLICIES, OPERATIONS, CONTRACTS AND OTHER MATTERS RELATING TO THE FUND.
INVESTORS WISHING TO OBTAIN SIMILAR INFORMATION REGARDING THE COMPANY'S FEDFUND,
T-FUND, T-CASH, FEDERAL TRUST FUND AND TREASURY TRUST FUND PORTFOLIOS MAY OBTAIN
SEPARATE PROSPECTUSES DESCRIBING THOSE PORTFOLIOS BY CALLING THE DISTRIBUTOR AT
800-998-7633.
The Company does not presently intend to hold annual meetings of
shareholders except as required by the 1940 Act or other applicable law. The
Company will call a meeting of shareholders for the purpose of voting upon the
question of removal of a member of the Board of Trustees upon written request of
shareholders owning at least 10% of the outstanding shares of the Company
entitled to vote.
Each Fund Share represents an equal proportionate interest in the assets
belonging to the Fund. Each share is without par value and has no preemptive or
conversion rights. When issued for payment as described in this Prospectus,
shares will be fully paid and non-assessable.
Holders of the Company's FedCash Shares and FedCash Dollar Shares will vote
in the aggregate and not by class or sub-class on all matters, except where
otherwise required by law and except that only Dollar Shares will be entitled to
vote on matters submitted to a vote of shareholders pertaining to the Fund's
arrangements with Service Organizations. Further, shareholders of all of the
Company's portfolios will vote in the aggregate and not by portfolio except as
otherwise required by law or when the Board of Trustees determines that the
matter to be voted upon affects only the interests of the shareholders of a
particular portfolio. (See the Statement of Additional Information under
"Additional Description Concerning Fund Shares" for examples where the 1940 Act
requires voting by portfolio.) Shareholders of the Company are entitled to one
vote for each full share held (irrespective of class, sub-class, or portfolio)
and fractional votes for fractional shares held. Voting rights are not
cumulative and, accordingly, the holders of more than 50% of the aggregate
shares of the Company may elect all of the trustees.
For information concerning the redemption of Fund shares and possible
restrictions on their transferability, see "Purchase and Redemption of Shares."
As stated above, the Company is organized as a trust under the laws of the
Commonwealth of Pennsylvania. Shareholders of such a trust may, under certain
circumstances, be held personally liable (as if they were partners) for the
obligations of the trust. The Company's Declaration of Trust provides for
indemnification out of the trust property of any shareholder of the Fund held
personally liable solely by reason of being or having been a shareholder and not
because of any acts or omissions or some other reason.
14
<PAGE> 91
NO PERSON HAS BEEN AUTHORIZED
TO GIVE ANY INFORMATION OR TO
MAKE ANY REPRESENTATIONS NOT
CONTAINED IN THIS PROSPECTUS,
OR IN THE FUND'S STATEMENT OF
ADDITIONAL INFORMATION
INCORPORATED HEREIN BY
REFERENCE, IN CONNECTION WITH
THE OFFERING MADE BY THIS
PROSPECTUS AND, IF GIVEN OR
MADE, SUCH INFORMATION OR
REPRESENTATIONS MUST NOT BE
RELIED UPON AS HAVING BEEN
AUTHORIZED BY THE COMPANY OR
ITS DISTRIBUTOR. THIS
PROSPECTUS DOES NOT
CONSTITUTE AN OFFERING BY THE
COMPANY OR BY THE DISTRIBUTOR
IN ANY JURISDICTION IN WHICH
SUCH OFFERING MAY NOT
LAWFULLY BE MADE.
---------------------------------------------------------------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
------
<S> <C>
Background and Expense
Information................... 2
Financial Highlights............ 3
Investment Objective and
Policies...................... 4
Purchase and Redemption of
Shares........................ 7
Management of the Fund.......... 8
Dividends....................... 12
Taxes........................... 12
Yields.......................... 13
Description of Shares and
Miscellaneous................. 13
</TABLE>
PIF-P-004
FEDCASH
AN INVESTMENT PORTFOLIO
OFFERED BY
TRUST FOR FEDERAL SECURITIES
LOGO
Prospectus
February 28, 1996
<PAGE> 92
TRUST FOR FEDERAL SECURITIES
(T-Cash Portfolio)
Cross Reference Sheet
<TABLE>
<CAPTION>
Form N-1A Item Prospectus Caption
-------------- ------------------
<S> <C> <C>
1. Cover Page . . . . . . . . . . . . . . . . . Cover Page
2. Synopsis . . . . . . . . . . . . . . . . . Background and
Expense Information
3. Condensed Financial Information . . . . . . Financial Highlights;
Yields
4. General Description of
Registrant . . . . . . . . . . . . . . . . Cover Page; Financial
Highlights; Investment
Objective and Policies
5. Management of the Fund . . . . . . . . . . . Management of the Fund;
Dividends
6. Capital Stock and Other
Securities . . . . . . . . . . . . . . . . Cover Page; Financial
Highlights; Dividends;
Taxes; Description of
Shares and
Miscellaneous
7. Purchase of Securities Being
Offered . . . . . . . . . . . . . . . Management of the Fund;
Purchase and Redemption
of Shares
8. Redemption or Repurchase . . . . . . . . . . Purchase and Redemption
of Shares
9. Pending Legal Proceedings . . . . . . . . . Inapplicable
</TABLE>
<PAGE> 93
T-Cash
An Investment Portfolio Offered By
Trust for Federal Securities
<TABLE>
<S> <C>
Bellevue Park Corporate Center For purchase and redemption orders only call:
400 Bellevue Parkway 800-441-7450 (in Delaware: 302-791-5350).
Suite 100 For yield information call: 800-821-6006
Wilmington, DE 19809 (T-Cash shares code: 72; T-Cash Dollar shares
code: 73).
For other information call: 800-821-7432.
</TABLE>
Trust for Federal Securities (the "Company") is a no-load, diversified,
open-end investment company that currently offers shares in six separate
investment portfolios. The shares described in this Prospectus represent
interests in the T-Cash portfolio (the "Fund"), a money market portfolio.
The Fund's investment objective is to seek current income with liquidity
and security of principal. The Fund invests in a portfolio consisting of U.S.
Treasury bills, notes and direct obligations of the U.S. Treasury and repurchase
agreements relating to direct Treasury obligations.
Fund shares may not be purchased by individuals directly, but institutional
investors may purchase shares for accounts maintained by individuals. In
addition to T-Cash Shares, investors may purchase T-Cash "Dollar Shares" which
accrue daily dividends in the same manner as T-Cash Shares but bear all fees
payable by the Fund to institutional investors for certain services they provide
to the beneficial owners of such Shares. (See "Management of the Fund--Service
Organizations.")
PNC Institutional Management Corporation ("PIMC") and PNC Bank, National
Association ("PNC Bank") serve as the Fund's adviser and sub-adviser,
respectively. PFPC Inc. ("PFPC") and Provident Distributors, Inc. ("PDI") serve
as the Fund's administrators. PDI also serves as the Fund's distributor.
SHARES OF THE FUND ARE NOT DEPOSITS OR OBLIGATIONS OF OR GUARANTEED,
ENDORSED, OR OTHERWISE SUPPORTED BY PNC BANK CORP. OR ITS AFFILIATES, OR
THE U.S. GOVERNMENT, AND ARE NOT FEDERALLY INSURED BY THE FEDERAL
DEPOSIT INSURANCE CORPORATION, THE FEDERAL RESERVE BOARD OR ANY
OTHER AGENCY. AN INVESTMENT IN THE FUND INVOLVES INVESTMENT
RISKS, INCLUDING THE POSSIBLE LOSS OF PRINCIPAL. THERE
CAN BE NO ASSURANCE THAT IT WILL BE ABLE TO
MAINTAIN ITS NET ASSET VALUE OF $1.00 PER
SHARE.
This Prospectus briefly sets forth certain information about the Fund that
investors should know before investing. Investors are advised to read this
Prospectus and retain it for future reference. Additional information about the
Fund, contained in a Statement of Additional Information currently dated
February 28, 1996, has been filed with the Securities and Exchange Commission
and is available to investors without charge by calling the Fund at
800-821-7432. The Statement of Additional Information, as amended from time to
time, is incorporated in its entirety by reference into this Prospectus.
------------------------
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.
------------------------
February 28, 1996
<PAGE> 94
BACKGROUND AND EXPENSE INFORMATION
Two classes of shares are offered by this Prospectus: T-Cash Shares and
T-Cash Dollar Shares. Shares of each class represent equal, pro rata interests
in the Fund and accrue daily dividends in the same manner except that the Dollar
Shares bear fees payable by the Fund (at the rate of .25% per annum) to
institutional investors for services they provide to the beneficial owners of
such shares. (See "Management of the Fund--Service Organizations.")
EXPENSE SUMMARY
<TABLE>
<CAPTION>
T-CASH
T-CASH DOLLAR
SHARES SHARES
------------ ------------
<S> <C> <C> <C> <C>
ANNUAL FUND OPERATING EXPENSES
- ---------------------------------------------------------------
(as a percentage of average net assets)
Management Fees (net of waivers).......................... .06% .06%
Other Expenses............................................ .14% .39%
Administration Fees (net of waivers)................. .06% .06%
Shareholder Servicing Fees........................... 0% .25%
Miscellaneous........................................ .06% .06%
--- ---
Total Fund Operating Expenses (net of waivers)............ .20% .45%
=== ===
</TABLE>
- ------------
<TABLE>
<CAPTION>
EXAMPLE 1 YEAR 3 YEARS 5 YEARS 10 YEARS
- ------- ------ ------- ------- --------
<S> <C> <C> <C> <C>
You would pay the following expenses on a $1,000
investment, assuming (1) a 5% annual return and
(2) redemption at the end of each time period with
respect to the following shares:
T-Cash Shares: $2 $ 6 $11 $ 26
T-Cash Dollar Shares: $5 $14 $25 $ 57
</TABLE>
THE FOREGOING SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR FUTURE
EXPENSES OR RATE OF RETURN. ACTUAL EXPENSES AND RATE OF RETURN MAY BE GREATER OR
LESSER THAN THOSE SHOWN.
The purpose of the foregoing table is to assist an investor in
understanding the various costs and expenses that an investor in the Fund will
bear directly or indirectly. The table is based on expenses incurred by the
T-Cash Shares and Dollar Shares during the last fiscal year, restated to reflect
the expenses which each class of shares expects to incur during the current
fiscal year. In addition, institutional investors may charge fees for providing
administrative services in connection with their customers' investment in Dollar
Shares. Absent fee waivers, Management and Administration fees for T-Cash Shares
and Dollar Shares each would have been .13% and Total Fund Operating Expenses
would have been .30% and .55%, respectively. (For more complete descriptions of
the various costs and expenses, see "Management of the Fund" in this Prospectus
and the Statement of Additional Information and the financial statements and
related notes contained in the Statement of Additional Information.) The
investment adviser and administrators may from time to time waive the advisory
and administration fees otherwise payable to them or may reimburse the Fund for
its operating expenses. The foregoing table has not been audited by the Fund's
independent accountants.
2
<PAGE> 95
FINANCIAL HIGHLIGHTS
The following financial highlights for T-Cash Fund Shares have been derived
from the financial statements of the Fund for the fiscal year ended October 31,
1995 and for each of the three preceding fiscal years, and for the fiscal period
ended October 31, 1991 (commencement of operations) and for T-Cash Dollar Shares
for the fiscal years ended October 31, 1995 and for each of the two preceding
fiscal years, and for the fiscal period ended October 31, 1992 (commencement of
operations). The financial highlights for the fiscal years set forth below have
been audited by Coopers & Lybrand L.L.P. independent accountants whose report on
the financial statements and financial highlights (for the most recent five
years) of the Fund is included in the Statement of Additional Information. The
tables should be read in conjunction with the financial statements and related
notes included in the Statement of Additional Information. Further information
about the performance of the Fund is available in the annual report to
shareholders, which may be obtained without charge by calling 800-821-7432.
TRUST FOR FEDERAL SECURITIES
FINANCIAL HIGHLIGHTS
(For a Share Outstanding Throughout Each Period)
T-CASH SHARES
<TABLE>
<CAPTION>
T-CASH SHARES
--------------------------------------------------------------------
YEAR ENDED OCTOBER 31, JUNE 5, 1991(3)
----------------------------------------------- TO
1995 1994 1993 1992 OCTOBER 31, 1991
-------- -------- -------- -------- ----------------
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Period.............. $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
-------- -------- -------- -------- --------
Income From Investment Operations:
Net Investment Income........................... .0565 .0371 .0311 .0406 .0235
-------- -------- -------- -------- --------
Total From Investment Operations................ .0565 .0371 .0311 .0406 .0235
-------- -------- -------- -------- --------
Less Distributions:
Dividends to Shareholders from:
Net Investment Income........................... (.0565) (.0371) (.0311) (.0406) (.0235)
-------- -------- -------- -------- --------
Total Distributions............................. (.0565) (.0371) (.0311) (.0406) (.0235)
-------- -------- -------- -------- --------
Net Asset Value, End of Period.................... $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
======== ======== ======== ======== ========
Total Return:..................................... 5.80% 3.77% 3.15% 4.13% 2.38%(4)
Ratios/Supplemental Data
Net Assets, End of Period (in 000s)............... $250,041 $217,910 $424,641 $477,599 $301,526
Ratio of Expenses to Average Net Assets(1)........ .18% .11% .10% .06% .00%(2)
Ratio of Net Investment Income to Average Net
Assets.......................................... 5.66% 3.58% 3.11% 3.99% 5.70%(2)
</TABLE>
- ------------
(1) Without the waiver of advisory and administration fees and without expense
reimbursements, the ratio of expenses to average daily net assets for T-Cash
Shares would have been .30%, .30%, .29% and .29%, respectively, for each of the
years ended October 31, 1995, 1994, 1993 and 1992, and .37% (annualized) for the
period ended October 31, 1991.
(2) Annualized.
(3) Commencement of operations.
(4) Total returns are not annualized for periods of less than one year.
3
<PAGE> 96
TRUST FOR FEDERAL SECURITIES
FINANCIAL HIGHLIGHTS
(For a Share Outstanding Throughout Each Period)
T-CASH DOLLAR SHARES
<TABLE>
<CAPTION>
T-CASH DOLLAR SHARES
--------------------------------------------------
AUGUST 4,
YEAR ENDED OCTOBER 31, 1992(3)
------------------------------ TO
1995 1994 1993 OCTOBER 31, 1992
------- ------- -------- ----------------
<S> <C> <C> <C> <C>
Net Asset Value, Beginning of Period................... $ 1.00 $ 1.00 $ 1.00 $ 1.00
------- ------- -------- --------
Income from Investment Operations:
Net Investment Income................................ .0540 .0346 .0286 .0080
------- ------- -------- --------
Total From Investment Operations..................... .0540 .0346 .0286 .0080
------- ------- -------- --------
Less Distributions:
Dividends to Shareholders from:
Net Investment Income................................ (.0540) (.0346) (.0286) (.0080)
------- ------- -------- --------
Total Distributions.................................. (.0540) (.0346) (.0286) (.0080)
------- ------- -------- --------
Net Asset Value, End of Period......................... $ 1.00 $ 1.00 $ 1.00 $ 1.00
======== ======== ========= =================
Total Return........................................... 5.55% 3.52% 2.90% .76%(4)
Ratios/Supplemental Data
Net Assets, End of Period (in 000s).................... $63,537 $82,293 $161,176 $ 24,261
Ratio of Expenses to Average
Net Assets(1)........................................ .43% .36% .35% .35%(2)
Ratio of Net Investment Income to Average Net Assets... 5.41% 3.33% 2.86% 3.03%(2)
</TABLE>
- ------------
(1) Without the waiver of advisory and administration fees and without expense
reimbursements, the ratio of expenses to average daily net assets for T-Cash
Dollar Shares would have been .55%, .55% and .54% for the years ended October
31, 1995, 1994 and 1993 and .58% (annualized) for the period ended October 31,
1992.
(2) Annualized.
(3) First issuance of shares.
(4) Total returns are not annualized for periods of less than one year.
INVESTMENT OBJECTIVE AND POLICIES
The Fund's investment objective is to seek current income with liquidity
and security of principal. The Fund invests solely in direct obligations of the
U.S. Treasury, such as Treasury bills and notes and repurchase agreements
relating to direct Treasury obligations. Portfolio obligations held by the Fund
have remaining maturities of 397 days (thirteen months) or less (with certain
exceptions), subject to the quality, diversification, and other requirements of
Rule 2a-7 under the Investment Company Act of 1940, as amended (the "1940 Act")
and other rules of the Securities and Exchange Commission (the "SEC").
Securities issued or guaranteed by the U.S. Government have historically
involved little risk of loss of principal if held to maturity. However, due to
fluctuations in interest rates, the market value of such securities may vary
during the period a shareholder owns shares of the Fund. Certain government
securities held by the Fund may have remaining maturities exceeding
4
<PAGE> 97
thirteen months if such securities provide for adjustments in their interest
rates not less frequently than every thirteen months. To the extent consistent
with its investment objectives, the Fund may invest in Treasury receipts and
other "stripped" securities issued or guaranteed by the U.S. Government, where
the principal and interest components are traded independently under the
Separate Trading of Registered Interest and Principal of Securities program
("STRIPS"). Under the STRIPS program, the principal and interest components are
individually numbered and separately issued by the U.S. Treasury at the request
of depository financial institutions, which then trade the component parts
independently. Currently, the Fund only invests in "stripped" securities issued
or guaranteed by the U.S. Government which are registered under the STRIPS
program. The principal and interest components may exhibit greater price
volatility than ordinary debt securities because of the manner in which their
principal and interest are returned to investors.
The Fund may purchase government securities from financial institutions,
such as banks and broker-dealers, subject to the seller's agreement to
repurchase them at an agreed upon time and price ("repurchase agreements"). The
securities subject to a repurchase agreement may bear maturities exceeding
thirteen months, provided the repurchase agreement itself matures in one year or
less. The Fund will not invest more than 10% of the value of its net assets in
repurchase agreements which do not provide for settlement within seven days. The
seller under a repurchase agreement will be required to maintain the value of
the securities subject to the agreement at not less than the repurchase price.
Default by or bankruptcy of the seller would, however, expose the Fund to
possible loss because of adverse market action or delay in connection with the
disposition of the underlying obligations.
The Fund may borrow funds for temporary purposes by entering into reverse
repurchase agreements in accordance with the investment restrictions described
below. Pursuant to such agreements, the Fund would sell portfolio securities to
financial institutions and agree to repurchase them at an agreed upon date and
price. The Fund would consider entering into reverse repurchase agreements to
avoid otherwise selling securities during unfavorable market conditions in order
to meet redemptions. Reverse repurchase agreements involve the risk that the
market value of the portfolio securities sold by the Fund may decline below the
price of the securities the Fund is obligated to repurchase.
The Fund may purchase securities on a "when-issued" basis. When-issued
securities are securities purchased for delivery beyond the normal settlement
date at a stated price and yield. The Fund will generally not pay for such
securities or start earning interest on them until they are received. Securities
purchased on a when-issued basis are recorded as an asset and are subject to
changes in value based upon changes in the general level of interest rates. The
Fund expects that commitments to purchase when-issued securities will not exceed
25% of the value of its total assets absent unusual market conditions. The Fund
does not intend to purchase when-issued securities for speculative purposes but
only in furtherance of its investment objective.
The Fund may also lend its portfolio securities to financial institutions
in accordance with the investment restrictions described below. Such loans would
involve risks of delay in receiving additional collateral or in recovering the
securities loaned or even loss of rights in the collateral should the borrower
of the securities fail financially. However, loans will be made only to
borrowers deemed by the Fund's investment adviser to be of good standing and
only when, in the adviser's judgment, the income to be earned from the loans
justifies the attendant risks.
5
<PAGE> 98
INVESTMENT LIMITATIONS
The Fund's investment objective and policies described above are not
fundamental and may be changed by the Company's Board of Trustees without a vote
of shareholders. If there is a change in the investment objective, shareholders
should consider whether the Fund remains an appropriate investment in light of
their then current financial position and needs. The Fund's investment
limitations summarized below may not be changed without the affirmative vote of
the holders of a majority of its outstanding shares. (A complete list of the
investment limitations that cannot be changed without a vote of shareholders is
contained in the Statement of Additional Information under "Investment
Objectives and Policies.")
The Fund may not:
1. Purchase securities other than direct obligations of the U.S.
Treasury such as Treasury bills and notes, some of which may be subject to
repurchase agreements.
2. Borrow money except from banks for temporary purposes and then in
an amount not exceeding 10% of the value of the Fund's total assets, or
mortgage, pledge or hypothecate its assets except in connection with any
such borrowing and in amounts not in excess of the lesser of the dollar
amounts borrowed or 10% of the value of the Fund's total assets at the time
of such borrowing.
3. Make loans except that the Fund may purchase or hold debt
obligations in accordance with its investment objective and policies, may
enter into repurchase agreements for securities and may lend portfolio
securities against collateral consisting of cash or securities which are
consistent with the Fund's permitted investments, which is equal at all
times to at least 100% of the value of the securities loaned. There is no
investment restriction on the amount of securities that may be loaned,
except that payments received on such loans, including amounts received
during the loan on account of interest on the securities loaned, may not
(together with all non-qualifying income) exceed 10% of the Fund's annual
gross income (without offset for realized capital gains) unless, in the
opinion of counsel to the Company, such amounts are qualifying income under
federal income tax provisions applicable to regulated investment companies.
PURCHASE AND REDEMPTION OF SHARES
PURCHASE PROCEDURES
Fund shares are sold at the net asset value per share next determined after
receipt of a purchase order by PFPC, the Fund's transfer agent. Purchase orders
for shares are accepted only on days on which both the New York Stock Exchange
and the Federal Reserve Bank of Philadelphia are open for business (a "Business
Day") and must be transmitted to PFPC in Wilmington, Delaware, by telephone
(800-441-7450; in Delaware: 302-791-5350) or through the Fund's computer access
program. Orders received before 12:00 noon, Eastern time, for which payment has
been received by PNC Bank, the Fund's custodian will be executed at 12:00 noon.
Orders received after 12:00 noon and before 3:00 P.M., Eastern time (or orders
received earlier in the same day for which payment has not been received by
12:00 noon), will be executed at 4:00 P.M., Eastern time, if payment has been
received by PNC Bank by that time. Orders received
6
<PAGE> 99
at other times, and orders for which payment has not been received by 4:00 P.M.,
Eastern time, will not be accepted, and notice thereof will be given to the
institution placing the order. (Payment for orders which are not received or
accepted will be returned after prompt inquiry to the sending institution.) The
Fund may in its discretion reject any order for shares.
Payment for Fund shares may be made only in federal funds or other funds
immediately available to PNC Bank. The minimum initial investment is $3 million
for T-Cash Shares and $5,000 for Dollar Shares. Broker-dealers and other
institutional investors may set a higher minimum for their customers. There is
no minimum subsequent investment. The Fund, at its discretion, may reduce the
minimum initial investment for T-Cash Shares for specific institutions whose
aggregate relationship with the Provident Institutional Funds is substantially
equivalent to this $3 million minimum and warrants this reduction.
Conflict of interest restrictions may apply to an institution's receipt of
compensation paid by the Fund in connection with the investment of fiduciary
funds in Dollar Shares. (See also "Management of the Fund--Service
Organizations.") Institutions, including banks regulated by the Comptroller of
the Currency and investment advisers and other money managers subject to the
jurisdiction of the SEC, the Department of Labor or state securities
commissions, should consult their legal advisors before investing fiduciary
funds in Dollar Shares. (See also "Management of the Fund--Banking Laws.")
REDEMPTION PROCEDURES
Redemption orders must be transmitted to PFPC in Wilmington, Delaware, in
the manner described under "Purchase Procedures." Shares are redeemed at the net
asset value per share next determined after PFPC's receipt of the redemption
order. While the Fund intends to use its best efforts to maintain its net asset
value per share at $1.00, the proceeds paid to a shareholder upon redemption may
be more or less than the amount invested depending upon a share's net asset
value at the time of redemption.
Payment for redeemed shares for which a redemption order is received by
PFPC by 3:00 P.M., Eastern time, on a Business Day is normally made in federal
funds wired to the redeeming shareholder on the same day. Payment for redemption
orders which are received between 3:00 P.M. and 4:00 P.M., Eastern time, or on a
day when PNC Bank is closed, is normally wired in federal funds on the next day
following redemption that PNC Bank is open for business.
The Fund shall have the right to redeem shares in any account if the value
of the account is less than $1,000 after sixty-days' prior written notice to the
shareholder. Any such redemption shall be effected at the net asset value per
share next determined after the redemption order is entered. If during the
sixty-day period the shareholder increases the value of its account to $1,000 or
more, no such redemption shall take place. Moreover, if a shareholder's T-Cash
Shares account falls below an average of $100,000 in any particular calendar
month, the account may be charged an account maintenance fee with respect to
that month. In addition, the Fund may also redeem shares involuntarily or
suspend the right of redemption under certain special circumstances described in
the Statement of Additional Information under "Additional Purchase and
Redemption Information."
7
<PAGE> 100
OTHER MATTERS
The Fund's net asset value per share for purposes of pricing purchase and
redemption orders is determined by PIMC as of 12:00 noon and 4:00 P.M., Eastern
time, on each day on which both the Federal Reserve Bank of Philadelphia and the
New York Stock Exchange are open for business. Currently, one or both of these
institutions are closed on the customary national business holidays of New
Year's Day, Martin Luther King, Jr. Day, Presidents' Day, Good Friday, Memorial
Day (observed), Independence Day, Labor Day, Columbus Day (observed), Veteran's
Day, Thanksgiving Day and Christmas Day. The net asset value per share of each
class of the Fund is calculated by adding the value of all securities and other
assets belonging to the Fund, subtracting liabilities attributable to each class
and dividing the result by the total number of the outstanding shares of each
class. In computing net asset value, the Fund uses the amortized cost method of
valuation as described in the Statement of Additional Information under
"Additional Purchase and Redemption Information." The Fund's net asset value per
share for purposes of pricing purchase and redemption orders is determined
independently of the net asset values of the shares of the Company's other
investment portfolios.
Fund shares are sold and redeemed without charge by the Fund. Institutional
investors purchasing or holding Fund shares for their customer accounts may
charge customer fees for cash management and other services provided in
connection with their accounts. A customer should, therefore, consider the terms
of its account with an institution before purchasing Fund shares. An institution
purchasing or redeeming Fund shares on behalf of its customers is responsible
for transmitting orders to the Fund in accordance with its customer agreements.
MANAGEMENT OF THE FUND
BOARD OF TRUSTEES
The business and affairs of the Fund are managed under the direction of the
Company's Board of Trustees. The trustees of the Company are as follows:
Philip E. Coldwell is an economic consultant and a former Member of
the Board of Governors of the Federal Reserve System.
Robert R. Fortune is a financial consultant and former Chairman,
President and Chief Executive Officer of Associated Electric & Gas
Insurance Services Limited.
Rodney D. Johnson is President of Fairmount Capital Advisors, Inc.
G. Willing Pepper, Chairman of the Board and President of the Company,
is a retired President of Scott Paper Company.
Mr. Pepper is considered by the Company to be an "interested person" of the
Company as defined in the 1940 Act.
The other officers of the Company are as follows:
Edward J. Roach is Vice President and Treasurer of the Company.
W. Bruce McConnel, III, Secretary of the Company, is a partner of the
law firm of Drinker Biddle & Reath, Philadelphia, Pennsylvania.
8
<PAGE> 101
INVESTMENT ADVISER AND SUB-ADVISER
PIMC, a wholly-owned subsidiary of PNC Bank, serves as the Fund's
investment adviser. PIMC was organized in 1977 by PNC Bank to perform advisory
services for investment companies and has its principal offices at Bellevue Park
Corporate Center, 400 Bellevue Parkway, Wilmington, Delaware 19809. PNC Bank
serves as the Fund's sub-adviser. PNC Bank is one of the largest bank managers
of investments for individuals in the United States, and together with its
predecessors has been in the business of managing the investments of fiduciary
and other accounts since 1847. PNC Bank is a wholly-owned, indirect subsidiary
of PNC Bank Corp. and has its principal offices at Broad and Chestnut Streets,
Philadelphia, Pennsylvania 19102. PNC Bank Corp. is a multi-bank holding
company. PIMC and PNC Bank also serve as adviser and sub-adviser, respectively,
to the Company's FedFund, T-Fund, FedCash, Federal Trust Fund and Treasury Trust
Fund portfolios.
PNC Bank Corp., headquartered in Pittsburgh, Pennsylvania, is one of the
largest financial services organizations in the United States with banking
subsidiaries in Pennsylvania, New Jersey, Delaware, Ohio, Kentucky, Indiana,
Massachusetts and Florida. Its major businesses include corporate banking,
consumer banking, mortgage banking and asset management.
PNC Financial Services Group is PNC Bank Corp.'s mutual fund complex,
headquartered in Wilmington, Delaware. This group includes PIMC, PFPC, and PNC
Bank. In 1973, Provident National Bank (predecessor to PNC Bank) commenced
advising the first institutional money market mutual fund - a U.S.
dollar-denominated constant net asset value fund - offered in the United States.
The PNC Financial Services Group is one of the largest U.S. bank managers
of mutual funds with assets currently under management in excess of $30 billion.
This group, through PFPC and PFPC International Ltd, is also a leading mutual
fund service provider having contractual relationships with approximately 370
mutual funds with 3.5 million shareholders and in excess of $101 billion in
assets, including some $2 billion in non-U.S. assets. This group, through its
PNC Institutional Investment Service, provides investment research to some 250
financial institutions located in the United States and abroad. PNC Bank
provides custodial services for approximately $210 billion in assets, including
$160 billion in mutual fund assets.
As adviser, PIMC manages the Fund's portfolio and is responsible for all
purchases and sales of the Fund's portfolio securities. PIMC also maintains
certain of the Fund's financial accounts and records and computes the Fund's net
asset value and net income. For the advisory services provided and expenses
assumed by it, PIMC is entitled to receive a fee, computed daily and payable
monthly, based on the Fund's average net assets. PIMC and the administrators may
from time to time reduce the advisory and administration fees otherwise payable
to them or may reimburse the Fund for its operating expenses. Any fees waived or
expenses reimbursed by PIMC or the administrators with respect to a particular
fiscal year are not recoverable. For the fiscal year ended October 31, 1995, the
Fund paid advisory fees aggregating .06% of the Fund's average net assets.
As sub-adviser, PNC Bank provides research, credit analysis and
recommendations with respect to the Fund's investments, and supplies PIMC with
certain computer facilities, personnel and other services. For its sub-advisory
services, PNC Bank is entitled to receive from PIMC an amount equal to 75% of
the advisory fee paid by the Fund to PIMC (subject to adjustment in certain
circumstances). The sub-advisory fees paid by PIMC to PNC Bank have no effect on
the
9
<PAGE> 102
advisory fees payable by the Fund to PIMC. PNC Bank also serves as the Fund's
custodian. The services provided by PNC Bank and PIMC and the fees payable by
the Fund for these services are described further in the Statement of Additional
Information under "Management of the Funds."
ADMINISTRATORS
PFPC, whose principal business address is 400 Bellevue Parkway, Wilmington,
Delaware 19809, and PDI whose principal business address is 259 Radnor-Chester
Road, Suite 120, Radnor, Pennsylvania 19087, serve as administrators. PFPC is an
indirect wholly-owned subsidiary of PNC Bank Corp. A majority of the outstanding
stock of PDI is owned by its officers. The administrative services provided by
the administrators, which are described more fully in the Statement of
Additional Information, include providing and supervising the operation of an
automated data processing system to process purchase and redemption orders;
assisting in maintaining the Fund's Wilmington, Delaware office; performing
administration services in connection with the Fund's computer access program
maintained to facilitate shareholder access to the Fund; accumulating
information for and coordinating the preparation of reports to the Fund's
shareholders and the SEC; and maintaining the registration or qualification of
the Fund's shares for sale under state securities laws. PFPC and PDI are each
responsible for carrying out the duties undertaken pursuant to the
Administration Agreement with the Fund.
For their administrative services, the administrators are entitled jointly
to receive a fee computed daily and payable monthly. (For information regarding
the administrators' waivers and expense reimbursements, see "Investment Adviser
and Sub-Adviser" above.) The Fund also reimburses each administrator for its
reasonable out-of-pocket expenses incurred in connection with the Funds'
computer access program. For the fiscal year ended October 31, 1995, the Fund
paid administration fees aggregating less than .06% of its average net assets.
PFPC also serves as transfer agent, registrar and dividend disbursing
agent. PFPC's address is P.O. Box 8950, Wilmington, Delaware 19885-9628. The
services provided by PFPC and PDI and the fees payable by the Fund for these
services are described further in the Statement of Additional Information under
"Management of the Funds."
DISTRIBUTOR
PDI serves as distributor of the Fund's shares. Its principal offices are
located at 259 Radnor-Chester Road, Suite 120, Radnor, Pennsylvania 19087. Fund
shares are sold on a continuous basis by the distributor as agent. The
distributor pays the cost of printing and distributing prospectuses to persons
who are not shareholders of the Fund (excluding preparation and printing
expenses necessary for the continued registration of the Fund's shares) and of
printing and distributing all sales literature. No compensation is payable by
the Fund to the distributor for its distribution services.
SERVICE ORGANIZATIONS
Institutional investors, such as banks, savings and loan associations and
other financial institutions, including affiliates of PNC Bank Corp. ("Service
Organizations"), may purchase Dollar Shares. Dollar Shares are identical in all
respects to the Company's T-Cash Shares except that they bear the service fees
described below and enjoy certain exclusive voting rights on matters relating to
these fees. The Fund will enter into an agreement with each Service
10
<PAGE> 103
Organization which purchases Dollar Shares requiring it to provide support
services to its customers who are the beneficial owners of such shares in
consideration of the Fund's payment of .25% (on an annualized basis) of the
average daily net asset value of the Dollar Shares held by the Service
Organization for the benefit of customers. Such services, which are described
more fully in the Statement of Additional Information under "Management of the
Funds--Service Organizations," include aggregating and processing purchase and
redemption requests from customers and placing net purchase and redemption
orders with PFPC; processing dividend payments from the Fund on behalf of
customers; providing information periodically to customers showing their
positions in Dollar Shares; and providing sub-accounting or the information
necessary for sub-accounting with respect to Dollar Shares beneficially owned by
customers. Under the terms of the agreements, Service Organizations are required
to provide to their customers a schedule of any fees that they may charge
customers in connection with their investments in Dollar Shares. T-Cash Shares
are sold to institutions that have not entered into servicing agreements with
the Fund in connection with their investments.
EXPENSES
Except as noted above and in the Statement of Additional Information, the
Fund's service contractors bear all expenses in connection with the performance
of their services. Similarly, the Fund bears the expenses incurred in its
operations. For the fiscal year ended October 31, 1995, the Fund's total
expenses with respect to T-Cash Shares and Dollar Shares were .18% and .43% (net
of fee waivers of .12% and .12%, respectively) of the average net assets of the
T-Cash Shares and T-Cash Dollar Shares, respectively. With regard to fees paid
exclusively by Dollar Shares, see "Service Organizations" above.
BANKING LAWS
Banking laws and regulations presently prohibit a bank holding company
registered under the Federal Bank Holding Company Act of 1956 or any bank or
non-bank affiliate thereof from sponsoring, organizing or controlling a
registered, open-end investment company engaged continuously in the issuance of
its shares, and prohibit banks generally from issuing, underwriting, selling or
distributing securities such as Fund shares. Such banking laws and regulations
do not prohibit such a holding company or affiliate or banks generally from
acting as investment adviser, transfer agent or custodian to such an investment
company, or from purchasing shares of such a company for or upon the order of
customers. PNC Bank, PIMC and PFPC, as well as some Service Organizations, are
subject to such banking laws and regulations, but believe they may perform the
services for the Fund contemplated by their respective agreements, this
Prospectus and the Statement of Additional Information without violating
applicable banking laws or regulations.
Should future legislative, judicial or administrative action prohibit or
restrict the activities of bank Service Organizations in connection with the
provision of support services to their customers, the Fund might be required to
alter or discontinue its arrangements with Service Organizations and change its
method of operations with respect to Dollar shares. It is not anticipated,
however, that any change in the Fund's method of operations would affect its net
asset value per share or result in a financial loss to any customer.
11
<PAGE> 104
DIVIDENDS
Shareholders of the Fund are entitled to dividends and distributions
arising only from the net investment income and capital gains, if any, earned on
investments held by the Fund. The Fund's net investment income is declared daily
as a dividend to its shareholders of record at the close of business on the day
of declaration. Shares begin accruing dividends on the day the purchase order
for the shares is executed and continue to accrue dividends through, and
including, the day before such shares are redeemed. Dividends are paid monthly
by check, or by wire transfer if requested in writing by the shareholder, within
five business days after the end of the month or within five business days after
a redemption of all of a shareholder's shares of a particular class. The Fund
does not expect to realize net long-term capital gains.
Dividends are determined in the same manner for each class of shares of the
Fund. Dollar Shares bear all the expense of fees paid to Service Organizations
and as a result, at any given time, the net yield on Dollar Shares will be
approximately .25% lower than the net yield on T-Cash Shares.
Institutional shareholders may elect to have their dividends reinvested in
additional full and fractional shares of the same class of shares with respect
to which such dividends are declared at the net asset value of such shares on
the payment date. Reinvested dividends receive the same tax treatment as
dividends paid in cash. Such election, or any revocation thereof, must be made
in writing to PFPC at P.O. Box 8950, Wilmington, Delaware 19885-9628, and will
become effective after its receipt by PFPC with respect to dividends paid.
PFPC, as transfer agent, will send each Fund shareholder or its authorized
representative an annual statement designating the amount, if any, of any
dividends and distributions made during each year and their federal tax
qualification.
TAXES
The Fund qualified in its last taxable year and intends to qualify in
future years as a "regulated investment company" under the Internal Revenue Code
of 1986, as amended (the "Code"). A regulated Investment Company is generally
exempt from federal income tax on amounts distributed to its shareholders.
Qualification as a regulated investment company under the Code for a
taxable year requires, among other things, that the Fund distribute to its
shareholders at least 90% of its investment company taxable income for such
year. In general, the Fund's investment company taxable income will be its
taxable income (including interest and short-term capital gains, if any),
subject to certain adjustments and excluding the excess of any net long-term
capital gain for the taxable year over the net short-term capital loss, if any,
for such year. The Fund intends to distribute substantially all of its
investment company taxable income each year. Such distributions will be taxable
as ordinary income to the Fund's shareholders that are not currently exempt from
federal income taxes, whether such income is received in cash or reinvested in
additional shares. (Federal income taxes for distributions to an IRA or a
qualified retirement plan are deferred under the Code.) It is anticipated that
none of the Fund's distributions will be eligible for the dividends received
deduction for corporations. The Fund does not expect to realize long-term
capital gains and, therefore, does not contemplate payment of any "capital gain
dividends," as described in the Code.
12
<PAGE> 105
Dividends declared in October, November or December of any year payable to
shareholders of record on a specified date in such months will be deemed to have
been received by the shareholders and paid by the Fund on December 31 of such
year, in the event such dividends are actually paid during January of the
following year.
The foregoing discussion is only a brief summary of some of the important
federal tax considerations generally affecting the Fund and its shareholders. As
indicated above, IRAs receive special tax treatment. No attempt is made to
present a detailed explanation of the federal, state or local income tax
treatment of the Fund or its shareholders, and this discussion is not intended
as a substitute for careful tax planning. Accordingly, potential investors in
the Fund should consult their tax advisors with specific reference to their own
tax situations.
YIELDS
From time to time in advertisements or in reports to shareholders, the
"yields" and "effective yields" for T-Cash Shares and Dollar Shares may be
quoted. Yield quotations are computed for T-Cash Shares separately from those
for Dollar Shares. The "yield" for a particular class or sub-class of Fund
shares refers to the income generated by an investment in such shares over
specified period (such as a seven-day period). This income is then "annualized";
that is, the amount of income generated by the investment during that period is
assumed to be generated for each such period over a 52-week or one-year period
and is shown as a percentage of the investment. The "effective yield" is
calculated similarly but, when annualized, the income earned by an investment in
a particular class or sub-class of shares is assumed to be reinvested. The
"effective yield" will be slightly higher than the "yield" because of the
compounding effect of this assumed reinvestment.
The Fund's yields may be compared to those of other mutual funds with
similar objectives, to stock or other relevant indices, or to rankings prepared
by independent services or other financial or industry publications that monitor
the performance of mutual funds. For example, such data are reported in national
financial publications such as IBC/Donoghue's Money Fund Report(R), The Wall
Street Journal, and The New York Times, reports prepared by Lipper Analytical
Services, Inc., and publications of a local or regional nature.
The Fund's yield figures for T-Cash Shares and T-Cash Dollar Shares
represent the Fund's past performance, will fluctuate, and should not be
considered as representative of future results. The yield of any investment is
generally a function of portfolio quality and maturity, type of investment and
operating expenses. Any fees charged by Service Organization or other
institutional investors directly to their customers in connection with
investments in Fund shares are not reflected in the Fund's yields; and, such
fees, if charged, would reduce the actual return received by customers on their
investments. The methods used to compute the Fund's yields are described in more
detail in the Statement of Additional Information. Investors may call 800-821-
6006 (T-Cash Shares code: 72 T-Cash Dollar Shares code: 73) to obtain current
yield information.
DESCRIPTION OF SHARES AND MISCELLANEOUS
The Company is a Pennsylvania business trust established on May 14, 1975.
Effective March 2, 1987, the Company's name was changed from Trust for
Short-Term Federal Securities to Trust for Federal Securities. The Company
commenced operations of the Fund in June, 1991.
13
<PAGE> 106
The Company's Declaration of Trust authorizes the Board of Trustees to
issue an unlimited number of full and fractional shares of beneficial interest
in the Company and to classify or reclassify any unissued shares into one or
more additional classes of shares. Pursuant to such authority, the Board of
Trustees has authorized the issuance of twelve classes of shares designated as
FedFund, FedFund Dollar, T-Fund, T-Fund Dollar, FedCash, FedCash Dollar, T-Cash,
T-Cash Dollar, Federal Trust, Federal Trust Dollar, Treasury Trust and Treasury
Trust Dollar. The Declaration of Trust further authorizes the trustees to
classify or reclassify any class of shares into one or more sub-classes.
THIS PROSPECTUS AND THE STATEMENT OF ADDITIONAL INFORMATION INCORPORATED
HEREIN RELATE PRIMARILY TO THE FUND AND DESCRIBE ONLY THE INVESTMENT OBJECTIVE
AND POLICIES, OPERATIONS, CONTRACTS AND OTHER MATTERS RELATING TO THE FUND.
INVESTORS WISHING TO OBTAIN SIMILAR INFORMATION REGARDING THE COMPANY'S FEDFUND,
T-FUND, FEDCASH, FEDERAL TRUST FUND AND TREASURY TRUST FUND PORTFOLIOS MAY
OBTAIN SEPARATE PROSPECTUSES DESCRIBING THOSE PORTFOLIOS BY CALLING THE
DISTRIBUTOR AT 800-998-7633.
The Company does not presently intend to hold annual meetings of
shareholders except as required by the 1940 Act or other applicable law. The
Company will call a meeting of shareholders for the purpose of voting upon the
question of removal of a member of the Board of Trustees upon written request of
shareholders owning at least 10% of the outstanding shares of the Company
entitled to vote.
Each Fund Share represents an equal proportionate interest in the assets
belonging to the Fund. Each share is without par value and has no preemptive or
conversion rights. When issued for payment as described in this Prospectus,
shares will be fully paid and non-assessable.
Holders of the Company's T-Cash Shares and T-Cash Dollar Shares will vote
in the aggregate and not by class or sub-class on all matters, except where
otherwise required by law and except that only Dollar Shares will be entitled to
vote on matters submitted to a vote of shareholders pertaining to the Fund's
arrangements with Service Organizations. Further, shareholders of all of the
Company's portfolios will vote in the aggregate and not by portfolio except as
otherwise required by law or when the Board of Trustees determines that the
matter to be voted upon affects only the interests of the shareholders of a
particular portfolio. (See the Statement of Additional Information under
"Additional Description Concerning Fund Shares" for examples where the 1940 Act
requires voting by portfolio.) Shareholders of the Company are entitled to one
vote for each full share held (irrespective of class, sub-class, or portfolio)
and fractional votes for fractional shares held. Voting rights are not
cumulative and, accordingly, the holders of more than 50% of the aggregate
shares of the Company may elect all of the trustees.
For information concerning the redemption of Fund shares and possible
restrictions on their transferability, see "Purchase and Redemption of Shares."
As stated above, the Company is organized as a trust under the laws of the
Commonwealth of Pennsylvania. Shareholders of such a trust may, under certain
circumstances, be held personally liable (as if they were partners) for the
obligations of the trust. The Company's Declaration of Trust provides for
indemnification out of the trust property of any shareholder of the Fund held
personally liable solely by reason of being or having been a shareholder and not
because of any acts or omissions or some other reason.
14
<PAGE> 107
NO PERSON HAS BEEN AUTHORIZED
TO GIVE ANY INFORMATION OR TO
MAKE ANY REPRESENTATIONS NOT
CONTAINED IN THIS PROSPECTUS,
OR IN THE FUND'S STATEMENT OF
ADDITIONAL INFORMATION
INCORPORATED HEREIN BY
REFERENCE, IN CONNECTION WITH
THE OFFERING MADE BY THIS
PROSPECTUS AND, IF GIVEN OR
MADE, SUCH INFORMATION OR
REPRESENTATIONS MUST NOT BE
RELIED UPON AS HAVING BEEN
AUTHORIZED BY THE COMPANY OR
ITS DISTRIBUTOR. THIS
PROSPECTUS DOES NOT
CONSTITUTE AN OFFERING BY THE
COMPANY OR BY THE DISTRIBUTOR
IN ANY JURISDICTION IN WHICH
SUCH OFFERING MAY NOT
LAWFULLY BE MADE.
---------------------------------------------------------------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
------
<S> <C>
Background and Expense
Information................... 2
Financial Highlights............ 3
Investment Objective and
Policies...................... 4
Purchase and Redemption of
Shares........................ 6
Management of the Fund.......... 8
Dividends....................... 12
Taxes........................... 12
Yields.......................... 13
Description of Shares and
Miscellaneous................. 13
</TABLE>
PIF-P-007
T-CASH
AN INVESTMENT PORTFOLIO
OFFERED BY
TRUST FOR FEDERAL SECURITIES
[PROVIDENT INSTITUTIONAL FUND LOGO]
Prospectus
February 28, 1996
<PAGE> 108
FEDCASH AND T-CASH
Investment Portfolios Offered By
Trust for Federal Securities
Statement of Additional Information
February __, 1996
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
THE COMPANY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
INVESTMENT OBJECTIVES AND POLICIES . . . . . . . . . . . . . . . . . . . 2
ADDITIONAL PURCHASE AND REDEMPTION INFORMATION . . . . . . . . . . . . . 7
MANAGEMENT OF THE FUNDS . . . . . . . . . . . . . . . . . . . . . . . . . 10
ADDITIONAL INFORMATION CONCERNING TAXES . . . . . . . . . . . . . . . . . 20
DIVIDENDS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
ADDITIONAL YIELD INFORMATION . . . . . . . . . . . . . . . . . . . . . . 22
ADDITIONAL DESCRIPTION CONCERNING FUND SHARES . . . . . . . . . . . . . . 24
COUNSEL . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
AUDITORS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
MISCELLANEOUS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
FINANCIAL STATEMENTS . . . . . . . . . . . . . . . . . . . . . . . . . . FS-1
</TABLE>
This Statement of Additional Information is meant to be read in
conjunction with the Prospectuses for FedCash and T-Cash dated February __,
1996 and is incorporated by reference in its entirety into those Prospectuses.
Because this Statement of Additional Information is not itself a prospectus, no
investment in shares of FedCash or T-Cash should be made solely upon the
information contained herein. Copies of the Prospectuses for FedCash and
T-Cash may be obtained by calling 800-821-7432. Capitalized terms used but not
defined herein have the same meanings as in the Prospectuses.
<PAGE> 109
THE COMPANY
Trust for Federal Securities (Trust for Short-Term Federal Securities
prior to March 2, 1987) is a no-load, diversified, open-end investment company
designed primarily as a vehicle by which institutional investors can invest
cash reserves in a choice of portfolios consisting of government securities.
Trust for Federal Securities (the "Company") consists of six separate
investment portfolios--FedFund, T-Fund, FedCash, T-Cash, Federal Trust Fund and
Treasury Trust Fund. This Statement of Additional Information relates
primarily to the Company's FedCash and T-Cash portfolios (the "Funds").
The securities held by FedCash consist of obligations issued or
guaranteed by the U.S. Government, its agencies or instrumentalities and
repurchase agreements relating to such obligations. Securities held by T-Cash
are limited to U.S. Treasury bills, notes and other direct obligations of the
U.S. Treasury and repurchase agreements relating to direct Treasury
obligations. Although both Funds have the same investment adviser and have
comparable investment objectives, their yields normally will differ due to
their differing cash flows and differences in the specific portfolio securities
held.
THIS STATEMENT OF ADDITIONAL INFORMATION AND THE FUNDS' PROSPECTUSES
RELATE PRIMARILY TO THE FUNDS AND DESCRIBE ONLY THE INVESTMENT OBJECTIVES AND
POLICIES, OPERATIONS, CONTRACTS, AND OTHER MATTERS RELATING TO THE FUNDS.
INVESTORS WISHING TO OBTAIN SIMILAR INFORMATION REGARDING THE COMPANY'S
FEDFUND, T-FUND, FEDERAL TRUST FUND OR TREASURY TRUST FUND PORTFOLIOS MAY
OBTAIN SEPARATE PROSPECTUSES DESCRIBING THOSE PORTFOLIOS BY CALLING THE
DISTRIBUTOR AT 800-998-7633.
INVESTMENT OBJECTIVES AND POLICIES
As stated in the Funds' Prospectuses, the investment objective of
each Fund is to seek current income with liquidity and security of principal.
The following policies supplement the description in the Prospectuses of the
investment objectives and policies of the Funds.
PORTFOLIO TRANSACTIONS
Subject to the general control of the Company's Board of Trustees,
PNC Institutional Management Corporation ("PIMC"), the Funds' investment
adviser, is responsible for, makes decisions with respect to and places orders
for all purchases and sales of portfolio securities for the Funds. Purchases
and sales of portfolio securities are usually principal transactions without
brokerage commissions. In making portfolio investments,
-2-
<PAGE> 110
PIMC seeks to obtain the best net price and the most favorable execution of
orders. To the extent that the execution and price offered by more than one
dealer are comparable, PIMC may, in its discretion, effect transactions in
portfolio securities with dealers who provide the Company with research advice
or other services. Although the Funds will not seek profits through short-term
trading, PIMC may, on behalf of the Funds, dispose of any portfolio security
prior to its maturity if it believes such disposition is advisable.
Investment decisions for the Funds are made independently from those
for other investment company portfolios or accounts advised or managed by PIMC.
Such other portfolios may invest in the same securities as the Funds. When
purchases or sales of the same security are made at substantially the same time
on behalf of such other portfolios, transactions are averaged as to price, and
available investments allocated as to amount, in a manner which PIMC believes
to be equitable to each portfolio, including either Fund. In some instances,
this investment procedure may adversely affect the price paid or received by a
Fund or the size of the position obtained for a Fund. To the extent permitted
by law, PIMC may aggregate the securities to be sold or purchased for a Fund
with those to be sold or purchased for such other investment company portfolios
in order to obtain best execution.
Portfolio securities will not be purchased from or sold to and the
Funds will not enter into repurchase agreements or reverse repurchase
agreements with PIMC, PNC Bank, National Association ("PNC Bank"), PFPC Inc.
("PFPC"), Provident Distributors, Inc. ("PDI") or any affiliated person (as
such term is defined in the Investment Company Act of 1940 (the "1940 Act") of
any of them, except to the extent permitted by the Securities and Exchange
Commission (the "SEC")). Furthermore, with respect to such transactions,
securities and repurchase agreements, the Funds will not give preference to
Service Organizations with whom the Funds enter into agreements concerning the
provision of support services to customers who beneficially own FedCash Dollar
shares or T-Cash Dollar shares ("Dollar shares"). (See the Prospectuses,
"Management of the Fund--Service Organizations.")
The Funds do not intend to seek profits through short-term trading.
The Funds' annual portfolio turnover rates will be relatively high but the
Funds' portfolio turnover is not expected to have a material effect on their
net incomes. The portfolio turnover rate for each of the Funds is expected to
be zero for regulatory reporting purposes.
-3-
<PAGE> 111
ADDITIONAL INFORMATION ON INVESTMENT PRACTICES
The repurchase price under the repurchase agreements described in the
Funds' Prospectuses generally equals the price paid by a Fund plus interest
negotiated on the basis of current short-term rates (which may be more or less
than the rate on the securities underlying the repurchase agreement).
Securities subject to repurchase agreements will be held by the Funds'
custodian, sub-custodian or in the Federal Reserve/Treasury book-entry system.
Repurchase agreements are considered to be loans by the Funds under the 1940
Act.
Whenever the Funds enter into reverse repurchase agreements as
described in their Prospectuses, they will place in a segregated custodial
account liquid assets having a value equal to the repurchase price (including
accrued interest) and will subsequently monitor the account to ensure such
equivalent value is maintained. Reverse repurchase agreements are considered
to be borrowings by the Funds under the 1940 Act.
As stated in the Funds' Prospectuses, the Funds may purchase
securities on a "when-issued" basis (i.e., for delivery beyond the normal
settlement date at a stated price and yield). When a Fund agrees to purchase
when-issued securities, its custodian will set aside cash or liquid portfolio
securities equal to the amount of the commitment in a separate account.
Normally, the custodian will set aside portfolio securities to satisfy a
purchase commitment, and in such a case such Fund may be required subsequently
to place additional assets in the separate account in order to ensure that the
value of the account remains equal to the amount of such Fund's commitment. It
may be expected that a Fund's net assets will fluctuate to a greater degree
when it sets aside portfolio securities to cover such purchase commitments than
when it sets aside cash. Because the Funds will set aside cash or liquid
assets to satisfy their respective purchase commitments in the manner
described, such a Fund's liquidity and ability to manage its portfolio might be
affected in the event its commitments to purchase when-issued securities ever
exceeded 25% of the value of its assets. Neither Fund intends to purchase
when-issued securities for speculative purposes but only in furtherance of its
investment objectives. The Funds reserve the right to sell the securities
before the settlement date if it is deemed advisable.
When a Fund engages in when-issued transactions, it relies on the
seller to consummate the trade. Failure of the seller to do so may result in a
Fund's incurring a loss or missing an opportunity to obtain a price considered
to be advantageous.
-4-
<PAGE> 112
With respect to loans by the Funds of their portfolio securities as
described in their Prospectuses, the Funds would continue to accrue interest on
loaned securities and would also earn income on loans. Any cash collateral
received by the Funds in connection with such loans would be invested in
short-term U.S. government obligations.
FedCash, may also invest in multiple class pass-through securities,
including collateralized mortgage obligations ("CMOs") issued or guaranteed by
U.S. Government agencies or instrumentalities, which have a remaining maturity
of 397 days or less in accordance with the requirements of Rule 2a-7 under the
1940 Act. Each class of a CMO, which frequently elect to be taxed as a real
estate mortgage investment conduit ("REMIC") represents an ownership interest
in, and the right to receive a specified portion of the cash flow consisting of
interest and principal on a pool of residential mortgage loans or mortgage
pass-through securities ("Mortgage Assets"). CMOs are issued in multiple
classes, each with a specified fixed or floating interest rate and a final
distribution date. The relative payment rights of the various CMO classes may
be structured in many ways. In most cases, however, payments of principal are
applied to the CMO classes in the order of their respective stated maturities,
so that no principal payments will be made on a CMO class until all other
classes having an earlier stated maturity date are paid in full. These
multiple class securities may be issued or guaranteed by U.S. Government
agencies or instrumentalities, including GNMA, FNMA and FHLMC, or issued by
trusts formed by private originators of, or investors in, mortgage loans.
Classes in CMOs which the Fund may hold are known as "regular" interests. CMOs
also issue "residual" interests, which in general are junior to and more
volatile than regular interests.
Neither Fund will invest more than 10% of the value of its assets in
investments which are not readily marketable at the time of purchase of a not
readily marketable security. Securities for purposes of this limitation do not
include securities which have been determined to be liquid by the Fund's Board
of Trustees based upon the trading markets for such securities.
INVESTMENT LIMITATIONS
The Funds' Prospectuses summarize certain investment limitations that
may not be changed without the affirmative vote of the holders of a "majority
of the outstanding shares" of the respective Fund (as defined below under
"Miscellaneous"). Below is a complete list of the Funds' investment
limitations that may not be changed without such a vote of shareholders.
-5-
<PAGE> 113
1. FedCash may not purchase securities other than U.S. Treasury
bills, notes and other obligations issued or guaranteed by the U.S.
Government, its agencies or instrumentalities, some of which may be subject to
repurchase agreements. There is no limit on the amount of FedCash's assets
which may be invested in the securities of any one issuer of such obligations.
2. T-Cash may not purchase securities other than direct obligations
of the U.S. Treasury such as Treasury bills and notes, some of which may be
subject to repurchase agreements. There is no limit on the amount of T-Cash's
assets which may be invested in securities of any one issuer of such
obligations.
FedCash and T-Cash may not:
3. Borrow money except from banks for temporary purposes and then
in an amount not exceeding 10% of the value of the particular Fund's total
assets, or mortgage, pledge or hypothecate its assets except in connection with
any such borrowing and in amounts not in excess of the lesser of the dollar
amounts borrowed or 10% of the value of the particular Fund's total assets at
the time of such borrowing. (This borrowing provision is not for investment
leverage, but solely to facilitate management of each Fund by enabling the
Company to meet redemption requests where the liquidation of portfolio
securities is deemed to be inconvenient or disadvantageous.) Borrowing may take
the form of a sale of portfolio securities accompanied by a simultaneous
agreement as to their repurchase. Interest paid on borrowed funds will not be
available for investment.
4. Act as an underwriter.
5. Make loans except that the Funds may purchase or hold debt
obligations in accordance with their respective investment objective and
policies, may enter into repurchase agreements for securities, and may lend
portfolio securities against collateral consisting of cash or securities which
are consistent with the lending Fund's permitted investments, which is equal at
all times to at least 100% of the value of the securities loaned. There is no
investment restriction on the amount of securities that may be loaned, except
that payments received on such loans, including amounts received during the
loan on account of interest on the securities loaned, may not (together with
all non-qualifying income) exceed 10% of the Fund's annual gross income
(without offset for realized capital gains) unless, in the opinion of counsel
to the Company, such amounts are qualifying income under federal income tax
provisions applicable to regulated investment companies.
-6-
<PAGE> 114
ADDITIONAL PURCHASE AND REDEMPTION INFORMATION
IN GENERAL
Information on how to purchase and redeem a Fund's shares is included
in its Prospectus. The issuance of shares is recorded on the books of the
Funds, and share certificates are not issued unless expressly requested in
writing. Certificates are not issued for fractional shares.
The regulations of the Comptroller of the Currency provide that funds
held in a fiduciary capacity by a national bank approved by the Comptroller to
exercise fiduciary powers must be invested in accordance with the instrument
establishing the fiduciary relationship and local law. The Company believes
that the purchase of FedCash shares and T-Cash shares by such national banks
acting on behalf of their fiduciary accounts is not contrary to applicable
regulations if consistent with the particular account and proper under the law
governing the administration of the account.
Prior to effecting a redemption of shares represented by
certificates, PFPC, the Funds' transfer agent, must have received such
certificates at its principal office. All such certificates must be endorsed
by the redeeming shareholder or accompanied by a signed stock power, in each
instance with the signature guaranteed by a commercial bank, a member of a
major stock exchange or other eligible guarantor institution, unless other
arrangements satisfactory to the Funds have previously been made. The Funds
may require any additional information reasonably necessary to evidence that a
redemption has been duly authorized.
Under the 1940 Act, the Funds may suspend the right of redemption or
postpone the date of payment upon redemption for any period during which the
New York Stock Exchange is closed, other than customary weekend and holiday
closings, or during which trading on said Exchange is restricted, or during
which (as determined by the SEC by rule or regulation) an emergency exists as a
result of which disposal or valuation of portfolio securities is not reasonably
practicable, or for such other periods as the SEC may permit. (The Funds may
also suspend or
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<PAGE> 115
postpone the recordation of the transfer of their shares upon the occurrence of
any of the foregoing conditions.)
In addition, the Funds may redeem shares involuntarily in certain
other instances if the Board of Trustees determines that failure to redeem may
have material adverse consequences to a Fund's shareholders in general. Each
Fund is obligated to redeem shares solely in cash up to $250,000 or 1% of the
Fund's net asset value, whichever is less, for any one shareholder within a
90-day period. Any redemption beyond this amount will also be in cash unless
the Board of Trustees determines that conditions exist which make payment of
redemption proceeds wholly in cash unwise or undesirable. In such a case, the
Fund may make payment wholly or partly in securities or other property, valued
in the same way as the Fund determines net asset value. (See "Net Asset Value"
below for an example of when such redemption or form of payment might be
appropriate.) Redemption in kind is not as liquid as a cash redemption.
Shareholders who receive a redemption in kind may incur transaction costs if
they sell such securities or property, and may receive less than the redemption
value of such securities or property upon sale, particularly where such
securities are sold prior to maturity.
Any institution purchasing shares on behalf of separate accounts will
be required to hold the shares in a single nominee name (a "Master Account").
Institutions investing in more than one of the Company's portfolios or classes
of shares must maintain a separate Master Account for each portfolio and class
of shares. Sub-accounts may be established by name or number either when the
Master Account is opened or later.
NET ASSET VALUE
As stated in each Fund's Prospectus, each Fund's net asset value per
share is calculated by adding the value of all of the Fund's portfolio
securities and other assets belonging to that Fund, subtracting the liabilities
charged to that Fund, and dividing the result by the total number of that
Fund's shares outstanding (by class). "Assets belonging to" a Fund consist of
the consideration received upon the issuance of shares together with all
income, earnings, profits and proceeds derived from the investment thereof,
including any proceeds from the sale, exchange or liquidation of such
investments, any funds or payments derived from any reinvestment of such
proceeds, and a portion of any general assets of the Company not belonging to a
particular portfolio. Assets belonging to a particular Fund are charged with
the direct liabilities of that Fund and with a share of the general liabilities
of the Company allocated in proportion to the relative net assets of such Fund
and the Company's other portfolios. Determinations made in good faith and in
accordance with generally accepted accounting principles by the Board of
-8-
<PAGE> 116
Trustees as to the allocations of any assets or liabilities with respect to a
Fund are conclusive.
As stated in the Funds' Prospectuses, in computing the net asset
value of shares of the Funds for purposes of sales and redemptions, the Funds
use the amortized cost method of valuation. Under this method, the Funds value
each of their portfolio securities at cost on the date of purchase and
thereafter assume a constant proportionate amortization of any discount or
premium until maturity of the security. As a result, the value of a portfolio
security for purposes of determining net asset value normally does not change
in response to fluctuating interest rates. While the amortized cost method
provides certainty in portfolio valuation, it may result in valuations for the
Funds' securities which are higher or lower than the market value of such
securities.
In connection with their use of amortized cost valuation, each of the
Funds limits the dollar-weighted average maturity of its portfolio to not more
than 90 days and does not purchase any instrument with a remaining maturity of
more than thirteen months (with certain exceptions). In determining the
average weighted portfolio maturity of each Fund, a variable rate obligation
that is issued or guaranteed by the U.S. Government, or an agency or
instrumentality thereof, is deemed to have a maturity equal to the period
remaining until the obligation's next interest rate adjustment. The Company's
Board of Trustees has also established procedures, pursuant to rules
promulgated by the SEC, that are intended to stabilize the net asset value per
share of each Fund for purposes of sales and redemptions at $1.00. Such
procedures include the determination at such intervals as the Board deems
appropriate, of the extent, if any, to which each Fund's net asset value per
share calculated by using available market quotations or a matrix believed to
provide reliable values deviates from $1.00 per share. In the event such
deviation exceeds 1/2 of 1% with respect to either Fund, the Board will
promptly consider what action, if any, should be initiated. If the Board
believes that the amount of any deviation from the $1.00 amortized cost price
per share of a Fund may result in material dilution or other unfair results to
investors or existing shareholders, it will take such steps as it considers
appropriate to eliminate or reduce to the extent reasonably practicable any
such dilution or unfair results. These steps may include selling portfolio
instruments prior to maturity; shortening the Fund's average portfolio
maturity; withholding or reducing dividends; redeeming shares in kind; or
utilizing a net asset value per share determined by using available market
quotations.
-9-
<PAGE> 117
MANAGEMENT OF THE FUNDS
TRUSTEES AND OFFICERS
The Company's trustees and executive officers, their addresses,
principal occupations during the past five years and other affiliations are
provided below. In addition to the information set forth below, the trustees
serve in the following capacities:
Each trustee of the Company serves as a director of Temporary
Investment Fund, Inc. ("Temp"), as a trustee of Municipal Fund for Temporary
Investment ("Muni"). In addition, Messrs. Fortune and Pepper are directors of
Independence Square Income Securities, Inc. ("ISIS") and Managing General
Partners of Chestnut Street Exchange Fund ("Chestnut"); Messrs. Pepper and
Johnson are directors of Municipal Fund for California Investors, Inc. ("Cal
Muni"); and Mr. Johnson is a director of Municipal Fund for New York Investors,
Inc. ("New York Muni") and the International Dollar Reserve Fund ("IDR").
Each of the Company's officers, with the exception of Mr. McConnel,
holds like offices with Temp and Muni. In addition, Mr. McConnel is Secretary
of Temp. Mr. Roach is Treasurer of Chestnut, President and Treasurer of The
RBB Fund, Inc. and New York Muni, and Vice President and Treasurer of ISIS and
Cal Muni; and Mr. Pepper is President and Chairman of the Board of Muni and Cal
Muni; and Mr. Fortune is President and Chairman of the Board of ISIS and
Chestnut.
<TABLE>
<CAPTION>
Principal Occupations
Position with the During Past 5 Years
Name and Address Company and Other Affiliations
- ---------------- ----------------- ----------------------
<S> <C> <C>
PHILIP E. COLDWELL(3),(4) Economic Consultant;
Coldwell Financial Chairman, Coldwell
Consultants Trustee Financial
3330 Southwestern Blvd. Consultants, Member
Dallas, Texas 75225 of the Board of
Governors of the
Federal Reserve
System, 1974 to
1980; President,
Federal Reserve
Bank of Dallas,
1968 to 1974;
Director, Maxus
Energy Corporation
(energy products)
(1989 -1993);
Director, Diamond
Shamrock Corp.
(energy and
chemical products)
until 1987.
ROBERT R. FORTUNE(2),(3),(4) Trustee Financial Consultant;
2920 Ritter Lane Chairman, President
Allentown, PA 18104 and Chief Executive
Officer
</TABLE>
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<PAGE> 118
<TABLE>
<CAPTION>
Principal Occupations
Position with the During the Past 5 Years
Name and Address Company and Other Affiliations
- ---------------- ----------------- -----------------------
<S> <C> <C>
of Associated
Electric & Gas
Insurance Services
Limited, 1984-1993;
Member of the
Financial Executives
Institute and
American Institute
of Certified Public
Accountants;
Director, Prudential
Utility Fund, Inc.,
Prudential
IncomeVertible Fund,
Inc., and Prudential
Structured Maturity
Fund, Inc.
RODNEY D. JOHNSON Trustee President, Fairmount
Fairmount Capital Capital Advisors,
Advisors, Inc. Inc. (financial
1435 Walnut Street advising) since
Drexel Building 1987; Treasurer,
Philadelphia, PA 19102 North Philadelphia
Health System
(formerly Girard
Medical Center),
1988 to 1992;
Member, Board of
Education, School
District of
Philadelphia, 1983
to 1988; Treasurer,
Cascade Aphasia
Center, 1984 to
1988.
G. WILLING PEPPER(1),(2) Chairman of Retired; Chairman of
128 Springton Lake Road the Board, the Board, The
Media, PA 19063 President and Institute for
Trustee Cancer Research
until 1979;
Director,
Philadelphia
National Bank until
1978; President,
Scott Paper
Company, 1971 to
1973; Chairman of
the Board,
Specialty
Composites Corp.
until May 1984.
EDWARD J. ROACH President Certified Public
Bellevue Park Corporate and Treasurer Accountant; Partner
Center of the accounting
400 Bellevue Parkway firm of Main
Suite 100 Hurdman until 1981;
Wilmington, DE 19809 Vice Chairman of
the Board, Fox
Chase Cancer
Center; Trustee
Emeritus,
Pennsylvania School
for the Deaf;
Trustee, Immaculata
College, 1983-1984;
</TABLE>
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<PAGE> 119
<TABLE>
<CAPTION>
Principal Occupations
Position with the During the Past 5 Years
Name and Address Company and Other Affiliations
- ---------------- ----------------- -----------------------
<S> <C> <C>
Director, The
Bradford Funds, Inc.
1995.
W. BRUCE McCONNEL, III Secretary Partner of the law
PNB Building firm of Drinker
1345 Chestnut Street Biddle & Reath
Philadelphia, PA Philadelphia,
19107-3496 Pennsylvania.
</TABLE>
- -----------------------
(1) This trustee is considered by the Company to be an "interested person"
of the Company as defined in the 1940 Act.
(2) Executive Committee Member.
(3) Audit Committee Member.
(4) Nominating Committee Member.
During intervals between meetings of the Board, the Executive
Committee may exercise the authority of the Board of Trustees in the
management of the Company's business to the extent permitted by law.
Each of the investment companies named above receives various
advisory and other services from PIMC and PNC Bank. Of the above-mentioned
funds, PDI provides distribution services to Temp, Muni, Cal Muni and New York
Muni. Of the above-mentioned funds, the administrators provide administration
services to Temp, Muni, Cal Muni and New York Muni.
For the fiscal year ended October 31, 1995, the Company paid a total
of $100,887 to its officers and trustees in all capacities of which $15,772 was
allocated to the Funds. In addition, the Company contributed $2,715 for the
fiscal year to its retirement plan for employees (which included Mr. Roach) of
which $418 was allocated to the Funds. Drinker Biddle & Reath, of which Mr.
McConnel is a partner, receives legal fees as counsel to the Company. No
employee of PDI, PIMC, PFPC or PNC Bank receives any compensation from the
Company for acting as an officer or trustee of the Company. The trustees and
officers of the Company as a group beneficially own less than 1% of the shares
of the Company's FedFund, T-Fund, FedCash, T-Cash, Federal Trust Fund and
Treasury Trust portfolios.
By virtue of the responsibilities assumed by PDI, PIMC, PFPC and PNC
Bank under their respective agreements with the
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<PAGE> 120
Company, the Company itself requires only one part-time employee in addition to
its officers.
The table below sets forth the compensation actually received from
the Fund Complex of which the Fund is a part by the trustees for the fiscal
year ended October 31, 1995:
<TABLE>
<CAPTION>
Total
Pension or Compensation
Retirement from Registrant
Aggregate Benefits Accrued Estimated Annual and Fund
Name of Person, Compensation as Part of Fund Benefits Upon Complex(1) Paid to
Position from Registrant Expenses Retirement Trustees
<S> <C> <C> <C> <C>
Philip E. Coldwell, $ 10,800.00 0 N/A (3)(2) $ 43,600.00
Trustee
Robert R. Fortune, 10,800.00 0 N/A (5)(2) 63,600.00
Trustee
Rodney D. Johnson, 10,800.00 0 N/A (5)(2) 55,850.00
Trustee
G. Willing Pepper, 19,100.00 0 N/A (6)(2) 96,250.00
Trustee and Chairman
David R. Wilmerding, 12,466.68 0 N/A (5)(2) 60,600.04
Jr.,(3) Trustee
Anthony M. 10,800.00 0 N/A (4)(2) 49,900.00
Santomero,(4) Trustee ---------- ---------
$74,766.68 $369,800.04
</TABLE>
- --------------------
1. A Fund Complex means two or more investment companies that hold themselves
out to investors as related companies for purposes of investment and
investor services, or have a common investment adviser or have an
investment adviser that is an affiliated person of the investment adviser
of any of the other investment companies.
2. Total number of such other investment companies trustee serves on within
the Fund Complex.
3. Mr. Wilmerding resigned as trustee of the Company on January 4, 1996.
4. Mr. Santomero resigned as trustee of the Company on January 4, 1996.
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<PAGE> 121
INVESTMENT ADVISER AND SUB-ADVISER
The advisory and sub-advisory services provided by PIMC and PNC, as
well as the fees payable to them, are described in the Funds' Prospectuses.
For the advisory services provided and expenses assumed by it, PIMC is entitled
to receive a fee, computed daily and payable monthly, based on the combined
average net assets of the Funds as follows:
<TABLE>
<CAPTION>
Annual Fee The Funds' Combined
---------- Average Net Assets
--------------------
<S> <C>
.175% . . . . . . of the first $1 billion
.150% . . . . . . of the next $1 billion
.125% . . . . . . of the next $1 billion
.100% . . . . . . of the next $1 billion
.095% . . . . . . of the next $1 billion
.090% . . . . . . of the next $1 billion
.085% . . . . . . of the next $1 billion
.080% . . . . . . of amounts in excess of $7 billion.
</TABLE>
The advisory fee is allocated between these Funds in proportion to
their relative net assets.
PIMC and the administrators have each agreed that if, in any fiscal
year, the expenses borne by a Fund exceed the applicable expense limitations
imposed by the securities regulations of any state in which shares of the
particular Fund are registered or qualified for sale to the public, they will
each reimburse such Fund for one-half of any excess to the extent required by
such regulations. Unless otherwise required by law, such reimbursement would
be accrued and paid on the same basis that the advisory and administration fees
are accrued and paid by such Fund. To the Funds' knowledge, of the expense
limitations in effect on the date of this Statement of Additional Information,
none is more restrictive than two and one-half percent (2-1/2%) of the first
$30 million of a Fund's average annual net assets, two percent (2%) of the next
$70 million of the average annual net assets and one and one-half percent
(1-1/2%) of the remaining average annual net assets.
For the fiscal years ended October 31, 1993, 1994 and 1995, FedCash
paid fees (net of waivers) for advisory services aggregating $161,363, $244,352
and $323,499, respectively. For the same period, advisory fees payable by
FedCash of $480,376, $546,532 and $275,671, respectively, were voluntarily
waived. For the fiscal years ended October 31, 1993, 1994 and 1995, T-Cash
paid fees (net of waivers) for advisory services aggregating $162,472, $149,523
and $218,122, respectively. For the same
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<PAGE> 122
period, advisory fees payable by T-Cash of $502,288, $409,893 and $210,166,
respectively, were voluntarily waived. Any fees waived by PIMC are not
recoverable. PIMC and PNC Bank also serve as the adviser and sub-adviser,
respectively, to the Company's FedFund, T-Fund, Federal Trust Fund and Treasury
Trust Fund portfolios.
BANKING LAWS
Certain banking laws and regulations with respect to investment
companies are discussed in each Fund's Prospectus. PIMC, PNC Bank and PFPC
believe that they may perform the services for the Funds contemplated by their
respective agreements, Prospectuses and this Statement of Additional
Information without violation of applicable banking laws or regulations. It
should be noted, however, that future changes in legal requirements relating to
the permissible activities of banks and their affiliates, as well as further
interpretations of present requirements, could prevent PIMC and PFPC from
continuing to perform such services for the Funds and PNC Bank from continuing
to perform such services for PIMC and the Funds. If PIMC, PFPC, or PNC Bank
were prohibited from continuing to perform such services, it is expected that
the Company's Board of Trustees would recommend that the Funds enter into new
agreements with other qualified firms. Any new advisory agreement would be
subject to shareholder approval.
In addition, state securities laws on this issue may differ from the
interpretations of federal law expressed herein and banks and financial
institutions may be required to register as dealers pursuant to State law.
ADMINISTRATORS
As the Funds' administrators, PFPC and PDI have agreed to provide the
following services: (i) assist generally in supervising the Funds' operations,
including providing a Wilmington, Delaware order-taking facility with toll-free
IN-WATS telephone lines, providing for the preparing, supervising and mailing
of purchase and redemption order confirmations to shareholders of record,
providing and supervising the operation of an automated data processing system
to process purchase and redemption orders, maintaining a back-up procedure to
reconstruct lost purchase and redemption data, providing information concerning
the Funds to their shareholders of record, handling shareholder problems,
supervising the services of employees, provided by PDI, whose principal
responsibility and function is to preserve and strengthen shareholder
relations, and monitoring the arrangements pertaining to the Funds' agreements
with Service
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<PAGE> 123
Organizations; (ii) assure that persons are available to receive and transmit
purchase and redemption orders; (iii) participate in the periodic updating of
the Funds' Prospectuses; (iv) assist in maintaining the Funds' Wilmington,
Delaware office; (v) perform administrative services in connection with the
Fund's computer access program maintained to facilitate shareholder access to
the Funds; (vi) accumulate information for and coordinate the preparation of
reports to the Funds' shareholders and the SEC; and (vii) maintain the
registration or qualification of the Funds' shares for sale under state
securities laws; (viii) prepare or review, and provide advice with respect to,
all sales literature (advertisements, brochures and shareholder communications)
for each of the Funds and any class or sub-class thereof; and (ix) assist in
the monitoring of regulatory and legislative developments which may affect the
Company, participate in counseling and assisting the Company in relation to
routine regulatory examinations and investigations, and work with the Company's
counsel in connection with regulatory matters and litigation.
For their administrative services, the administrators are entitled
jointly to receive fees from the six Funds referred to above determined and
allocated in the same manner as PIMC's advisory fee set forth above. As stated
in their prospectuses, each administrator is also reimbursed for its reasonable
out-of-pocket expenses incurred in connection with the Fund's computer access
program. For the Fiscal year ended October 31, 1995, Fedcash and T-Cash paid
PFPC and PDI fees (net of waivers) for administrative services aggregating
$323,499 and $218,122, respectively. For the same fiscal year, PFPC and PDI
voluntarily waived administration fees aggregating $275,671 with respect to
FedCash and $210,166 with respect to T-Cash. For the fiscal year ended October
31, 1994, FedCash and T-Cash paid PFPC and PDI fees (net of waivers) for
administrative services aggregating $244,352 and $149,523, respectively. For
the period from November 1, 1992 through January 17, 1993, the Company paid
fees (net of waivers) totalling $30,138 with respect to FedCash and $30,634
with respect to T-Cash to Boston Advisors. For the same period, administration
fees payable by FedCash and T-Cash of $22,206 and $22,848, respectively, were
voluntarily waived. For the period from January 18, 1993 through October 31,
1993, the Company paid fees (net of waivers) for administrative services to
PFPC and MFD, its administrators, aggregating $161,363 with respect to FedCash
Fund and $162,471 with respect to T-Cash Fund. For the same period,
administration fees of $508,289 with respect to T-Cash Fund and $480,376 with
respect to FedCash Fund were voluntarily waived.
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<PAGE> 124
For information regarding the administrators' obligations to
reimburse the Funds in the event their expenses exceed certain prescribed
limits, see "Investment Adviser and Sub-Adviser" above. PFPC, a wholly owned,
indirect subsidiary of PNC Bank provides advisory, administrative or, in some
cases, sub-advisory and/or sub-administrative services to investment companies
which are distributed by PDI. PFPC and PDI also serve as co-administrators of
the Company's FedFund, T-Fund, Federal Trust Fund and Treasury Trust Fund
portfolios.
DISTRIBUTOR
PDI acts as the distributor of the Funds' shares. Each Fund's shares
are sold on a continuous basis by the distributor as agent, although it is not
obliged to sell any particular amount of shares. PDI will prepare or review,
provide advice with respect to, and file with the federal and state agencies or
other organizations as required by federal, state, or other applicable laws and
regulations, all sales literature (advertisements, brochures and shareholder
communications) for each of the Funds and any class or sub-class thereof. The
distributor pays the cost of printing and distributing prospectuses to persons
who are not shareholders of the Funds (excluding preparation and printing
expenses necessary for the continued registration of Fund shares) and of
preparing, printing and distributing all sales literature. No compensation is
payable by the Funds to the distributor for its distribution services. PDI
also serves as the distributor for the Company's FedFund, T-Fund, Federal Trust
Fund and Treasury Trust Fund portfolios. PDI is a Delaware corporation with
its principal place of business located at 259 Radnor-Chester Road, Suite 120,
Radnor, Pennsylvania 19087.
CUSTODIAN AND TRANSFER AGENT
Pursuant to a Custodian Agreement, PNC Bank serves as the Funds'
custodian. Under the Agreement, PNC Bank has agreed to provide the following
services: (i) maintain a separate account or accounts in the name of the
Funds; (ii) hold and disburse portfolio securities on account of the Funds;
(iii) collect and make disbursements of money on behalf of the Funds; (iv)
collect and receive all income and other payments and distributions on account
of the Funds' portfolio securities; and (v) make periodic reports to the Board
of Trustees concerning the Funds' operations. The Custodian Agreement permits
PNC, on 30 days' notice, to assign its rights and delegate its duties
thereunder to any other affiliate of PNC Bank or PNC Bank Corp., provided that
PNC Bank remains responsible for the performance of the delegate under the
Custodian Agreement.
-17-
<PAGE> 125
The Funds reimburse PNC Bank for its direct and indirect costs and
expenses incurred in rendering custodial services. Under the Custodian
Agreement, each Fund pays PNC Bank an annual fee equal to $.25 for each $1,000
of such Fund's average daily gross assets, which fee declines as such Fund's
average daily gross assets increase. In addition, each Fund pays the custodian
a fee for each purchase, sale or delivery of a security, interest collection or
claim item, and reimburses PFPC for out-of-pocket expenses incurred on behalf
of the Fund. For the fiscal years ended October 31, 1993, 1994 and 1995,
FedCash paid fees for custodian services aggregating $114,671, $130,951 and
$105,672, respectively. For the same periods, T-Cash paid fees for custodian
services aggregating $119,904, $100,276 and $80,119, respectively. PNC Bank
also serves as Custodian for the Company's FedFund, T-Fund, Federal Trust Fund
and Treasury Trust Fund portfolios. PNC's principal business address is Broad
and Chestnut Streets, Philadelphia, Pennsylvania 19102.
PFPC also serves as the Funds' transfer agent, registrar and dividend
disbursing agent pursuant to a Transfer Agency Agreement. Under the Agreement,
PFPC has agreed to provide the following services: (i) maintain a separate
account or accounts in the name of the Funds; (ii) issue, transfer and redeem
shares of the Funds; (iii) disburse dividends and distributions, in the manner
described in each Fund's Prospectus, to shareholders of the Fund; (iv) transmit
all communications by the Funds to their shareholders or their authorized
representatives, including reports to shareholders, distribution and dividend
notices and proxy materials for meetings of shareholders; (v) prepare and file
with the appropriate taxing authorities reports or notices relating to
dividends and distributions made by the Funds; (vi) respond to correspondence
by shareholders, security brokers and others relating to its duties; (vii)
maintain shareholder accounts; and (viii) make periodic reports to the
Company's Board of Trustees concerning the Funds' operations. The Transfer
Agency Agreement permits PFPC, on 30-days' notice, to assign its rights and
duties thereunder to any other affiliate of PNC Bank or PNC Bank Corp.,
provided that PFPC remains responsible for the performance of the delegate
under the Transfer Agency Agreement.
Under the Transfer Agency Agreement, each Fund pays PFPC fees at an
annual rate of $12.00 per account and sub-account maintained by PFPC plus $1.00
for each purchase or redemption transaction by an account (other than a
purchase transaction made in connection with the automatic reinvestment of
dividends). Payments to PFPC for sub-accounting services provided by others
are limited to the amount which PFPC pays to others for such
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<PAGE> 126
services. In addition, the Funds reimburse PFPC for out-of-pocket expenses
related to such services. For the fiscal years ended October 31, 1993, 1994
and 1995, FedCash paid fees for transfer agency services aggregating $18,905,
$23,192 and $21,630, respectively. For the same periods, T-Cash paid fees for
transfer agency expenses aggregating $22,708, $25,305 and $24,604,
respectively. PFPC also serves as transfer agent, registrar and dividend
disbursing agent for the Company's FedFund, T-Fund, Federal Trust Fund and
Treasury Trust Fund portfolios.
SERVICE ORGANIZATIONS
As stated in the Funds' Prospectuses, the Funds will enter into an
agreement with each Service Organization which purchases Dollar shares
requiring it to provide support services to its customers who beneficially own
Dollar shares in consideration of the Funds' payment of .25% (on an annualized
basis) of the average daily net asset value of the Dollar shares held by the
Service Organization for the benefit of customers. Such services include: (i)
aggregating and processing purchase and redemption requests from customers and
placing net purchase and redemption orders with the transfer agent; (ii)
providing customers with a service that invests the assets of their accounts in
Dollar shares; (iii) processing dividend payments from the Funds on behalf of
customers; (iv) providing information periodically to customers showing their
positions in Dollar shares; (v) arranging for bank wires; (vi) responding to
customer inquiries relating to the services performed by the Service
Organization; (vii) providing sub-accounting with respect to Dollar shares
beneficially owned by customers or the information necessary for
sub-accounting; (viii) forwarding shareholder communications from the Funds
(such as proxies, shareholder reports, annual and semi-annual financial
statements and dividend, distribution and tax notices) to customers, if
required by law; and (ix) other similar services if requested by the Funds.
For the fiscal year ended October 31, 1995, the Company paid $153,266 in
servicing fees to an affiliate of the Company's adviser (representing 30.0% of
the aggregate servicing fees) all of which was allocated to T-Cash pursuant to
service agreements in effect during such period.
Each Fund's agreements with Service Organizations are governed by a
Shareholder Services Plan (the "Plan") that has been adopted by the Company's
Board of Trustees pursuant to an exemptive order granted by the SEC in
connection with the creation of the Dollar shares. Pursuant to each Plan, the
Board of Trustees reviews, at least quarterly, a written report of the amounts
expended under the Fund's agreements with Service
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<PAGE> 127
Organizations and the purposes for which the expenditures were made. In
addition, the Funds' arrangements with Service Organizations must be approved
annually by a majority of the Company's trustees, including a majority of the
trustees who are not "interested persons" of the Company as defined in the 1940
Act and have no direct or indirect financial interest in such arrangements.
The Board of Trustees has approved the Funds' arrangements with
Service Organizations based on information provided by the Funds' service
contractors that there is a reasonable likelihood that the arrangements will
benefit the Funds and their shareholders by affording the Funds greater
flexibility in connection with the servicing of the accounts of the beneficial
owners of their shares in an efficient manner. Any material amendment to the
Funds' arrangements with Service Organizations must be approved by a majority
of the Company's Board of Trustees (including a majority of the non-interested
trustees). So long as the Funds' arrangements with Service Organizations are
in effect, the selection and nomination of the members of the Company's Board
of Trustees who are not "interested persons" (as defined in the 1940 Act) of
the Company will be committed to the discretion of such non-interested
trustees.
EXPENSES
The Funds' expenses include taxes, interest, fees and salaries of the
Company's trustees and officers, SEC fees, state securities qualification fees,
Standard & Poor's rating fees, Moody's rating fees (cost incurred by T-Cash
only), costs of preparing and printing prospectuses for regulatory purposes and
for distribution to shareholders, advisory and administration fees, charges of
the custodian, transfer agent and dividend disbursing agent, Service
Organization fees, certain insurance premiums, outside auditing and legal
expenses, costs of shareholder reports and shareholder meetings and any
extraordinary expenses. The Funds also pay for brokerage fees and commissions
(if any) in connection with the purchase of portfolio securities.
ADDITIONAL INFORMATION CONCERNING TAXES
The following summarizes certain additional tax considerations
generally affecting each Fund and its shareholders that are not described in
each Fund's Prospectus. No attempt is made to present a detailed explanation
of the tax treatment of the Funds or their shareholders or possible legislative
changes,
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<PAGE> 128
and the discussion here and in each Fund's Prospectus is not intended as a
substitute for careful tax planning. Investors should consult their tax
advisors with specific reference to their own tax situations.
Each Fund of the Company is treated as a separate corporate entity
under the Code and intends to qualify each year as a regulated investment
company under the Code. In order to so qualify for a taxable year, each Fund
must satisfy the distribution requirement described in its Prospectus, derive
at least 90% of its gross income for the year from certain qualifying sources,
comply with certain diversification requirements and derive less than 30% of
its gross income from the sale or other disposition of securities and certain
other investments held for less than three months. Interest (including
original issue discount and accrued market discount) received by a Fund upon
maturity or disposition of a security held for less than three months will not
be treated as gross income derived from the sale or other disposition of such
security within the meaning of this requirement. However, any other income
that is attributable to realized market appreciation will be treated as gross
income from the sale or other disposition of securities for this purpose.
A 4% nondeductible excise tax is imposed on regulated investment
companies that fail to distribute currently an amount equal to specified
percentages of their ordinary taxable income and capital gain net income
(excess of capital gains over capital losses). Each Fund intends to make
sufficient distributions or deemed distributions of its ordinary taxable income
and any capital gain net income each calendar year to avoid liability for this
excise tax.
If for any taxable year a Fund does not qualify for tax treatment as
a regulated investment company, all of its taxable income will be subject to
federal income tax at regular corporate rates, without any deduction for
distributions to Fund shareholders. In such event, dividend distributions
would be taxable as ordinary income to Fund shareholders to the extent of that
Fund's current and accumulated earnings and profits and would be eligible for
the dividends received deduction in the case of corporate shareholders.
Each Fund will be required in certain cases to withhold and remit to
the U.S. Treasury 31% of taxable dividends or gross sale proceeds paid to any
shareholder who has failed to provide a correct tax identification number in
the manner required, who is subject to withholding by the Internal Revenue
Service for failure to properly include on its return payments of taxable
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<PAGE> 129
interest or dividends, or who has failed to certify to the Fund when required
to do so that he is not subject to backup withholding or that he is an "exempt
recipient."
Depending upon the extent of the Funds' activities in states and
localities in which their offices are maintained, in which their agents or
independent contractors are located or in which they are otherwise deemed to be
conducting business, the Funds may be subject to the tax laws of such states or
localities. In addition, in those states and localities which have income tax
laws, the treatment of the Funds and their shareholders under such laws may
differ from their treatment under federal income tax laws. Shareholders are
advised to consult their tax advisors concerning the application of state and
local taxes.
The foregoing discussion is based on federal tax laws and regulations
which are in effect on the date of this Statement of Additional Information;
such laws and regulations may be changed by legislative or administrative
action.
DIVIDENDS
Net income of each of the Funds for dividend purposes consists of (i)
interest accrued and original issue discount earned on the Fund's assets, (ii)
plus the amortization of market discount and minus the amortization of market
premium on such assets, (iii) less accrued expenses directly attributable to
the Fund and the general expenses (e.g., legal, accounting and trustees' fees)
of the Company prorated to the Fund on the basis of its relative net assets.
In addition, Dollar shares bear exclusively the expense of fees paid to Service
Organizations. (See "Management of the Funds--Service Organizations.")
As stated, the Company uses its best efforts to maintain the net
asset value per share of FedCash and T-Cash at $1.00. As a result of a
significant expense or realized or unrealized loss incurred by either Fund, it
is possible that the Fund's net asset value per share may fall below $1.00.
ADDITIONAL YIELD INFORMATION
The "yields" and "effective yields" are calculated separately for
each class of shares of each Fund and in accordance with the formulas
prescribed by the SEC. The seven-day yield for each class of shares is
calculated by determining the net change in the value of a hypothetical
pre-existing
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<PAGE> 130
account in the particular Fund which has a balance of one share of the class
involved at the beginning of the period, dividing the net change by the value
of the account at the beginning of the period to obtain the base period return,
and multiplying the base period return by 365/7. The net change in the value
of an account in a Fund includes the value of additional shares purchased with
dividends from the original share and dividends declared on the original share
and any such additional shares, net of all fees charged to all shareholder
accounts in proportion to the length of the base period and the Fund's average
account size, but does not include gains and losses or unrealized appreciation
and depreciation. In addition, an effective annualized yield quotation may be
computed on a compounded basis with respect to each class of its shares by
adding 1 to the base period return for the class involved (calculated as
described above), raising that sum to a power equal to 365/7, and subtracting 1
from the result. Similarly, based on the calculations described above, the
Funds' 30-day (or one-month) yields and effective yields may also be
calculated.
For the seven-day period ended October 31, 1995, the yields on
FedCash shares and T-Cash shares were 5.60% and 5.66%, respectively, and the
compounded effective yields on FedCash shares and T-Cash shares were 5.76% and
5.82%, respectively; the yields on FedCash Dollar shares and T-Cash Dollar
shares were 5.35% and 5.41%, respectively, and the compounded effective yields
on FedCash Dollar Shares and T-Cash Dollar Shares were 5.49% and 5.56%,
respectively. During this seven-day period, the Funds' adviser and
administrator voluntarily waived a portion of its advisory and administration
fees payable by the Funds. Without these waivers, for the same period the
yields on FedCash shares and T-Cash shares would have been 5.48% and 5.54%,
respectively, and the compounded effective yields on FedCash shares and T-Cash
shares would have been 5.63% and 5.69%, respectively; and the yields on FedCash
Dollar Shares and T-Cash Dollar Shares would have been 5.23% and 5.29%,
respectively, and the compounded effective yields on FedCash Dollar Shares and
T-Cash Dollar Shares would have been 5.37% and 5.43%.
For the 30-day period ended October 31, 1995, the yields on FedCash and
T-Cash shares were 5.61% and 5.62%, respectively, and the compounded effective
yields on FedCash and T-Cash were 5.77% and 5.78%, respectively; the yields on
FedCash Dollar Shares and T-Cash Dollar Shares were 5.36% and 5.37%,
respectively, and the compounded effective yields on FedCash Dollar Shares and
T-Cash Dollar Shares were 5.50% and 5.51%, respectively. During this 30-day
period, the Funds' adviser and administrator voluntarily waived a portion of
the
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<PAGE> 131
advisory and administration fees payable by the Funds. Without these waivers
for the same period the yields on FedCash shares and T-Cash shares would have
been 5.49% and 5.50%, respectively, and the compounded effective yields on
FedCash shares and T-Cash shares would have been 5.64% and 5.65%, respectively;
the yield on FedCash Dollar Shares and T-Cash Dollar Shares would have been
5.24% and 5.25%, respectively, and the compounded effective yields on FedCash
Dollar Shares and T-Cash Dollar shares would have been 5.38% and 5.39%,
respectively.
From time to time, in advertisements or in reports to shareholders,
the performance of the Funds may be quoted and compared to that of other money
market funds or accounts with similar investment objectives and to stock or
other relevant indices. For example, the yields of the Funds may be compared
to the Donoghue's Money Fund Average, which is an average compiled by
IBC/Donoghue's MONEY FUND REPORT(R) of Holliston, MA 01746, a widely recognized
independent publication that monitors the performance of money market funds, or
to the average yields reported by the Bank Rate Monitor from money market
deposit accounts offered by the 50 leading banks and thrift institutions in the
top five standard metropolitan statistical areas.
THE FUNDS' YIELDS WILL FLUCTUATE, AND ANY QUOTATION OF YIELD SHOULD
NOT BE CONSIDERED AS REPRESENTATIVE OF THE FUTURE PERFORMANCE OF THE FUNDS.
Since yields fluctuate, yield data cannot necessarily be used to compare an
investment in the Funds' shares with bank deposits, savings accounts, and
similar investment alternatives which often provide an agreed or guaranteed
fixed yield for a stated period of time. Shareholders should remember that
performance and yield are generally functions of kind and quality of the
investments held in a Fund, portfolio maturity, operating expenses net of
waivers and expense reimbursements, and market conditions. Any fees charged by
Service Organizations or other institutional investors with respect to customer
accounts in investing in shares of the Funds will not be included in
calculations of yield and performance; such fees, if charged, would reduce the
actual performance and yield from that quoted.
ADDITIONAL DESCRIPTION CONCERNING FUND SHARES
The Company does not presently intend to hold annual meetings of
shareholders except as required by the 1940 Act or other applicable law. Upon
the written request of shareholders owning at least twenty percent of the
Company's shares, the Company will call for a meeting of shareholders to
consider the
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removal of one or more trustees and other certain matters. To the extent
required by law, the Company will assist in shareholder communication in such
matters.
As stated in the Prospectuses for the Funds, holders of the Company's
FedCash and FedCash Dollar shares will vote in the aggregate and not by class
on all matters, except where otherwise required by law and except that only
FedCash Dollar shares will be entitled to vote on matters submitted to a vote
of shareholders pertaining to the Fund's arrangements with Service
Organizations. (See "Management of the Funds--Service Organizations.") Holders
of the Company's T-Cash and T-Cash Dollar shares will also vote in the
aggregate and not by class as described above. Further, shareholders of all of
the Company's portfolios will vote in the aggregate and not by portfolio except
as otherwise required by law or when the Board of Trustees determines that the
matter to be voted upon affects only the interests of the shareholders of a
particular portfolio. Rule 18f-2 under the 1940 Act provides that any matter
required to be submitted by the provisions of such Act or applicable state law,
or otherwise, to the holders of the outstanding securities of an investment
company such as the Company shall not be deemed to have been effectively acted
upon unless approved by the holders of a majority of the outstanding shares of
each portfolio affected by the matter. Rule 18f-2 further provides that a
portfolio shall be deemed to be affected by a matter unless it is clear that
the interests of each portfolio in the matter are identical or that the matter
does not affect any interest of the portfolio. Under the Rule the approval of
an investment advisory agreement or any change in a fundamental investment
policy would be effectively acted upon with respect to a portfolio only if
approved by the holders of a majority of the outstanding voting securities of
such portfolio. However, the Rule also provides that the ratification of the
selection of independent accountants, the approval of principal underwriting
contracts and the election of trustees are not subject to the separate voting
requirements and may be effectively acted upon by shareholders of the
investment company voting without regard to portfolio.
COUNSEL
Drinker Biddle & Reath, Philadelphia National Bank Building, 1345
Chestnut Streets, Philadelphia, Pennsylvania 19107-3496, of which W. Bruce
McConnel, III, Secretary of the Company, is a partner, serves as counsel to the
Company and will pass upon the legality of the shares offered hereby.
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<PAGE> 133
AUDITORS
The financial statements of the Funds which appear in this Statement
of Additional Information and the information included in the Financial
Highlights section which appears in the Funds' Prospectuses have been audited
by Coopers & Lybrand L.L.P., independent accountants, whose report thereon
appears elsewhere herein, and have been included herein and in the Funds'
Prospectuses in reliance upon the report of said firm of accountants given upon
their authority as experts in accounting and auditing. Coopers & Lybrand
L.L.P. has offices at 2400 Eleven Penn Center, Philadelphia, Pennsylvania
19103.
MISCELLANEOUS
SHAREHOLDER VOTE
As used in this Statement of Additional Information and the
Prospectuses for the Funds, a "majority of the outstanding shares" of a Fund or
of any other portfolio means, with respect to the approval of an investment
advisory agreement, a distribution plan or a change in a fundamental investment
policy, the vote of the lesser of (1) 67% of the shares of such Fund
(irrespective of class) or of the portfolio represented at a meeting at which
the holders of more than 50% of the outstanding shares of such Fund or
portfolio are present in person or by proxy, or (2) more than 50% of the
outstanding shares of such Fund (irrespective of class) or of the portfolio.
CERTAIN RECORD HOLDERS
On January 10, 1996, the name, address and percentage of ownership of
each institutional investor that owned of record 5% or more of the outstanding
shares of the Company's FedCash and T-Cash portfolios were as follows:
<TABLE>
<S> <C>
FedCash
-------
Saxon & Company 63.65%
PNC Bank
200 Stevens Drive
Lester, PA 19113
Transco & Company 8.93%
Intrust Bank NA
P.O. Box 1
Wichita, KS 67201
</TABLE>
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<PAGE> 134
<TABLE>
<S> <C>
Linden Owner Partnership 10.28%
c/o GE Capital
570 Lexington Avenue, 11th Floor
New York, NY 10022
T-Cash
------
Jato & Co. 14.92%
National City Bank/Minneapolis
P.O. Box E 1919
Minneapolis, MN 55480
Bank IV Kansas NA 6.73%
P.O. Box 47010
Wichita, KS 67202
Overton & Co. 8.70%
Overton Bank & Trust NA
P.O. Box 16509
Ft. Worth, TX 76162
Oltrust & Co. 23.84%
Old Natl. Bank in Evansville
P.O. Box 207
Evansville, IN 47702
Corporate Cash Sweep 16.12%
PNC Bank Kentucky Inc.
539 S 4th Avenue
Louisville, KY 40202
</TABLE>
SHAREHOLDER AND TRUSTEE LIABILITY
The Company is organized as a "business trust" under the laws of the
Commonwealth of Pennsylvania. Shareholders of such a trust may, under certain
circumstances, be held personally liable (as if they were partners) for the
obligations of the trust. The Declaration of Trust of the Company provides
that shareholders of the Funds shall not be subject to any personal liability
for the acts or obligations of the Company and that every note, bond, contract,
order or other undertaking made by the Company shall contain a provision to the
effect that the shareholders are not personally liable thereunder. The
Declaration of Trust provides for indemnification out of the trust property of
any shareholder held personally liable solely by reason of being or having been
a shareholder and not because
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<PAGE> 135
of any acts or omissions or some other reason. The Declaration of Trust also
provides that the Company shall, upon request, assume the defense of any claim
made against any shareholder for any act or obligation of the Company and
satisfy any judgment thereon. Thus, the risk of a shareholder's incurring
financial loss beyond its investment on account of shareholder liability is
limited to circumstances in which the Company itself would be unable to meet
its obligations.
The Company's Declaration of Trust provides further that no trustee,
officer or agent of the Company shall be personally liable for or on account of
any contract, debt, tort, claim, damage, judgment or decree arising out of or
connected with the administration or preservation of the trust estate or the
conduct of any business of the Company, nor shall any trustee be personally
liable to any person for any action or failure to act except by reason of bad
faith, willful misfeasance, gross negligence in the performance of any duties
or by reason of reckless disregard of the obligations and duties as trustee.
It also provides that all persons having any claim against the trustees or the
Company shall look solely to the trust property for payment. With the
exceptions stated, the Declaration of Trust provides that a trustee is entitled
to be indemnified against all liabilities and expenses reasonably incurred by
him or her in connection with the defense or disposition of any proceeding in
which the trustee may be involved or with which the trustee may be threatened
by reason of being or having been a trustee, and that the trustees have the
power, but not the duty, to indemnify officers and employees of the Company
unless such person would not be entitled to indemnification had he or she been
a trustee.
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<PAGE> 136
APPENDIX A
COMMERCIAL PAPER RATINGS
A Standard & Poor's commercial paper rating is a current
assessment of the likelihood of timely payment of debt considered short-term in
the relevant market. The following summarizes the rating categories used by
Standard and Poor's for commercial paper:
"A-1" - Issue's degree of safety regarding timely payment is
strong. Those issues determined to possess extremely strong safety
characteristics are denoted "A-1+."
"A-2" - Issue's capacity for timely payment is satisfactory.
However, the relative degree of safety is not as high as for issues designated
"A-1."
"A-3" - Issue has an adequate capacity for timely payment. It
is, however, somewhat more vulnerable to the adverse effects of changes and
circumstances than an obligation carrying a higher designation.
"B" - Issue has only a speculative capacity for timely
payment.
"C" - Issue has a doubtful capacity for payment.
"D" - Issue is in payment default.
Moody's commercial paper ratings are opinions of the ability
of issuers to repay punctually promissory obligations not having an original
maturity in excess of 9 months. The following summarizes the rating categories
used by Moody's for commercial paper:
"Prime-1" - Issuer or related supporting institutions are
considered to have a superior capacity for repayment of short-term promissory
obligations. Prime-1 repayment capacity will normally be evidenced by the
following characteristics: leading market positions in well established
industries; high rates of return on funds employed; conservative capitalization
structures with moderate reliance on debt and ample asset protection; broad
margins in earning coverage of fixed financial
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<PAGE> 137
charges and high internal cash generation; and well established access to a
range of financial markets and assured sources of alternate liquidity.
"Prime-2" - Issuer or related supporting institutions are
considered to have a strong capacity for repayment of short-term promissory
obligations. This will normally be evidenced by many of the characteristics
cited above but to a lesser degree. Earnings trends and coverage ratios, while
sound, will be more subject to variation. Capitalization characteristics,
while still appropriate, may be more affected by external conditions. Ample
alternative liquidity is maintained.
"Prime-3" - Issuer or related supporting institutions have an
acceptable capacity for repayment of short-term promissory obligations. The
effects of industry characteristics and market composition may be more
pronounced. Variability in earnings and profitability may result in changes in
the level of debt protection measurements and the requirement for relatively
high financial leverage. Adequate alternate liquidity is maintained.
"Not Prime" - Issuer does not fall within any of the Prime
rating categories.
The three rating categories of Duff & Phelps for investment
grade commercial paper and short-term debt are "D-1," "D-2" and "D-3." Duff &
Phelps employs three designations, "D-1+," "D-1" and "D-1-," within the highest
rating category. The following summarizes the rating categories used by Duff &
Phelps for commercial paper:
"D-1+" - Debt possesses highest certainty of timely payment.
Short-term liquidity, including internal operating factors and/or access to
alternative sources of funds, is outstanding, and safety is just below
risk-free U.S. Treasury short-term obligations.
"D-1" - Debt possesses very high certainty of timely payment.
Liquidity factors are excellent and supported by good fundamental protection
factors. Risk factors are minor.
"D-1-" - Debt possesses high certainty of timely payment.
Liquidity factors are strong and supported by good fundamental protection
factors. Risk factors are very small.
"D-2" - Debt possesses good certainty of timely payment.
Liquidity factors and company fundamentals are sound. Although ongoing funding
needs may enlarge total financing requirements, access to capital markets is
good. Risk factors are small.
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<PAGE> 138
"D-3" - Debt possesses satisfactory liquidity, and other
protection factors qualify issue as investment grade. Risk factors are larger
and subject to more variation. Nevertheless, timely payment is expected.
"D-4" - Debt possesses speculative investment characteristics.
Liquidity is not sufficient to ensure against disruption in debt service.
Operating factors and market access may be subject to a high degree of
variation.
"D-5" - Issuer has failed to meet scheduled principal and/or
interest payments.
Fitch short-term ratings apply to debt obligations that are
payable on demand or have original maturities of up to three years. The
following summarizes the rating categories used by Fitch for short-term
obligations:
"F-1+" - Securities possess exceptionally strong credit
quality. Issues assigned this rating are regarded as having the strongest
degree of assurance for timely payment.
"F-1" - Securities possess very strong credit quality. Issues
assigned this rating reflect an assurance of timely payment only slightly less
in degree than issues rated "F-1+."
"F-2" - Securities possess good credit quality. Issues
assigned this rating have a satisfactory degree of assurance for timely
payment, but the margin of safety is not as great as the "F-1+" and "F-1"
categories.
"F-3" - Securities possess fair credit quality. Issues
assigned this rating have characteristics suggesting that the degree of
assurance for timely payment is adequate; however, near-term adverse changes
could cause these securities to be rated below investment grade.
"F-S" - Securities possess weak credit quality. Issues
assigned this rating have characteristics suggesting a minimal degree of
assurance for timely payment and are vulnerable to near-term adverse changes in
financial and economic conditions.
"D" - Securities are in actual or imminent payment default.
Fitch may also use the symbol "LOC" with its short-term
ratings to indicate that the rating is based upon a letter of credit issued by
a commercial bank.
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<PAGE> 139
Thomson BankWatch short-term ratings assess the likelihood of
an untimely or incomplete payment of principal or interest of unsubordinated
instruments having a maturity of one year or less which is issued by United
States commercial banks, thrifts and non-bank banks; non-United States banks;
and broker-dealers. The following summarizes the ratings used by Thomson
BankWatch:
"TBW-1" - This designation represents Thomson BankWatch's
highest rating category and indicates a very high degree of likelihood that
principal and interest will be paid on a timely basis.
"TBW-2" - This designation indicates that while the degree of
safety regarding timely payment of principal and interest is strong, the
relative degree of safety is not as high as for issues rated "TBW-1."
"TBW-3" - This designation represents the lowest investment
grade category and indicates that while the debt is more susceptible to adverse
developments (both internal and external) than obligations with higher ratings,
capacity to service principal and interest in a timely fashion is considered
adequate.
"TBW-4" - This designation indicates that the debt is regarded
as non-investment grade and therefore speculative.
IBCA assesses the investment quality of unsecured debt with an
original maturity of less than one year which is issued by bank holding
companies and their principal bank subsidiaries. The following summarizes the
rating categories used by IBCA for short-term debt ratings:
"A1+" - Obligations supported by the highest capacity for
timely repayment.
"A1" - Obligations are supported by a strong capacity for
timely repayment.
"A2" - Obligations are supported by a satisfactory capacity
for timely repayment, although such capacity may be susceptible to adverse
changes in business, economic or financial conditions.
"A3" - Obligations are supported by a satisfactory capacity
for timely repayment. Such capacity is more susceptible to adverse changes in
business, economic or financial conditions than for obligations in higher
categories.
A-4
<PAGE> 140
"B" - Obligations for which the capacity for timely repayment
is susceptible to adverse changes in business, economic or financial
conditions.
"C" - Obligations for which there is an inadequate capacity to
ensure timely repayment.
"D" - Obligations which have a high risk of default or which
are currently in default.
CORPORATE AND MUNICIPAL LONG-TERM DEBT RATINGS
The following summarizes the ratings used by Standard & Poor's
for corporate and municipal debt:
"AAA" - This designation represents the highest rating
assigned by Standard & Poor's to a debt obligation and indicates an extremely
strong capacity to pay interest and repay principal.
"AA" - Debt is considered to have a very strong capacity to
pay interest and repay principal and differs from AAA issues only in small
degree.
"A" - Debt is considered to have a strong capacity to pay
interest and repay principal although such issues are somewhat more susceptible
to the adverse effects of changes in circumstances and economic conditions than
debt in higher-rated categories.
"BBB" - Debt is regarded as having an adequate capacity to pay
interest and repay principal. Whereas such issues normally exhibit adequate
protection parameters, adverse economic conditions or changing circumstances
are more likely to lead to a weakened capacity to pay interest and repay
principal for debt in this category than in higher-rated categories.
"BB," "B," "CCC," "CC" and "C" - Debt is regarded, on balance,
as predominantly speculative with respect to capacity to pay interest and repay
principal in accordance with the terms of the obligation. "BB" indicates the
lowest degree of speculation and "C" the highest degree of speculation. While
such debt will likely have some quality and protective characteristics, these
are outweighed by large uncertainties or major risk exposures to adverse
conditions.
"BB" - Debt has less near-term vulnerability to default than
other speculative issues. However, it faces major ongoing uncertainties or
exposure to adverse business, financial or economic conditions which could lead
to inadequate capacity to meet timely interest and principal payments. The
"BB" rating
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<PAGE> 141
category is also used for debt subordinated to senior debt that is assigned an
actual or implied "BBB-" rating.
"B" - Debt has a greater vulnerability to default but
currently has the capacity to meet interest payments and principal repayments.
Adverse business, financial or economic conditions will likely impair capacity
or willingness to pay interest and repay principal. The "B" rating category is
also used for debt subordinated to senior debt that is assigned an actual or
implied "BB" or "BB-" rating.
"CCC" - Debt has a currently identifiable vulnerability to
default, and is dependent upon favorable business, financial and economic
conditions to meet timely payment of interest and repayment of principal. In
the event of adverse business, financial or economic conditions, it is not
likely to have the capacity to pay interest and repay principal. The "CCC"
rating category is also used for debt subordinated to senior debt that is
assigned an actual or implied "B" or "B-" rating.
"CC" - This rating is typically applied to debt subordinated
to senior debt that is assigned an actual or implied "CCC" rating.
"C" - This rating is typically applied to debt subordinated to
senior debt which is assigned an actual or implied "CCC-" debt rating. The "C"
rating may be used to cover a situation where a bankruptcy petition has been
filed, but debt service payments are continued.
"CI" - This rating is reserved for income bonds on which no
interest is being paid.
"D" - Debt is in payment default. This rating is used when
interest payments or principal payments are not made on the date due, even if
the applicable grace period has not expired, unless S & P believes such
payments will be made during such grace period. "D" rating is also used upon
the filing of a bankruptcy petition if debt service payments are jeopardized.
PLUS (+) OR MINUS (-) - The ratings from "AA" through "CCC"
may be modified by the addition of a plus or minus sign to show relative
standing within the major rating categories.
"r" - This rating is attached to highlight derivative, hybrid,
and certain other obligations that S & P believes may experience high
volatility or high variability in expected returns due to non-credit risks.
Examples of such obligations are: securities whose principal or interest return
is indexed to equities, commodities, or currencies; certain swaps and options;
and interest only and principal only mortgage securities.
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<PAGE> 142
The following summarizes the ratings used by Moody's for corporate and
municipal long-term debt:
"Aaa" - Bonds are judged to be of the best quality. They
carry the smallest degree of investment risk and are generally referred to as
"gilt edged." Interest payments are protected by a large or by an
exceptionally stable margin and principal is secure. While the various
protective elements are likely to change, such changes as can be visualized are
most unlikely to impair the fundamentally strong position of such issues.
"Aa" - Bonds 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 in
"Aaa" securities.
"A" - Bonds possess many favorable investment attributes and
are to be considered as upper medium-grade obligations. Factors giving
security to principal and interest are considered adequate but elements may be
present which suggest a susceptibility to impairment sometime in the future.
"Baa" - Bonds 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," "B," "Caa," "Ca," and "C" - Bonds that possess one of
these ratings provide questionable protection of interest and principal ("Ba"
indicates some speculative elements; "B" indicates a general lack of
characteristics of desirable investment; "Caa" represents a poor standing; "Ca"
represents obligations which are speculative in a high degree; and "C"
represents the lowest rated class of bonds). "Caa," "Ca" and "C" bonds may be
in default.
Con. (---) - Bonds for which the security depends upon the
completion of some act or the fulfillment of some condition are rated
conditionally. These are bonds secured by (a) earnings of projects under
construction, (b) earnings of projects unseasoned in operation experience, (c)
rentals which begin when facilities are completed, or (d) payments to which
some other limiting condition attaches. Parenthetical rating denotes
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<PAGE> 143
probable credit stature upon completion of construction or elimination of basis
of condition.
Moody's applies numerical modifiers 1, 2 and 3 in each generic
classification from "Aa" to "B" in its bond rating system. The modifier 1
indicates that the issuer ranks in the higher end of its generic rating
category; the modifier 2 indicates a mid-range ranking; and the modifier 3
indicates that the issuer ranks at the lower end of its generic rating
category.
The following summarizes the long-term debt ratings used by
Duff & Phelps for corporate and municipal long-term debt:
"AAA" - Debt is considered to be of the highest credit
quality. The risk factors are negligible, being only slightly more than for
risk-free U.S. Treasury debt.
"AA" - Debt is considered of high credit quality. Protection
factors are strong. Risk is modest but may vary slightly from time to time
because of economic conditions.
"A" - Debt possesses protection factors which are average but
adequate. However, risk factors are more variable and greater in periods of
economic stress.
"BBB" - Debt possesses below average protection factors but
such protection factors are still considered sufficient for prudent investment.
Considerable variability in risk is present during economic cycles.
"BB," "B," "CCC," "DD," and "DP" - Debt that possesses one of
these ratings is considered to be below investment grade. Although below
investment grade, debt rated "BB" is deemed likely to meet obligations when
due. Debt rated "B" possesses the risk that obligations will not be met when
due. Debt rated "CCC" is well below investment grade and has considerable
uncertainty as to timely payment of principal, interest or preferred dividends.
Debt rated "DD" is a defaulted debt obligation, and the rating "DP" represents
preferred stock with dividend arrearages.
To provide more detailed indications of credit quality, the
"AA," "A," "BBB," "BB" and "B" ratings may be modified by the addition of a
plus (+) or minus (-) sign to show relative standing within these major
categories.
The following summarizes the highest four ratings used by
Fitch for corporate and municipal bonds:
"AAA" - Bonds considered to be investment grade and of the
highest credit quality. The obligor has an exceptionally
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<PAGE> 144
strong ability to pay interest and repay principal, which is unlikely to be
affected by reasonably foreseeable events.
"AA" - Bonds considered to be investment grade and of very
high credit quality. The obligor's ability to pay interest and repay principal
is very strong, although not quite as strong as bonds rated "AAA." Because
bonds rated in the "AAA" and "AA" categories are not significantly vulnerable
to foreseeable future developments, short-term debt of these issuers is
generally rated "F-1+."
"A" - Bonds considered to be investment grade and of high
credit quality. The obligor's ability to pay interest and repay principal is
considered to be strong, but may be more vulnerable to adverse changes in
economic conditions and circumstances than bonds with higher ratings.
"BBB" - Bonds considered to be investment grade and of
satisfactory credit quality. The obligor's ability to pay interest and repay
principal is considered to be adequate. Adverse changes in economic conditions
and circumstances, however, are more likely to have an adverse impact on these
bonds, and therefore, impair timely payment. The likelihood that the ratings
of these bonds will fall below investment grade is higher than for bonds with
higher ratings.
"BB," "B," "CCC," "CC," "C," "DDD," "DD," and "D" - Bonds that
possess one of these ratings are considered by Fitch to be speculative
investments. The ratings "BB" to "C" represent Fitch's assessment of the
likelihood of timely payment of principal and interest in accordance with the
terms of obligation for bond issues not in default. For defaulted bonds, the
rating "DDD" to "D" is an assessment of the ultimate recovery value through
reorganization or liquidation.
To provide more detailed indications of credit quality, the
Fitch ratings from and including "AA" to "C" may be modified by the addition of
a plus (+) or minus (-) sign to show relative standing within these major
rating categories.
IBCA assesses the investment quality of unsecured debt with an
original maturity of more than one year which is issued by bank holding
companies and their principal bank subsidiaries. The following summarizes the
rating categories used by IBCA for long-term debt ratings:
"AAA" - Obligations for which there is the lowest expectation
of investment risk. Capacity for timely repayment of principal and interest is
substantial such that adverse changes in business, economic or financial
conditions are unlikely to increase investment risk substantially.
A-9
<PAGE> 145
"AA" - Obligations for which there is a very low expectation
of investment risk. Capacity for timely repayment of principal and interest is
substantial. Adverse changes in business, economic or financial conditions may
increase investment risk albeit not very significantly.
"A" - Obligations for which there is a low expectation of
investment risk. Capacity for timely repayment of principal and interest is
strong, although adverse changes in business, economic or financial conditions
may lead to increased investment risk.
"BBB" - Obligations for which there is currently a low
expectation of investment risk. Capacity for timely repayment of principal and
interest is adequate, although adverse changes in business, economic or
financial conditions are more likely to lead to increased investment risk than
for obligations in higher categories.
"BB," "B," "CCC," "CC," and "C" - Obligations are assigned one
of these ratings where it is considered that speculative characteristics are
present. "BB" represents the lowest degree of speculation and indicates a
possibility of investment risk developing. "C" represents the highest degree
of speculation and indicates that the obligations are currently in default.
IBCA may append a rating of plus (+) or minus (-) to a rating
to denote relative status within major rating categories.
Thomson BankWatch assesses the likelihood of an untimely
repayment of principal or interest over the term to maturity of long term debt
and preferred stock which are issued by United States commercial banks, thrifts
and non-bank banks; non-United States banks; and broker-dealers. The following
summarizes the rating categories used by Thomson BankWatch for long-term debt
ratings:
"AAA" - This designation represents the highest category
assigned by Thomson BankWatch to long-term debt and indicates that the ability
to repay principal and interest on a timely basis is extremely high.
"AA" - This designation indicates a very strong ability to
repay principal and interest on a timely basis with limited incremental risk
compared to issues rated in the highest category.
"A" - This designation indicates that the ability to repay
principal and interest is strong. Issues rated "A" could
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<PAGE> 146
be more vulnerable to adverse developments (both internal and external) than
obligations with higher ratings.
"BBB" - This designation represents Thomson BankWatch's lowest
investment grade category and indicates an acceptable capacity to repay
principal and interest. Issues rated "BBB" are, however, more vulnerable to
adverse developments (both internal and external) than obligations with higher
ratings.
"BB," "B," "CCC," and "CC," - These designations are assigned
by Thomson BankWatch to non-investment grade long-term debt. Such issues are
regarded as having speculative characteristics regarding the likelihood of
timely payment of principal and interest. "BB" indicates the lowest degree of
speculation and "CC" the highest degree of speculation.
"D" - This designation indicates that the long-term debt is in
default.
PLUS (+) OR MINUS (-) - The ratings from "AAA" through "CC"
may include a plus or minus sign designation which indicates where within the
respective category the issue is placed.
MUNICIPAL NOTE RATINGS
A Standard and Poor's rating reflects the liquidity concerns
and market access risks unique to notes due in three years or less. The
following summarizes the ratings used by Standard & Poor's Ratings Group for
municipal notes:
"SP-1" - The issuers of these municipal notes exhibit very
strong or strong capacity to pay principal and interest. Those issues
determined to possess overwhelming safety characteristics are given a plus (+)
designation.
"SP-2" - The issuers of these municipal notes exhibit
satisfactory capacity to pay principal and interest.
"SP-3" - The issuers of these municipal notes exhibit
speculative capacity to pay principal and interest.
Moody's ratings for state and municipal notes and other
short-term loans are designated Moody's Investment Grade ("MIG") and variable
rate demand obligations are designated Variable Moody's Investment Grade
("VMIG"). Such ratings recognize the differences between short-term credit
risk and long-term risk. The following summarizes the ratings by Moody's
Investors Service, Inc. for short-term notes:
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<PAGE> 147
"MIG-1"/"VMIG-1" - Loans bearing this designation are of the
best quality, enjoying strong protection by established cash flows, superior
liquidity support or demonstrated broad-based access to the market for
refinancing.
"MIG-2"/"VMIG-2" - Loans bearing this designation are of high
quality, with margins of protection ample although not so large as in the
preceding group.
"MIG-3"/"VMIG-3" - Loans bearing this designation are of
favorable quality, with all security elements accounted for but lacking the
undeniable strength of the preceding grades. Liquidity and cash flow
protection may be narrow and market access for refinancing is likely to be less
well established.
"MIG-4"/"VMIG-4" - Loans bearing this designation are of
adequate quality, carrying specific risk but having protection commonly
regarded as required of an investment security and not distinctly or
predominantly speculative.
"SG" - Loans bearing this designation are of speculative
quality and lack margins of protection.
Fitch and Duff & Phelps use the short-term ratings described
under Commercial Paper Ratings for municipal notes.
A-12
<PAGE> 148
TRUST FOR FEDERAL SECURITIES
(Federal Trust Fund Portfolio)
Cross Reference Sheet
<TABLE>
<CAPTION>
Form N-1A Item Prospectus Caption
-------------- ------------------
<S> <C> <C>
1. Cover Page . . . . . . . . . . . . . . . . . Cover Page
2. Synopsis . . . . . . . . . . . . . . . . . Background and
Expense Information
3. Condensed Financial Information . . . . . . Financial Highlights;
Yields
4. General Description of
Registrant . . . . . . . . . . . . . . . . Cover Page; Financial
Highlights; Investment
Objective and Policies;
Description of Shares
and Miscellaneous
5. Management of the Fund . . . . . . . . . . . Management of the Fund;
Dividends
6. Capital Stock and Other
Securities . . . . . . . . . . . . . . . . Cover Page; Financial
Highlights; Dividends;
Taxes; Description of
Shares and
Miscellaneous
7. Purchase of Securities Being
Offered . . . . . . . . . . . . . . . Management of the Fund;
Purchase and Redemption
of Shares
8. Redemption or Repurchase . . . . . . . . . . Purchase and Redemption
of Shares
9. Pending Legal Proceedings . . . . . . . . . Inapplicable
</TABLE>
<PAGE> 149
Federal Trust Fund
An Investment Portfolio Offered By
Trust for Federal Securities
<TABLE>
<S> <C>
Bellevue Park Corporate Center For purchase and redemption orders only call:
400 Bellevue Parkway 800-441-7450 (in Delaware: 302-791-5350).
Suite 100 For yield information call: 800-821-6006
Wilmington, DE 19809 (Federal Trust shares code: 11;
Federal Trust Dollar shares code: 12).
For other information call: 800-821-7432.
</TABLE>
Trust for Federal Securities (the "Company") is a no-load, diversified,
open-end investment company that currently offers shares in six separate
investment portfolios. The shares described in this Prospectus represent
interests in the Federal Trust Fund portfolio (the "Fund"), a money market
portfolio.
To the extent permissible by federal and state law, the Fund is structured
to provide shareholders with income that is exempt or excluded from taxation at
the state and local level. See "Taxes." The Fund is also designed to provide an
economical and convenient means for the investment of short-term funds held by
banks, trust companies, corporations, employee benefit plans and other
institutional investors. The investment objective of the Fund is to seek current
income with liquidity and security of principal. The Fund invests in those
obligations issued or guaranteed as to principal and interest by the U.S.
Government or by agencies or instrumentalities thereof the interest income from
which, under current law, generally may not be subject to state income tax by
reason of federal law.
Fund shares may not be purchased by individuals directly, but institutional
investors may purchase shares for accounts maintained by individuals. In
addition to Federal Trust Shares, investors may purchase Federal Trust "Dollar
Shares" which accrue daily dividends in the same manner as Federal Trust Shares
but bear all fees payable by the Fund to institutional investors for certain
services they provide to the beneficial owners of such Shares. (See "Management
of the Fund--Service Organizations.")
PNC Institutional Management Corporation ("PIMC") and PNC Bank, National
Association ("PNC Bank") serve as the Fund's adviser and sub-adviser,
respectively. PFPC Inc. ("PFPC") and Provident Distributors, Inc. ("PDI") serve
as the Fund's administrators. PDI also serves as the Fund's distributor.
------------------------
SHARES OF THE FUND ARE NOT DEPOSITS OR OBLIGATIONS OF OR GUARANTEED, ENDORSED,
OR OTHERWISE SUPPORTED BY PNC BANK CORP. OR ITS AFFILIATES, OR THE U.S.
GOVERNMENT, AND ARE NOT FEDERALLY INSURED BY THE FEDERAL DEPOSIT
INSURANCE CORPORATION, THE FEDERAL RESERVE BOARD OR ANY OTHER
AGENCY. AN INVESTMENT IN THE FUND INVOLVES INVESTMENT RISKS,
INCLUDING THE POSSIBLE LOSS OF PRINCIPAL. THERE CAN BE NO
ASSURANCE THAT IT WILL BE ABLE TO MAINTAIN ITS NET ASSET
VALUE OF $1.00 PER SHARE.
------------------------
This Prospectus briefly sets forth certain information about the Fund that
investors should know before investing. Investors are advised to read this
Prospectus and retain it for future reference. Additional information about the
Fund, contained in a Statement of Additional Information currently dated
February 28, 1996, has been filed with the Securities and Exchange Commission
and is available to investors without charge by calling the Fund at
800-821-7432. The Statement of Additional Information, as amended from time to
time, is incorporated in its entirety by reference into this Prospectus.
------------------------
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.
------------------------
February 28, 1996
<PAGE> 150
BACKGROUND AND EXPENSE INFORMATION
Two classes of shares are offered by this Prospectus: Federal Trust shares
and Federal Trust Dollar shares. Shares of each class represent equal, pro rata
interests in the Fund and accrue daily dividends in the same manner except that
the Dollar shares bear fees payable by the Fund (at the rate of .25% per annum)
to institutional investors for services they provide to the beneficial owners of
such shares. (See "Management of the Fund--Service Organizations.")
EXPENSE SUMMARY
<TABLE>
<CAPTION>
FEDERAL
FEDERAL TRUST
TRUST DOLLAR
SHARES SHARES
-------------- --------------
<S> <C> <C> <C> <C>
ANNUAL FUND OPERATING EXPENSES
- ------------------------------
(as a percentage of average net assets)
Management Fees (net of waivers)........................ .06% .06%
Other Expenses.......................................... .14% .39%
Administration Fees (net of waivers)............... .06% .06%
Shareholder Servicing Fees......................... 0% .25%
Miscellaneous...................................... .06% .06%
----- -----
Total Fund Operating Expenses (net of waivers).......... .20% .45%
===== =====
</TABLE>
- ------------
<TABLE>
<CAPTION>
EXAMPLE 1 YEAR 3 YEARS 5 YEARS 10 YEARS
- ------- ------ ------- ------- --------
<S> <C> <C> <C> <C>
You would pay the following expenses on a $1,000
investment, assuming (1) a 5% annual return and (2)
redemption at the end of each time period with
respect to the following shares:
Federal Trust Shares: $2 $ 6 $11 $ 26
Federal Trust Dollar Shares: $5 $14 $25 $ 57
</TABLE>
THE FOREGOING SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR FUTURE
EXPENSES OR RATE OF RETURN. ACTUAL EXPENSES AND RATE OF RETURN MAY BE GREATER OR
LESSER THAN THOSE SHOWN.
The purpose of the foregoing table is to assist an investor in
understanding the various costs and expenses that an investor in the Fund will
bear directly or indirectly. The table is based on expenses incurred by the
Federal Trust Shares and Dollar Shares during the last fiscal year, restated to
reflect the expenses which each class of shares expects to incur during the
current fiscal year. In addition, institutional investors may charge fees for
providing administrative services in connection with their customers' investment
in Dollar Shares. Absent fee waivers, Management and Administration fees for
Federal Trust Shares and Dollar Shares each would have been .13% and Total Fund
Operating Expenses would have been .32% and .57%, respectively. (For more
complete descriptions of the various costs and expenses, see "Management of the
Fund" in this Prospectus and the Statement of Additional Information and the
financial statements and related notes contained in the Statement of Additional
Information.). The investment adviser and administrators may from time to time
waive the advisory and administration fees otherwise payable to them or may
reimburse the Fund for its operating expenses. The foregoing table has not been
audited by the Fund's independent accountants.
2
<PAGE> 151
FINANCIAL HIGHLIGHTS
The following financial highlights for Federal Trust Fund Shares have been
derived from the financial statements of the Fund for the fiscal years ended
October 31, 1995 and for each of the three preceding fiscal years and for the
fiscal period ended October 31, 1991 (commencement of operations) and for
Federal Trust Dollar Shares for the fiscal years ended October 31, 1995 and for
each of the three preceding fiscal years and for the fiscal period ended October
31, 1991 (commencement of operations). The financial highlights for the fiscal
years set forth below have been audited by Coopers & Lybrand L.L.P. independent
accountants whose report on the financial statements and financial highlights of
the Fund is included in the Statement of Additional Information. The tables
should be read in conjunction with the financial statements and related notes
included in the Statement of Additional Information. Further information about
the performance of the Fund is available in the annual report to shareholders,
which may be obtained without charge by calling 800-821-7432.
TRUST FOR FEDERAL SECURITIES
FINANCIAL HIGHLIGHTS
(FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)
FEDERAL TRUST SHARES
<TABLE>
<CAPTION>
YEAR ENDED OCTOBER 31, DECEMBER 3, 1990(3)
-------------------------------------------- TO
1995 1994 1993 1992 OCTOBER 31, 1991
-------- -------- -------- -------- -----------------
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Period......... $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
-------- -------- -------- -------- -----------------
Income From Investment Operations:
Net Investment Income...................... .0563 .0380 .0302 .0389 .0564
Net Capital Gains.......................... -- -- .0001 .0018 --
-------- -------- -------- -------- -----------------
Total From Investment Operations........... .0563 .0380 .0303 .0407 .0564
-------- -------- -------- -------- -----------------
Less Distributions:
Dividends to Shareholders from:
Net Investment Income.................... (.0563) (.0380) (.0302) (.0389) (.0564)
Net Capital Gains........................ -- -- (.0001) (.0018) --
-------- -------- -------- -------- -----------------
Total Distributions........................ (.0563) (.0380) (.0303) (.0407) (.0564)
-------- -------- -------- -------- -----------------
Net Asset Value, End of Period............... $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
========= ========= ========= ========= ==================
Total Return................................. 5.77% 3.87% 3.06% 4.15% 5.79%(4)
Ratios/Supplemental Data:
Net Assets, End of Period (in 000s)........ $237,718 $317,769 $257,125 $428,365 $ 184,063
Ratio of Expenses to Average Net
Assets(1)................................ .18% .18% .18% .20% .12%(2)
Ratio of Net Investment Income to Average
Net Assets............................... 5.61% 3.85% 3.02% 3.75% 5.93%(2)
</TABLE>
- ------------
(1) Without the waiver of advisory and administration fees and without expense
reimbursements, the ratio of expenses to average daily net assets would have
been .32%, .31%, .29% and .30% respectively, for each of the years ended
October 31, 1995, 1994, 1993 and 1992, and .39% (annualized) for the period
ended October 31, 1991 for Federal Trust Shares.
(2) Annualized.
(3) Commencement of operations.
(4) Total returns are not annualized for periods of less than one year.
3
<PAGE> 152
TRUST FOR FEDERAL SECURITIES
FINANCIAL HIGHLIGHTS
(FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)
FEDERAL TRUST DOLLAR SHARES
<TABLE>
<CAPTION>
DECEMBER 31,
YEAR ENDED OCTOBER 31, 1990(3)
---------------------------------------- TO
1995 1994 1993 1992 OCTOBER 31, 1991
------- ------- ------- ------- ------------------
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Period........... $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
------- ------- ------- ------- --------
Income From Investment Operations:
Net Investment Income........................ .0538 .0355 .0277 .0364 .0487
Net Capital Gains............................ -- -- .0001 .0018 --
------- ------- ------- ------- --------
Total From Investment Operations............. .0538 .0355 .0278 .0382 .0487
------- ------- ------- ------- --------
Less Distributions:
Dividends to Shareholders from:
Net Investment Income...................... (.0538) (.0355) (.0277) (.0364) (.0487)
Net Capital Gains.......................... -- -- (.0001) (.0018) --
------- ------- ------- ------- --------
Total Distributions.......................... (.0538) (.0355) (.0278) (.0382) (.0487)
------- ------- ------- ------- --------
Net Asset Value, End of Period................. $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
======== ======== ======== ======== ===================
Total Return................................... 5.52% 3.62% 2.81% 3.90% 4.98%(4)
Ratios/Supplemental Data:
Net Assets, End of Period (in 000s).......... $28,402 $ 8,278 $ 1,025 $ 2,442 $ 1,681
Ratio of Expenses to Average Net Assets(1)... .43% .43% .43% .45% .37%(2)
Ratio of Net Investment Income to Average Net
Assets..................................... 5.36% 3.60% 2.77% 3.50% 5.86%(2)
</TABLE>
- ------------
(1) Without the waiver of advisory and administration fees and without expense
reimbursements, the ratio of expenses to average daily net assets would have
been .57%, .56%, .54% and .55%, respectively, for each of the years ended
October 31, 1995, 1994, 1993 and 1992, and .64% (annualized) for the period
ended October 31, 1991 for Federal Trust Dollar Shares.
(2) Annualized.
(3) First issuance of shares.
(4) Total returns are not annualized for periods of less than one year.
4
<PAGE> 153
INVESTMENT OBJECTIVE AND POLICIES
IN GENERAL
The Fund's investment objective is to seek current income with liquidity
and security of principal. The investment objective of the Fund is fundamental
and may not be changed without the approval of the holders of at least a
majority of the outstanding shares of the Fund. The Fund invests in obligations
issued or guaranteed as to principal and interest by the U.S. Government or by
agencies or instrumentalities thereof the interest income from which, under
current law, generally may not be subject to state income tax by reason of
federal law, including securities issued by the U.S. Treasury and by certain
agencies or instrumentalities such as the Federal Home Loan Bank, Federal Farm
Credit Banks Funding Corp. and the Student Loan Marketing Association.
Shareholders in a particular state that imposes an income tax should determine
through consultation with their own tax advisors whether such interest income,
when distributed by the Fund, will be considered by the state to have retained
exempt status, and whether the Fund's capital gain and other income, if any,
when distributed will be subject to the state's income tax. See "Taxes." DUE TO
STATE INCOME TAX CONSIDERATIONS, THE FUND WILL NOT ENTER INTO REPURCHASE
AGREEMENTS.
Portfolio obligations held by the Fund have remaining maturities of 397
days (thirteen months) or less (with certain exceptions), subject to the
quality, diversification, and other requirements of Rule 2a-7 under the
Investment Company Act of 1940, as amended (the "1940 Act") and other rules of
the Securities and Exchange Commission (the "SEC"). Certain government
securities held by the Fund may have remaining maturities exceeding thirteen
months if such securities provide for adjustments in their interest rates not
less frequently than every thirteen months.
Securities issued or guaranteed by the U.S. Government, its agencies and
instrumentalities have historically involved little risk of loss of principal if
held to maturity. However, due to fluctuations in interest rates, the market
value of such securities may vary during the period a shareholder owns shares of
the Fund. The Fund may from time to time engage in portfolio trading for
liquidity purposes, in order to enhance its yield or if otherwise deemed
advisable. In selling portfolio securities prior to maturity, the Fund may
realize a price higher or lower than that paid to acquire any given security,
depending upon whether interest rates have decreased or increased since its
acquisition. To the extent consistent with its investment objectives, the Fund
may invest in Treasury receipts and other "stripped" securities issued or
guaranteed by the U.S. Government, where the principal and interest components
are traded independently under the Separate Trading of Registered Interest and
Principal of Securities program ("STRIPS"). Under the STRIPS program, the
principal and interest components are individually numbered and separately
issued by the U.S. Treasury at the request of depository financial institutions,
which then trade the component parts independently. Currently, the Fund only
invests in "stripped" securities issued or guaranteed by the U.S. Government
which are registered under the STRIPS program. The principal and interest
components may exhibit greater price volatility then ordinary debt securities
because of the manner in which their principal and interest are returned to
investors.
The Fund may purchase securities on a "when-issued" basis. When-issued
securities are securities purchased for delivery beyond the normal settlement
date at a stated price and yield. The Fund will generally not pay for such
securities or start earning interest on them until they are
5
<PAGE> 154
received. Securities purchased on a when-issued basis are recorded as an asset
and are subject to changes in value based upon changes in the general level of
interest rates. The Fund expects that commitments to purchase when-issued
securities will not exceed 25% of the value of its total assets absent unusual
market conditions. The Fund does not intend to purchase when-issued securities
for speculative purposes but only in furtherance of its investment objective.
SUITABILITY
The Fund is designed as an economical and convenient vehicle for those
institutional investors seeking to obtain current income with liquidity and
security of principal. The Fund is designed for banks and other institutions
seeking investment of monies held in accounts for which the institution acts in
a fiduciary, advisory, agency, custodial or other similar capacity. The Fund may
also be suitable for the investment of funds held or managed by corporations,
employee benefit plans, insurance companies, unions, hospitals, investment
counselors, professional firms, educational, religious and charitable
organizations, investment bankers, brokers, and others, if consistent with the
objectives of the particular account and any applicable state and federal laws
and regulations.
The Fund offers the advantage of diversification and economies of scale,
thereby avoiding the generally greater expense of executing a large number of
small transactions. Moreover, investment in the Fund relieves the investor of
many management and administrative burdens associated with the direct purchase
and sale of income obligations. These include the selection of investments;
surveying the market for the best terms at which to buy and sell; receipt,
delivery and safekeeping of securities; and recordkeeping.
INVESTMENT LIMITATIONS
The Fund's investment policies described above may be changed by the
Company's Board of Trustees without a vote of shareholders. The Fund's
investment objective and investment limitations summarized below may not be
changed without the affirmative vote of the holders of a majority of its
outstanding shares. (A complete list of the investment limitations that cannot
be changed without a vote of shareholders is contained in the Statement of
Additional Information under "Investment Objectives and Policies.")
The Fund may not:
1. Purchase securities other than obligations issued or guaranteed by
the U.S. Government, its agencies or instrumentalities.
2. Borrow money except from banks for temporary purposes and then in
an amount not exceeding 10% of the value of the Fund's total assets, or
mortgage, pledge or hypothecate its assets except in connection with any
such borrowing and in amounts not in excess of the lesser of the dollar
amounts borrowed or 10% of the value of the Fund's total assets at the time
of such borrowing.
3. Make loans except that the Fund may purchase or hold debt
obligations in accordance with its investment objective and policies.
6
<PAGE> 155
PURCHASE AND REDEMPTION OF SHARES
PURCHASE PROCEDURES
Fund shares are sold at the net asset value per share next determined after
receipt of a purchase order by PFPC, the Fund's transfer agent. Purchase orders
for shares are accepted only on days on which both the New York Stock Exchange
and the Federal Reserve Bank of Philadelphia are open for business (a "Business
Day") and must be transmitted to PFPC in Wilmington, Delaware, by telephone
(800-441-7450; in Delaware: 302-791-5350) or through the Fund's computer access
program. Orders received before 12:00 noon, Eastern time, for which payment has
been received by PNC Bank, the Fund's custodian, will be executed at 12:00 noon.
Orders received after 12:00 noon and before 2:30 P.M., Eastern time (or orders
received earlier in the same day for which payment has not been received by
12:00 noon) will be executed at 4:00 P.M., Eastern time, if payment has been
received by PNC Bank by that time. Orders received at other times, and orders
for which payment has not been received by 4:00 P.M., Eastern time, will not be
accepted, and notice thereof will be given to the institution placing the order.
(Payment for orders which are not received or accepted will be returned after
prompt inquiry to the sending institution.) The Fund may in its discretion
reject any order for shares.
Payment for Fund shares may be made only in federal funds or other funds
immediately available to PNC Bank. The minimum initial investment by an
institution is $3 million for Federal Trust Shares and $5,000 for Dollar Shares;
however, broker-dealers and other institutional investors may set a higher
minimum for their customers. There is no minimum subsequent investment. The
Fund, at its discretion, may reduce the minimum initial investment for Federal
Trust Shares for specific institutions whose aggregate relationship with the
Provident Institutional Funds is substantially equivalent to this $3 million
minimum and warrants this reduction.
Conflict of interest restrictions may apply to an institution's receipt of
compensation paid by the Fund in connection with the investment of fiduciary
funds in Dollar Shares. (See also "Management of the Fund--Service
Organizations.") Institutions, including banks regulated by the Comptroller of
the Currency and investment advisers and other money managers subject to the
jurisdiction of the SEC, the Department of Labor or state securities
commissions, should consult their legal advisors before investing fiduciary
funds in Dollar Shares. (See also "Management of the Fund--Banking Laws.")
REDEMPTION PROCEDURES
Redemption orders must be transmitted to PFPC in Wilmington, Delaware in
the manner described under "Purchase Procedures." Shares are redeemed at the net
asset value per share next determined after PFPC's receipt of the redemption
order. While the Fund intends to use its best efforts to maintain its net asset
value per share at $1.00, the proceeds paid to a shareholder upon redemption may
be more or less than the amount invested depending upon a share's net asset
value at the time of redemption.
Payment for redeemed shares for which a redemption order is received by
PFPC by 2:30 P.M., Eastern time, on a Business Day is normally made in federal
funds wired to the redeeming shareholder on the same day. Payment for redemption
orders which are received between 2:30 P.M. and 4:00 P.M., Eastern time, or on a
day when PNC Bank is closed, is normally wired in federal funds on the next day
following redemption that PNC Bank is open for business.
7
<PAGE> 156
The Fund shall have the right to redeem shares in any account if the value
of the account is less than $1,000 after sixty-days' prior written notice to the
shareholder. Any such redemption shall be effected at the net asset value per
share next determined after the redemption order is entered. If during the
sixty-day period the shareholder increases the value of its account to $1,000 or
more, no such redemption shall take place. Moreover, if a shareholder's Federal
Trust Shares account falls below an average of $100,000 in any particular
calendar month, the account may be charged an account maintenance fee with
respect to that month. In addition, the Fund may also redeem shares
involuntarily or suspend the right of redemption under certain special
circumstances described in the Statement of Additional Information under
"Additional Purchase and Redemption Information."
OTHER MATTERS
The Fund's net asset value per share for purposes of pricing purchase and
redemption orders is determined by PIMC as of 12:00 noon and 4:00 P.M., Eastern
time, on each day (on which both the Federal Reserve Bank of Philadelphia and
the New York Stock Exchange are open for business). Currently, one or both of
these institutions are closed on the customary national business holidays of New
Year's Day, Martin Luther King, Jr. Day, Presidents' Day, Good Friday, Memorial
Day (observed), Independence Day, Labor Day, Columbus Day (observed), Veteran's
Day, Thanksgiving Day and Christmas Day. The net asset value per share of each
class of the Fund is calculated by adding the value of all securities and other
assets belonging to the Fund, subtracting liabilities attributable to each class
and dividing the result by the total number of the outstanding shares of each
class. In computing net asset value, the Fund uses the amortized cost method of
valuation as described in the Statement of Additional Information under
"Additional Purchase and Redemption Information." The Fund's net asset value per
share for purposes of pricing purchase and redemption orders is determined
independently of the net asset values of the shares of the Company's other
investment portfolios.
Fund shares are sold and redeemed without charge by the Fund. Institutional
investors purchasing or holding Fund shares for their customer accounts may
charge customer fees for cash management and other services provided in
connection with their accounts. A customer should, therefore, consider the terms
of its account with an institution before purchasing Fund shares. An institution
purchasing or redeeming Fund shares on behalf of its customers is responsible
for transmitting orders to the Fund in accordance with its customer agreements.
MANAGEMENT OF THE FUND
BOARD OF TRUSTEES
The business and affairs of the Fund are managed under the direction of the
Company's Board of Trustees. The trustees of the Company are as follows:
Philip E. Coldwell is an economic consultant and a former Member of
the Board of Governors of the Federal Reserve System.
Robert R. Fortune is a financial consultant and former Chairman,
President and Chief Executive Officer of Associated Electric & Gas
Insurance Services Limited.
Rodney D. Johnson is President of Fairmount Capital Advisors, Inc.
8
<PAGE> 157
G. Willing Pepper, Chairman of the Board and President of the Company,
is a retired President of Scott Paper Company.
Mr. Pepper is considered by the Company to be an "interested person"
of the Company as defined in the 1940 Act.
The other officers of the Company are as follows:
Edward J. Roach is Vice President and Treasurer of the Company.
W. Bruce McConnel, III, Secretary of the Company, is a partner of the
law firm of Drinker Biddle & Reath, Philadelphia, Pennsylvania.
INVESTMENT ADVISER AND SUB-ADVISER
PIMC, a wholly-owned subsidiary of PNC Bank, serves as the Fund's
investment adviser. PIMC was organized in 1977 by PNC Bank to perform advisory
services for investment companies and has its principal offices at 400 Bellevue
Parkway, Wilmington, Delaware 19809. PNC Bank serves as the Fund's sub-adviser.
PNC Bank is one of the largest bank managers of investments for individuals in
the United States, and together with its predecessors has been in the business
of managing the investments of fiduciary and other accounts since 1847. PNC Bank
is a wholly-owned, indirect subsidiary of PNC Bank Corp. and has its principal
offices at Broad and Chestnut Streets, Philadelphia, Pennsylvania 19102. PNC
Bank Corp. is a multi-bank holding company. PIMC and PNC Bank also serve as
adviser and sub-adviser, respectively, to the Company's FedFund, T-Fund,
FedCash, T-Cash and Treasury Trust Fund portfolios.
PNC Bank Corp., headquartered in Pittsburgh, Pennsylvania, is one of the
largest financial services organizations in the United States with banking
subsidiaries in Pennsylvania, New Jersey, Delaware, Ohio, Kentucky, Indiana,
Massachusetts and Florida. Its major businesses include corporate banking,
consumer banking, mortgage banking and asset management.
PNC Financial Services Group is PNC Bank Corp.'s mutual fund complex,
headquartered in Wilmington, Delaware. This group includes PIMC, PFPC and PNC
Bank. In 1973, Provident National Bank (predecessor to PNC Bank) commenced
advising the first institutional money market mutual fund--a U.S.
dollar-denominated constant net asset value fund--offered in the United States.
The PNC Financial Services Group is one of the largest U.S. bank managers
of mutual funds with assets currently under management in excess of $30 billion.
This group, through PFPC and PFPC International Ltd., is also a leading mutual
fund service provider having contractual relationships with approximately 370
mutual funds with 3.5 million shareholders and in excess of $101 billion in
assets, including some $2 billion in non-U.S. assets. This group, through its
PNC Institutional Investment Service, provides investment research to some 250
financial institutions located in the United States and abroad. PNC Bank
provides custodial services for approximately $210 billion in assets, including
$160 billion in mutual fund assets.
As adviser, PIMC manages the Fund's portfolio and is responsible for all
purchases and sales of the Fund's portfolio securities. PIMC also maintains
certain of the Fund's financial accounts and records and computes the Fund's net
asset value and net income. For the advisory services provided and expenses
assumed by it, PIMC is entitled to receive a fee, computed daily and payable
monthly, based on the Fund's average net assets. PIMC and the administrators may
from
9
<PAGE> 158
time to time reduce the advisory and administration fees otherwise payable to
them or may reimburse the Fund for its operating expenses. Any fees waived or
expenses reimbursed by PIMC or the administrators with respect to a particular
fiscal year are not recoverable. For the fiscal year ended October 31, 1995, the
Fund paid advisory fees aggregating .06% of the Fund's average net assets.
As sub-adviser, PNC Bank provides research, credit analysis and
recommendations with respect to the Fund's investments, and supplies PIMC with
certain computer facilities, personnel and other services. For its sub-advisory
services, PNC Bank is entitled to receive from PIMC an amount equal to 75% of
the advisory fee paid by the Fund to PIMC (subject to adjustment in certain
circumstances). The sub-advisory fees paid by PIMC to PNC Bank have no effect on
the advisory fees payable by the Fund to PIMC. PNC Bank also serves as the
Fund's custodian. The services provided by PNC Bank and PIMC and the fees
payable by the Fund for these services are described further in the Statement of
Additional Information under "Management of the Funds."
ADMINISTRATORS
PFPC whose principal business address is 400 Bellevue Parkway, Wilmington,
Delaware 19809, and PDI, whose principal business address is 259 Radnor-Chester
Road, Suite 120, Radnor, Pennsylvania 19087, serve as administrators. PFPC is an
indirect wholly-owned subsidiary of PNC Bank Corp. A majority of the outstanding
stock of PDI is owned by its officers. The administrative services provided by
the administrators, which are described more fully in the Statement of
Additional Information, include providing and supervising the operation of an
automated data processing system to process purchase and redemption orders;
assisting in maintaining the Fund's Wilmington, Delaware office; performing
administrative services in connection with the Fund's computer access program
maintained to facilitate shareholder access to the Fund; accumulating
information for and coordinating the preparation of reports to the Fund's
shareholders and the Securities and Exchange Commission; and maintaining the
registration or qualification of the Fund's shares for sale under state
securities laws. PFPC and PDI are each responsible for carrying out the duties
undertaken pursuant to the Administration Agreement with the Fund.
For their administrative services, the administrators are entitled jointly
to receive a fee computed daily and payable monthly. (For information regarding
the administrators' waivers and expense reimbursements, see "Investment Adviser
and Sub-Adviser" above.) The Fund also reimburses each administrator for its
reasonable out-of-pocket expenses incurred in connection with the Funds'
computer access program. For the fiscal year ended October 31, 1995, the Fund
paid administration fees aggregating .06% of its average net assets.
PFPC also serves as transfer agent, registrar and dividend disbursing
agent. PFPC's address is P.O. Box 8950, Wilmington, Delaware 19885-9628. The
services provided by PFPC and PDI and the fees payable by the Fund for these
services are described further in the Statement of Additional Information under
"Management of the Funds."
DISTRIBUTOR
PDI serves as distributor of the Fund's shares. Its principal offices are
located at 259 Radnor-Chester Road, Suite 120, Radnor, Pennsylvania 19087. Fund
shares are sold on a continuous basis by the distributor as agent. The
distributor pays the cost of printing and distributing prospectuses to persons
who are not shareholders of the Fund (excluding preparation and printing
expenses
10
<PAGE> 159
necessary for the continued registration of the Fund's shares) and of printing
and distributing all sales literature. No compensation is payable by the Fund to
the distributor for its distribution services.
SERVICE ORGANIZATIONS
Institutional investors, such as banks, savings and loan associations and
other financial institutions, including affiliates of PNC Bank Corp. ("Service
Organizations") may purchase Dollar Shares. Dollar Shares are identical in all
respects to the Company's Federal Trust Shares except that they bear the service
fees described below and enjoy certain exclusive voting rights on matters
relating to these fees. The Fund will enter into an agreement with each Service
Organization which purchases Dollar Shares requiring it to provide support
services to its customers who are the beneficial owners of such shares in
consideration of the Fund's payment of .25% (on an annualized basis) of the
average daily net assets of the Dollar Shares held by the Service Organization
for the benefit of customers. Such services, which are described more fully in
the Statement of Additional Information under "Management of the Funds--Service
Organizations," include aggregating and processing purchase and redemption
requests from customers and placing net purchase and redemption orders with
PFPC; processing dividend payments from the Fund on behalf of customers;
providing information periodically to customers showing their positions in
Dollar Shares; and providing sub-accounting or the information necessary for
sub-accounting with respect to Dollar Shares beneficially owned by customers.
Under the terms of the agreements, Service Organizations are required to provide
to their customers a schedule of any fees that they may charge customers in
connection with their investments in Dollar Shares. Federal Trust Shares are
sold to institutions that have not entered into servicing agreements with the
Fund in connection with their investments.
EXPENSES
Except as noted above and in the Statement of Additional Information, the
Fund's service contractors bear all expenses in connection with the performance
of their services. Similarly, the Fund bears the expenses incurred in its
operations. For the fiscal year ended October 31, 1995, the Fund's total
expenses with respect to Federal Trust Shares and Dollar Shares were .18% and
.43% (net of fee waivers of .14% and .14%, respectively) of the average net
assets of the Federal Trust Shares and Federal Trust Dollar Shares,
respectively. With regard to fees paid exclusively by Dollar Shares, see
"Service Organizations" above.
BANKING LAWS
Banking laws and regulations presently prohibit a bank holding company
registered under the Federal Bank Holding Company Act of 1956 or any bank or
non-bank affiliate thereof from sponsoring, organizing or controlling a
registered, open-end investment company engaged continuously in the issuance of
its shares, and prohibit banks generally from issuing, underwriting, selling or
distributing securities such as Fund shares. Such banking laws and regulations
do not prohibit such a holding company or affiliate or banks generally from
acting as investment adviser, transfer agent or custodian to such an investment
company, or from purchasing shares of such a company for or upon the order of
customers. PNC Bank, PIMC and PFPC, as well as some Service Organizations, are
subject to such banking laws and regulations, but believe they may perform the
11
<PAGE> 160
services for the Fund contemplated by their respective agreements, this
Prospectus and the Statement of Additional Information without violating
applicable banking laws or regulations.
Should future legislative, judicial or administrative action prohibit or
restrict the activities of bank Service Organizations in connection with the
provision of support services to their customers, the Fund might be required to
alter or discontinue its arrangements with Service Organizations and change its
method of operations with respect to Dollar Shares. It is not anticipated,
however, that any change in the Fund's method of operations would affect its net
asset value per share or result in a financial loss to any customer.
DIVIDENDS
Shareholders of the Fund are entitled to dividends and distributions
arising only from the net investment income and capital gains, if any, earned on
investments held by the Fund. The Fund's net investment income is declared daily
as a dividend to its shareholders of record at the close of business on the day
of declaration. Shares begin accruing dividends on the day the purchase order
for the shares is executed and continue to accrue dividends through, and
including, the day before such shares are redeemed. Dividends are paid monthly
by check, or by wire transfer if requested in writing by the shareholder, within
five business days after the end of the month or within five business days after
a redemption of all of a shareholder's shares of a particular class. The Fund
does not expect to realize net long-term capital gains.
Dividends are determined in the same manner for each class of shares of the
Fund. Dollar Shares bear all the expense of fees paid to Service Organizations
and as a result, at any given time, the net yield on Dollar Shares will be
approximately .25% lower than the net yield on Federal Trust Shares.
Institutional shareholders may elect to have their dividends reinvested in
additional full and fractional shares of the same class of shares with respect
to which such dividends are declared at the net asset value of such shares on
the payment date. Reinvested dividends receive the same tax treatment as
dividends paid in cash. Such election, or any revocation thereof, must be made
in writing to PFPC at P.O. Box 8950, Wilmington, Delaware 19885-9628, and will
become effective after its receipt by PFPC with respect to dividends paid.
PFPC, as transfer agent, will send each Fund shareholder or its authorized
representative an annual statement designating the amount, if any, of any
dividends and distributions made during each year and their federal tax
qualification.
TAXES
The Fund qualified in its last taxable year and intends to qualify in
future years as a "regulated investment company" under the Internal Revenue Code
of 1986, as amended (the "Code"). A regulated investment company is generally
exempt from federal income tax on amounts distributed to its shareholders.
Qualification as a regulated investment company under the Code for a
taxable year requires, among other things, that the Fund distribute to its
shareholders at least 90% of its investment company taxable income for such
year. In general, the Fund's investment company taxable income will be its
taxable income (including interest and short-term capital gains, if any),
subject
12
<PAGE> 161
to certain adjustments and excluding the excess of any net long-term capital
gain for the taxable year over the net short-term capital loss, if any, for such
year. The Fund intends to distribute substantially all of its investment company
taxable income each year. Such distributions will be taxable as ordinary income
to the Fund's shareholders that are not currently exempt from federal income
taxes, whether such income is received in cash or reinvested in additional
shares. (Federal income taxes for distributions to an IRA or a qualified
retirement plan are deferred under the Code.) It is anticipated that none of the
Fund's distributions will be eligible for the dividends received deduction for
corporations. The Fund does not expect to realize long-term capital gains and,
therefore, does not contemplate payment of any "capital gain dividends", as
described in the Code.
Dividends declared in October, November or December of any year payable to
shareholders of record on a specified date in such months will be deemed to have
been received by the shareholders and paid by the Fund on December 31 of such
year, in the event such dividends are actually paid during January of the
following year.
TO THE EXTENT PERMISSIBLE BY FEDERAL AND STATE LAW, THE FUND IS STRUCTURED
TO PROVIDE SHAREHOLDERS WITH INCOME THAT IS EXEMPT OR EXCLUDED FROM TAXATION AT
THE STATE AND LOCAL LEVEL. SUBSTANTIALLY ALL DIVIDENDS PAID TO SHAREHOLDERS
RESIDING IN CERTAIN STATES WILL BE EXEMPT OR EXCLUDED FROM STATE INCOME TAX.
MANY STATES, BY STATUTE, JUDICIAL DECISION OR ADMINISTRATIVE ACTION, HAVE TAKEN
THE POSITION THAT DIVIDENDS OF A REGULATED INVESTMENT COMPANY SUCH AS THE FUND
THAT ARE ATTRIBUTABLE TO INTEREST ON OBLIGATIONS OF THE U.S. TREASURY AND
CERTAIN U.S. GOVERNMENT AGENCIES AND INSTRUMENTALITIES ARE THE FUNCTIONAL
EQUIVALENT OF INTEREST FROM SUCH OBLIGATIONS AND ARE, THEREFORE, EXEMPT FROM
STATE AND LOCAL INCOME TAXES. INVESTORS SHOULD BE AWARE OF THE APPLICATION OF
THEIR STATE AND LOCAL TAX LAWS TO INVESTMENTS IN THE FUND.
The foregoing discussion is only a brief summary of some of the important
federal tax considerations generally affecting the Fund and its shareholders. As
indicated above, IRAs receive special tax treatment. No attempt is made to
present a detailed explanation of the federal, state or local income tax
treatment of the Fund or its shareholders, and this discussion is not intended
as a substitute for careful tax planning. Accordingly, potential investors in
the Fund should consult their tax advisors with specific reference to their own
tax situations.
YIELDS
From time to time, in advertisements or in reports to shareholders, the
"yields" and "effective yields" for Federal Trust Shares and Dollar Shares may
be quoted. Yield quotations are computed for Federal Trust Shares separately
from those for Dollar Shares. The "yield" for a particular class or sub-class of
Fund shares refers to the income generated by an investment in such shares over
a specified period (such as a seven-day period). This income is then
"annualized"; that is, the amount of income generated by the investment during
that period is assumed to be generated for each such period over a 52-week or
one-year period and is shown as a percentage of the investment. The "effective
yield" is calculated similarly but, when annualized, the income earned by an
investment in a particular class or sub-class of shares is assumed to be
reinvested. The "effective yield" will be slightly higher than the "yield"
because of the compounding effect of this assumed reinvestment.
13
<PAGE> 162
The Fund's yields may be compared to those of other mutual funds with
similar objectives, to stock or other relevant indices, or to rankings prepared
by independent services or other financial or industry publications that monitor
the performance of mutual funds. For example, such data are reported in national
financial publications such as IBC/Donoghue's Money Fund Report(R), The Wall
Street Journal, and The New York Times, reports prepared by Lipper Analytical
Services, Inc., and publications of a local or regional nature.
The Fund's yield figures for Federal Trust Fund Shares and Federal Trust
Fund Dollar Shares represent the Fund's past performance, will fluctuate, and
should not be considered as representative of future results. The yield of any
investment is generally a function of portfolio quality and maturity, type of
investment and operating expenses. Any fees charged by Service Organization or
other institutional investors directly to their customers in connection with
investments in Fund shares are not reflected in the Fund's yields; and, such
fees, if charged, would reduce the actual return received by customers on their
investments. The methods used to compute the Fund's yields are described in more
detail in the Statement of Additional Information. Investors may call
800-821-6006 (Federal Trust Shares code: 11; Federal Trust Dollar Shares code:
12) to obtain current yield information.
DESCRIPTION OF SHARES AND MISCELLANEOUS
The Company is a Pennsylvania business trust established on May 14, 1975.
Effective March 2, 1987, the Company's name was changed from Trust for
Short-Term Federal Securities to Trust for Federal Securities. The Company
commenced operations of the Fund in December, 1990.
The Company's Declaration of Trust authorizes the Board of Trustees to
issue an unlimited number of full and fractional shares of beneficial interest
in the Company and to classify or reclassify any unissued shares into one or
more additional classes of shares. Pursuant to such authority, the Board of
Trustees has authorized the issuance of twelve classes of shares designated as
Federal Trust, Federal Trust Dollar, FedFund, FedFund Dollar, T-Fund, T-Fund
Dollar, FedCash, FedCash Dollar, T-Cash, T-Cash Dollar, Treasury Trust and
Treasury Trust Dollar. The Declaration of Trust further authorizes the trustees
to classify or reclassify any class of shares into one or more sub-classes.
THIS PROSPECTUS AND THE STATEMENT OF ADDITIONAL INFORMATION INCORPORATED
HEREIN RELATE PRIMARILY TO THE FUND AND DESCRIBE ONLY THE INVESTMENT OBJECTIVE
AND POLICIES, OPERATIONS, CONTRACTS AND OTHER MATTERS RELATING TO THE FUND.
INVESTORS WISHING TO OBTAIN SIMILAR INFORMATION REGARDING THE COMPANY'S FEDFUND,
T-FUND, FEDCASH, T-CASH AND TREASURY TRUST FUND PORTFOLIOS MAY OBTAIN SEPARATE
PROSPECTUSES DESCRIBING THESE PORTFOLIOS BY CALLING THE DISTRIBUTOR AT
800-998-7633.
The Company does not presently intend to hold annual meetings of
shareholders except as required by the 1940 Act or other applicable law. The
Company will call a meeting of shareholders for the purpose of voting upon the
question of removal of a member of the Board of Trustees upon written request of
shareholders owning at least 10% of the outstanding shares of the Company
entitled to vote.
14
<PAGE> 163
Each Fund Share represents an equal proportionate interest in the assets
belonging to the Fund. Each share is without par value and has no preemptive or
conversion rights. When issued for payment as described in this Prospectus,
shares will be fully paid and non-assessable.
Holders of the Company's Federal Trust Shares and Federal Trust Dollar
Shares will vote in the aggregate and not by class or sub-class on all matters,
except where otherwise required by law and except that only Federal Trust Dollar
Shares will be entitled to vote on matters submitted to a vote of shareholders
pertaining to the Fund's arrangements with Service Organizations. Further,
shareholders of all of the Company's portfolios will vote in the aggregate and
not by portfolio except as otherwise required by law or when the Board of
Trustees determines that the matter to be voted upon affects only the interests
of the shareholders of a particular portfolio. (See the Statement of Additional
Information under "Additional Description Concerning Fund Shares" for examples
where the 1940 Act requires voting by portfolio.) Shareholders of the Company
are entitled to one vote for each full share held (irrespective of class,
sub-class, or portfolio) and fractional votes for fractional shares held. Voting
rights are not cumulative and, accordingly, the holders of more than 50% of the
aggregate shares of the Company may elect all of the trustees.
For information concerning the redemption of Fund shares and possible
restrictions on their transferability, see "Purchase and Redemption of Shares."
As stated above, the Company is organized as a trust under the laws of the
Commonwealth of Pennsylvania. Shareholders of such a trust may, under certain
circumstances, be held personally liable (as if they were partners) for the
obligations of the trust. The Company's Declaration of Trust provides for
indemnification out of the trust property of any shareholder of the Fund held
personally liable solely by reason of being or having been a shareholder and not
because of any acts or omissions or some other reason.
15
<PAGE> 164
TRUST FOR FEDERAL SECURITIES
(Treasury Trust Fund Portfolio)
Cross Reference Sheet
<TABLE>
<CAPTION>
Form N-1A Item Prospectus Caption
-------------- ------------------
<S> <C> <C>
1. Cover Page . . . . . . . . . . . . . . . . . Cover Page
2. Synopsis . . . . . . . . . . . . . . . . . Background and
Expense Information
3. Condensed Financial Information . . . . . . Financial Highlights;
Yields
4. General Description of
Registrant . . . . . . . . . . . . . . . . Cover Page; Financial
Highlights; Investment
Objective and Policies
5. Management of the Fund . . . . . . . . . . . Management of the Fund;
Dividends
6. Capital Stock and Other
Securities . . . . . . . . . . . . . . . . Cover Page; Financial
Highlights; Dividends;
Taxes; Description of
Shares and
Miscellaneous
7. Purchase of Securities Being
Offered . . . . . . . . . . . . . . . Management of the Fund;
Purchase and Redemption
of Shares
8. Redemption or Repurchase . . . . . . . . . . Purchase and Redemption
of Shares
9. Pending Legal Proceedings . . . . . . . . . Inapplicable
</TABLE>
<PAGE> 165
Treasury Trust Fund
An Investment Portfolio Offered By
Trust for Federal Securities
<TABLE>
<S> <C>
Bellevue Park Corporate Center For purchase and redemption orders only call:
400 Bellevue Parkway 800-441-7450 (in Delaware: 302-791-5350).
Suite 100 For yield information call: 800-821-6006
Wilmington, DE 19809 (Treasury Trust shares code: 62; Treasury
Trust Dollar shares code: 63).
For other information call: 800-821-7432.
</TABLE>
Trust for Federal Securities (the "Company") is a no-load, diversified,
open-end investment company that currently offers shares in six separate
investment portfolios. The shares described in this Prospectus represent
interests in the Treasury Trust Fund portfolio (the "Fund"), a money market
portfolio.
To the extent permissible by federal and state law, the Fund is structured
to provide shareholders with income that is exempt or excluded from taxation at
the state and local level. See "Taxes." The Fund is also designed to provide an
economical and convenient means for the investment of short-term funds held by
banks, trust companies, corporations, employee benefit plans and other
institutional investors. The investment objective of the Fund is to seek current
income with liquidity and security of principal. The Fund invests solely in U.S.
Treasury bills, notes and direct obligations of the U.S. Treasury.
Fund shares may not be purchased by individuals directly, but institutional
investors may purchase shares for accounts maintained by individuals. In
addition to Treasury Trust Shares, investors may purchase Treasury Trust "Dollar
Shares" which accrue daily dividends in the same manner as Treasury Trust Shares
but bear all fees payable by the Fund to institutional investors for certain
services they provide to the beneficial owners of such Shares. (See "Management
of the Fund-- Service Organizations.")
PNC Institutional Management Corporation ("PIMC") and PNC Bank, National
Association ("PNC Bank") serve as the Fund's adviser and sub-adviser,
respectively. PFPC Inc. ("PFPC") and Provident Distributors, Inc. ("PDI") serve
as the Fund's administrators. PDI also serves as the Fund's distributor.
------------------------
SHARES OF THE FUND ARE NOT DEPOSITS OR OBLIGATIONS OF OR GUARANTEED, ENDORSED,
OR OTHERWISE SUPPORTED BY PNC BANK CORP. OR ITS AFFILIATES, OR THE U.S.
GOVERNMENT, AND ARE NOT FEDERALLY INSURED BY THE FEDERAL DEPOSIT
INSURANCE CORPORATION, THE FEDERAL RESERVE BOARD OR ANY OTHER
AGENCY. AN INVESTMENT IN THE FUND INVOLVES INVESTMENT RISKS,
INCLUDING THE POSSIBLE LOSS OF PRINCIPAL. THERE CAN BE NO
ASSURANCE THAT IT WILL BE ABLE TO MAINTAIN ITS NET ASSET
VALUE OF $1.00 PER SHARE.
------------------------
This Prospectus briefly sets forth certain information about the Fund that
investors should know before investing. Investors are advised to read this
Prospectus and retain it for future reference. Additional information about the
Fund, contained in a Statement of Additional Information currently dated
February 28, 1996, has been filed with the Securities and Exchange Commission
and is available to investors without charge by calling the Fund at
800-821-7432. The Statement of Additional Information, as amended from time to
time, is incorporated in its entirety by reference into this Prospectus.
------------------------
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.
------------------------
February 28, 1996
<PAGE> 166
BACKGROUND AND EXPENSE INFORMATION
Two classes of shares are offered by this Prospectus: Treasury Trust Shares
and Treasury Trust Dollar Shares. Shares of each class represent equal, pro rata
interests in the Fund and accrue daily dividends in the same manner except that
the Dollar Shares bear fees payable by the Fund (at the rate of .25% per annum)
to institutional investors for services they provide to the beneficial owners of
such shares. (See "Management of the Fund--Service Organizations.")
EXPENSE SUMMARY
<TABLE>
<CAPTION>
TREASURY
TREASURY TRUST
TRUST DOLLAR
SHARES SHARES
-------------- --------------
<S> <C> <C> <C> <C>
ANNUAL FUND OPERATING EXPENSES
(as a percentage of average net assets)
Management Fees (net of waivers)............................. .07% .07%
Other Expenses............................................... .13% .38%
Administration Fees (net of waivers)................. .07% .07%
Shareholder Servicing Fees........................... 0% .25%
Miscellaneous........................................ .04% .04%
----- -----
Total Fund Operating Expenses (net of waivers)................. .20% .45%
===== =====
</TABLE>
- ---------------
<TABLE>
<CAPTION>
EXAMPLE 1 YEAR 3 YEARS 5 YEARS 10 YEARS
------ ------- ------- --------
<S> <C> <C> <C> <C>
You would pay the following expenses on a $1,000
investment, assuming (1) a 5% annual return and (2)
redemption at the end of each time period with
respect to the following shares:
Treasury Trust Shares: $2 $ 6 $11 $ 26
Treasury Trust Dollar Shares: $5 $14 $25 $ 57
</TABLE>
THE FOREGOING SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR FUTURE
EXPENSES OR RATE OF RETURN. ACTUAL EXPENSES AND RATE OF RETURN MAY BE GREATER OR
LESSER THAN THOSE SHOWN.
The purpose of the foregoing table is to assist an investor in
understanding the various costs and expenses that an investor in the Fund will
bear directly or indirectly. The table is based on expenses incurred by the
Treasury Trust Shares and Dollar Shares during the last fiscal year, restated to
reflect the expenses which each class of shares expects to incur during the
current fiscal year. In addition, institutional investors may charge fees for
providing administrative services in connection with their customers' investment
in Dollar Shares. Absent fee waivers, Management and Administration fees for
Treasury Trust Shares and Dollar Shares each would have been .13% and Total Fund
Operating Expenses would have been .29% and .54%, respectively. (For more
complete descriptions of the various costs and expenses, see "Management of the
Fund" in this Prospectus and the Statement of Additional Information and the
financial statements and related notes contained in the Statement of Additional
Information.) The investment adviser and administrators may from time to time
waive the advisory and administration fees otherwise payable to them or may
reimburse the Fund for its operating expenses. The foregoing table has not been
audited by the Fund's independent accountants.
2
<PAGE> 167
FINANCIAL HIGHLIGHTS
The following financial highlights for Treasury Trust Fund Shares and for
Treasury Trust Fund Dollar Shares for the fiscal year ended October 31, 1995 and
for each of the five preceding fiscal years and the fiscal period ended October
31, 1989 (commencement of operations). The financial highlights for the fiscal
years set forth below have been audited by Coopers & Lybrand L.L.P. independent
accountants whose report on the financial statements and financial highlights
(for the most recent five years) of the Fund is included in the Statement of
Additional Information. The tables should be read in conjunction with the
financial statements and related notes included in the Statement of Additional
Information. Further information about the performance of the Fund is available
in the annual report to shareholders, which may be obtained without charge by
calling 800-821-7432.
TRUST FOR FEDERAL SECURITIES
FINANCIAL HIGHLIGHTS
(FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)
TREASURY TRUST SHARES
<TABLE>
<CAPTION>
YEAR ENDED OCTOBER 31, MAY 1, 1989(3)
------------------------------------------------------------------------- TO
1995 1994 1993 1992 1991 1990 OCTOBER 31, 1989
--------- --------- --------- --------- --------- -------- ----------------
<S> <C> <C> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of
Period........................ $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
--------- --------- --------- --------- --------- -------- --------
Income From Investment
Operations:
Net Investment Income......... .0545 .0359 .0292 .0380 .0612 .0777 0.422
--------- --------- --------- --------- --------- -------- --------
Total From Investment
Operations.................. .0545 .0359 .0292 .0380 .0612 .0777 0.422
--------- --------- --------- --------- --------- -------- --------
Less Distributions:
Dividends to Shareholders from:
Net Investment Income......... (.0545) (.0359) (.0292) (.0380) (.0612) (.0777) (0.422)
--------- --------- --------- --------- --------- -------- --------
Total Distributions............ (.0545) (.0359) (.0292) (.0380) (.0612) (.0777) (0.422)
--------- --------- --------- --------- --------- -------- --------
Net Asset Value, End of Period.. $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
========= ========= ========= ========= ========= ======== ===========
Total Returns................. 5.59% 3.65% 2.96% 3.85% 6.30% 8.05% 4.29%(4)
Ratios/Supplemental Data
Net Assets, End of Period, (in
000s)....................... $1,101,834 $1,016,635 $1,188,412 $1,552,207 $1,275,545 $692,404 $111,556
Ratio of Expenses to Average
Net Assets(1)............... .18% .18% .18% .20% .20% .20% .20%(2)
Ratio of Net Investment Income
to Average Net Assets....... 5.45% 3.57% 2.92% 3.78% 6.00% 7.74% 8.29%(2)
</TABLE>
- ------------
(1) Without the waiver of advisory and administration fees, ratio of expenses to
average daily net assets would have been .29%, .29%, .28%, .27%, .32%, and
.37% respectively, for each of the years ended October 31, 1995, 1994, 1993,
1992, 1991 and 1990, and .43% (annualized) for the period ended October 31,
1989 for Treasury Trust Shares.
(2) Annualized.
(3) Commencement of operations.
(4) Total returns are not annualized for periods of less than one year.
3
<PAGE> 168
TRUST FOR FEDERAL SECURITIES
FINANCIAL HIGHLIGHTS
(For a Share Outstanding Throughout Each Period)
TREASURY TRUST DOLLAR SHARES
<TABLE>
<CAPTION>
YEAR ENDED OCTOBER 31, JUNE 14, 1989(3)
------------------------------------------------------------------ TO
1995 1994 1993 1992 1991 1990 OCTOBER 31, 1989
-------- -------- -------- -------- ------- ------- ----------------
<S> <C> <C> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of
Period........................... $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
-------- -------- -------- -------- ------- ------- ------
Income From Investment Operations:
Net Investment Income............ .0520 .0334 .0267 .0355 .0587 .0752 .0309
-------- -------- -------- -------- ------- ------- ------
Total From Investment
Operations..................... .0520 .0334 .0267 .0355 .0587 .0752 .0309
-------- -------- -------- -------- ------- ------- ------
Less Distributions:
Dividends to Shareholders from:
Net Investment Income............ (.0520) (.0334) (.0267) (.0355) (.0587) (.0752) (.0309)
-------- -------- -------- -------- ------- ------- ------
Total Distributions.............. (.0520) (.0334) (.0267) (.0355) (.0587) (.0752) (.0309)
-------- -------- -------- -------- ------- ------- ------
Net Asset Value, End of Period..... $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
======== ======== ======== ======== ======= ======= ================
Total Return..................... 5.34% 3.40% 2.71% 3.60% 6.05% 7.80% 3.13%(4)
Ratios/Supplemental Data
Net Assets, End of Period
(in 000s)...................... $223,272 $181,934 $258,206 $218,320 $50,729 $61,270 $1,448
Ratio of Expenses to Average
Net Assets(1).................. .43% .43% .43% .45% .45% .45% .45%(2)
Ratio of Net Investment Income to
Average Net Assets............. 5.20% 3.32% 2.67% 3.53% 5.75% 7.49% 8.19%(2)
</TABLE>
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(1) Without the waiver of advisory and administration fees, the ratios of
expenses to average daily net assets would have been .54%, .54%, .53%, .52%,
.57% and .62%, respectively, for each of the fiscal years ended October 31,
1995, 1994, 1993, 1992, 1991 and 1990, and .68% (annualized) for the period
ended October 31, 1989 for Treasury Trust Dollar Shares.
(2) Annualized.
(3) First issuance of shares.
(4) Total returns are not annualized for periods of less than one year.
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INVESTMENT OBJECTIVE AND POLICIES
IN GENERAL
The Fund's investment objective is to seek current income with liquidity
and security of principal. The Fund invests solely in direct obligations of the
U.S. Treasury, such as Treasury bills and notes. The Fund does not enter into
repurchase agreements nor does the Fund purchase obligations of agencies or
instrumentalities of the U.S. Government. Because the Fund invests exclusively
in direct U.S. Treasury obligations, investors may benefit from income tax
exclusions or exemptions that are available in certain states and localities.
See "Taxes." As a fundamental policy, the Fund will invest only in those
instruments which will permit Fund shares to qualify as "short-term liquid
assets" for federally regulated thrifts.
Portfolio obligations held by the Fund have remaining maturities of one
year or less (with certain exceptions), subject to the quality, diversification,
and other requirements of Rule 2a-7 under the Investment Company Act of 1940, as
amended (the "1940 Act") and other rules of the Securities and Exchange
Commission (the "SEC"). Certain government securities held by the Fund may have
remaining maturities exceeding one year if such securities provide for
adjustments in their interest rates not less frequently than annually.
Securities issued or guaranteed by the U.S. Government have historically
involved little risk of loss of principal if held to maturity. However, due to
fluctuations in interest rates, the market value of such securities may vary
during the period a shareholder owns shares of the Fund. The Fund may from time
to time engage in portfolio trading for liquidity purposes, in order to enhance
its yield or if otherwise deemed advisable. In selling portfolio securities
prior to maturity, the Fund may realize a price higher or lower than that paid
to acquire any given security, depending upon whether interest rates have
decreased or increased since its acquisition. To the extent consistent with its
investment objectives, the Fund may invest in Treasury receipts and other
"stripped" securities issued or guaranteed by the U.S. Government, where the
principal and interest components are traded independently under the Separate
Trading of Registered Interest and Principal of Securities program ("STRIPS").
Under the STRIPS program, the principal and interest components are individually
numbered and separately issued by the U.S. Treasury at the request of depository
financial institutions, which then trade the component parts independently.
Currently, the Fund only invests in "stripped" securities issued or guaranteed
by the U.S. Government which are registered under the STRIPS program. The
principal and interest components may exhibit greater price volatility than
ordinary debt securities because of the manner in which their principal and
interest are returned to investors.
The Fund may purchase securities on a "when-issued" basis. When-issued
securities are securities purchased for delivery beyond the normal settlement
date at a stated price and yield. The Fund will generally not pay for such
securities or start earning interest on them until they are received. Securities
purchased on a when-issued basis are recorded as an asset and are subject to
changes in value based upon changes in the general level of interest rates. The
Fund expects that commitments to purchase when-issued securities will not exceed
25% of the value of its total assets absent unusual market conditions. The Fund
does not intend to purchase when-issued securities for speculative purposes but
only in furtherance of its investment objective.
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SUITABILITY
The Fund is designed as an economical and convenient vehicle for those
institutional investors seeking to obtain current income with liquidity and
security of principal. The Fund is designed for banks and other institutions
seeking investment of monies held in accounts for which the institution acts in
a fiduciary, advisory, agency, custodial or other similar capacity. The Fund may
also be suitable for the investment of funds held or managed by corporations,
employee benefit plans, insurance companies, unions, hospitals, investment
counselors, professional firms, educational, religious and charitable
organizations, investment bankers, brokers, and others, if consistent with the
objectives of the particular account and any applicable state and federal laws
and regulations.
The Fund offers the advantage of diversification and economies of scale,
thereby avoiding the generally greater expense of executing a large number of
small transactions. Moreover, investment in the Fund relieves the investor of
many management and administrative burdens associated with the direct purchase
and sale of income obligations. These include the selection of investments;
surveying the market for the best terms at which to buy and sell; receipt,
delivery and safekeeping of securities; and recordkeeping.
The Fund's investment policies are intended to qualify Fund shares for the
investment of funds of federally regulated thrifts. The Fund intends to qualify
its shares as "short-term liquid assets" as established in the published
rulings, interpretations, and regulations of the Office of Thrift Supervision.
However, investing institutions are advised to consult their primary regulator
for concurrence that Fund shares qualify under applicable regulations and
policies.
INVESTMENT LIMITATIONS
The Fund's investment objective described above is not fundamental and may
be changed by the Company's Board of Trustees without a vote of shareholders. If
there is a change in the investment objective, shareholders should consider
whether the Fund remains an appropriate investment in light of their then
current financial position and needs. The Fund's investment limitations
summarized below may not be changed without the affirmative vote of the holders
of a majority of its outstanding shares. (A complete list of the investment
limitations that cannot be changed without a vote of shareholders is contained
in the Statement of Additional Information under "Investment Objectives and
Policies.")
The Fund may not:
1. Purchase securities other than direct obligations of the U.S. Treasury
such as Treasury bills and notes which will permit Fund shares to qualify as
"short-term liquid assets" for federally regulated thrifts.
2. Borrow money except from banks for temporary purposes and then in an
amount not exceeding 10% of the value of the Fund's total assets, or mortgage,
pledge or hypothecate its assets except in connection with any such borrowing
and in amounts not in excess of the lesser of the dollar amounts borrowed or 10%
of the value of the Fund's total assets at the time of such borrowing.
3. Make loans except that the Fund may purchase or hold debt obligations in
accordance with its investment objective and policies.
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PURCHASE AND REDEMPTION OF SHARES
PURCHASE PROCEDURES
Fund shares are sold at the net asset value per share next determined after
receipt of a purchase order by PFPC, the Fund's transfer agent. Purchase orders
for shares are accepted only on days on which both the New York Stock Exchange
and the Federal Reserve Bank of Philadelphia, are open for business (a "Business
Day") and must be transmitted to PFPC in Wilmington, Delaware, by telephone
(800-441-7450; in Delaware: 302-791-5350) or through the Fund's computer access
program. Orders received before 12:00 noon, Eastern time, for which payment has
been received by PNC Bank, the Fund's custodian, will be executed at 12:00 noon.
Orders received after 12:00 noon and before 2:30 P.M., Eastern time (or orders
received earlier in the same day for which payment has not been received by
12:00 noon) will be executed at 4:00 P.M., Eastern time, if payment has been
received by PNC Bank by that time. Orders received at other times, and orders
for which payment has not been received by 4:00 P.M., Eastern time, will not be
accepted, and notice thereof will be given to the institution placing the order.
(Payment for orders which are not received or accepted will be returned after
prompt inquiry to the sending institution.) The Fund may in its discretion
reject any order for shares.
Payment for Fund shares may be made only in federal funds or other funds
immediately available to PNC Bank. The minimum initial investment by an
institution is $3 million for Treasury Trust Shares and $5,000 for Dollar
Shares; however, broker-dealers and other institutional investors may set a
higher minimum for their customers. There is no minimum subsequent investment.
The Fund, at its discretion, may reduce the minimum initial investment for
Treasury Trust Shares for specific institutions whose aggregate relationship
with the Provident Institutional Funds is substantially equivalent to this $3
million minimum and warrants this reduction.
Conflict of interest restrictions may apply to an institution's receipt of
compensation paid by the Fund in connection with the investment of fiduciary
funds in Dollar Shares. (See also "Management of the Fund--Service
Organizations.") Institutions, including banks regulated by the Comptroller of
the Currency and investment advisers and other money managers subject to the
jurisdiction of the SEC, the Department of Labor or state securities
commissions, should consult their legal advisors before investing fiduciary
funds in Dollar Shares. (See also "Management of the Fund--Banking Laws.")
REDEMPTION PROCEDURES
Redemption orders must be transmitted to PFPC in Wilmington, Delaware, in
the manner described under "Purchase Procedures." Shares are redeemed at the net
asset value per share next determined after PFPC receipt of the redemption
order. While the Fund intends to use its best efforts to maintain its net asset
value per share at $1.00, the proceeds paid to a shareholder upon redemption may
be more or less than the amount invested depending upon a share's net asset
value at the time of redemption.
Payment for redeemed shares for which a redemption order is received by
PFPC by 2:30 P.M., Eastern time, on a Business Day is normally made in Federal
funds wired to the redeeming shareholder on the same business day. Payment for
redemption orders which are received between 2:30 P.M. and 4:00 P.M., Eastern
time, or on a day when PNC Bank is closed, is
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<PAGE> 172
normally wired in federal funds on the next day following redemption that PNC
Bank is open for business.
The Fund shall have the right to redeem shares in any account if the value
of the account is less than $1,000 after sixty-days' prior written notice to the
shareholder. Any such redemption shall be effected at the net asset value per
share next determined after the redemption order is entered. If during the
sixty-day period the shareholder increases the value of its account to $1,000 or
more, no such redemption shall take place. Moreover, if a shareholder's Treasury
Trust Shares account falls below an average of $100,000 in any particular
calendar month, the account may be charged an account maintenance fee with
respect to that month. In addition, the Fund may also redeem shares
involuntarily or suspend the right of redemption under certain special
circumstances described in the Statement of Additional Information under
"Additional Purchase and Redemption Information."
OTHER MATTERS
The Fund's net asset value per share for purposes of pricing purchase and
redemption orders is determined by PIMC as of 12:00 noon and 4:00 P.M., Eastern
time, on each day on which both the Federal Reserve Bank of Philadelphia and the
New York Stock Exchange are open for business. Currently, one or both of these
institutions are closed on the customary national business holidays of New
Year's Day, Martin Luther King, Jr. Day, Presidents' Day, Good Friday, Memorial
Day (observed), Independence Day, Labor Day, Columbus Day (observed), Veteran's
Day, Thanksgiving Day and Christmas Day. The net asset value per share of each
class of the Fund is calculated by adding the value of all securities and other
assets belonging to the Fund, subtracting liabilities attributable to each class
and dividing the result by the total number of the outstanding shares of each
class. In computing net asset value, the Fund uses the amortized cost method of
valuation as described in the Statement of Additional Information under
"Additional Purchase and Redemption Information." The Fund's net asset value per
share for purposes of pricing purchase and redemption orders is determined
independently of the net asset values of the shares of the Company's other
investment portfolios.
Fund shares are sold and redeemed without charge by the Fund. Institutional
investors purchasing or holding Fund shares for their customer accounts may
charge customer fees for cash management and other services provided in
connection with their accounts. A customer should, therefore, consider the terms
of its account with an institution before purchasing Fund shares. An institution
purchasing or redeeming Fund shares on behalf of its customers is responsible
for transmitting orders to the Fund in accordance with its customer agreements.
MANAGEMENT OF THE FUND
BOARD OF TRUSTEES
The business and affairs of the Fund are managed under the direction of the
Company's Board of Trustees. The trustees of the Company are as follows:
Philip E. Coldwell is an economic consultant and a former Member of
the Board of Governors of the Federal Reserve System.
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<PAGE> 173
Robert R. Fortune is a financial consultant and former Chairman,
President and Chief Executive Officer of Associated Electric & Gas
Insurance Services Limited.
Rodney D. Johnson is President of Fairmount Capital Advisors, Inc.
G. Willing Pepper, Chairman of the Board and President of the Company,
is a retired President of Scott Paper Company.
Mr. Pepper is considered by the Company to be an "interested person" of the
Company as defined in the 1940 Act.
The other officers of the Company are as follows:
Edward J. Roach is Vice President and Treasurer of the Company.
W. Bruce McConnel, III, Secretary of the Company, is a partner of the
law firm of Drinker Biddle & Reath, Philadelphia, Pennsylvania.
INVESTMENT ADVISER AND SUB-ADVISER
PIMC, a wholly-owned subsidiary of PNC Bank, serves as the Fund's
investment adviser. PIMC was organized in 1977 by PNC Bank to perform advisory
services for investment companies and has its principal offices at Bellevue Park
Corporate Center, 400 Bellevue Parkway, Wilmington, Delaware 19809. PNC Bank
serves as the Fund's sub-adviser. PNC Bank is one of the largest bank managers
of investments for individuals in the United States, and together with its
predecessors has been in the business of managing the investments of fiduciary
and other accounts since 1847. PNC Bank is a wholly-owned, indirect subsidiary
of PNC Bank Corp. has its principal offices at Broad and Chestnut Streets,
Philadelphia, Pennsylvania 19102. PNC Bank Corp. is a multi-bank holding
company. PIMC and PNC Bank also serve as adviser and sub-adviser, respectively,
to the Company's FedFund, T-Fund, FedCash, T-Cash and Federal Trust Fund
Portfolios.
PNC Bank Corp., headquartered in Pittsburgh, Pennsylvania, is one of the
largest financial services organizations in the United States with banking
subsidiaries in Pennsylvania, New Jersey, Delaware, Ohio, Kentucky, Indiana,
Massachusetts and Florida. Its major businesses include corporate banking,
consumer banking, mortgage banking and asset management.
PNC Financial Services Group is PNC Bank Corp.'s mutual fund complex,
headquartered in Wilmington, Delaware. This group includes PIMC, PFPC and PNC
Bank. In 1973, Provident National Bank (predecessor to PNC Bank) commenced
advising the first institutional money market mutual fund - a U.S.
dollar-denominated constant net asset value fund - offered in the United States.
The PNC Financial Services Group is one of the largest U.S. bank managers
of mutual funds with assets currently under management in excess of $30 billion.
This group, through PFPC and PFPC International Ltd, is also a leading mutual
fund service provider having contractual relationships with approximately 370
mutual funds with 3.5 million shareholders and in excess of $101 billion in
assets, including some $2 billion in non-U.S. assets. This group, through its
PNC Institutional Investment Service, provides investment research to some 250
financial institutions located in the United States and abroad. PNC Bank
provides custodial services for approximately $210 billion in assets, including
$160 billion in mutual fund assets.
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<PAGE> 174
As adviser, PIMC manages the Fund's portfolio and is responsible for all
purchases and sales of the Fund's portfolio securities. PIMC also maintains
certain of the Fund's financial accounts and records and computes the Fund's net
asset value and net income. For the advisory services provided and expenses
assumed by it, PIMC is entitled to receive a fee, computed daily and payable
monthly, based on the Fund's average net assets. PIMC and the administrators may
from time to time reduce the advisory and administration fees otherwise payable
to them or may reimburse the Fund for its operating expenses. Any fees waived or
expenses reimbursed by PIMC and the administrators with respect to a particular
fiscal year are not recoverable. For the fiscal year ended October 31, 1995, the
Fund paid investment advisory fees aggregating .07% of its average net assets.
As sub-adviser, PNC Bank provides research, credit analysis and
recommendations with respect to the Fund's investments, and supplies PIMC with
certain computer facilities, personnel and other services. For its sub-advisory
and other services, PNC Bank is entitled to receive from PIMC an amount equal to
75% of the advisory fee paid by the Fund to PIMC (subject to adjustment in
certain circumstances). The sub-advisory fees paid by PIMC to PNC Bank have no
effect on the advisory fees payable by the Fund to PIMC. PNC Bank also serves as
the Fund's custodian. The services provided by PNC Bank and PIMC and the fees
payable by the Fund for these services are described further in the Statement of
Additional Information under "Management of the Funds."
ADMINISTRATORS
PFPC, whose principal business address is 400 Bellevue Parkway, Wilmington,
Delaware 19809, and PDI whose principal business address is 259 Radnor-Chester
Road, Suite 120, Radnor, Pennsylvania 19087, serve as administrators. PFPC is an
indirect wholly-owned subsidiary of PNC Bank Corp. A majority of the outstanding
stock of PDI is owned by its officers. The administrative services provided by
the administrators, which are described more fully in the Statement of
Additional Information, include providing and supervising the operation of an
automated data processing system to process purchase and redemption orders;
assisting in maintaining the Fund's Wilmington, Delaware office; performing
administrative services in connection with the Fund's computer access program
maintained to facilitate shareholder access to the Fund; accumulating
information for and coordinating the preparation of reports to the Fund's
shareholders and the Securities and Exchange Commission; and maintaining the
registration or qualification of the Fund's shares for sale under state
securities laws. PFPC and PDI are each responsible for carrying out the duties
undertaken pursuant to the Administration Agreement with the Fund.
For their administrative services, the administrators are entitled jointly
to receive a fee computed daily and payable monthly. (For information on
regarding the administrators' waivers and expense reimbursements, see
"Investment Adviser and Sub-Adviser" above.) The Fund also reimburses each
administrator for its reasonable out-of-pocket expenses incurred in connection
with the Funds' computer access program. For the fiscal year ended October 31,
1995, the Fund paid administration fees aggregating .07% of its average net
assets.
PFPC also serves as transfer agent, registrar and dividend disbursing
agent. PFPC's address is P.O. Box 8950, Wilmington Delaware 19885-9628. The
services provided by PFPC and PDI and the fees payable by the Fund for these
services are described in the Statement of Additional Information under
"Management of the Funds."
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<PAGE> 175
DISTRIBUTOR
PDI serves as distributor of the Fund's shares. Its principal offices are
located at 259 Radnor-Chester Road, Suite 120, Radnor, Pennsylvania 19087. Fund
shares are sold on a continuous basis by the distributor as agent. The
distributor pays the cost of printing and distributing prospectuses to persons
who are not shareholders of the Fund (excluding preparation and printing
expenses necessary for the continued registration of the Fund's shares) and of
printing and distributing all sales literature. No compensation is payable by
the Fund to the distributor for its distribution services.
SERVICE ORGANIZATIONS
Institutional investors, such as banks, savings and loan associations and
other financial institutions, including affiliates of PNC Bank Corp. ("Service
Organizations"), may purchase Dollar Shares. Dollar Shares are identical in all
respects to Treasury Trust Shares except that they bear the service fees
described below and enjoy certain exclusive voting rights on matters relating to
these fees. The Fund will enter into an agreement with each Service Organization
which purchases Dollar Shares requiring it to provide support services to its
customers who are the beneficial owners of such shares in consideration of the
Fund's payment of .25% (on an annualized basis) of the average daily net asset
value of the Dollar Shares held by the Service Organization for the benefit of
customers. Such services, which are described more fully in the Statement of
Additional Information under "Management of the Fund-Service Organizations,"
include aggregating and processing purchase and redemption requests from
customers and placing net purchase and redemption orders with PFPC; processing
dividend payments from the Fund on behalf of customers; providing information
periodically to customers showing their positions in Dollar Shares; and
providing sub-accounting or the information necessary for sub-accounting with
respect to Dollar Shares beneficially owned by customers. Under the terms of the
agreements, Service Organizations are required to provide to their customers a
schedule of any fees that they may charge customers in connection with their
investments in Dollar Shares. Treasury Trust Shares are sold to institutions
that have not entered into servicing agreements with the Fund in connection with
their investments.
EXPENSES
Except as noted above and in the Statement of Additional Information, the
Fund's service contractors bear all expenses in connection with the performance
of their services. Similarly, the Fund bears the expenses incurred in its
operations. For the fiscal year ended October 31, 1995, the Fund's total
expenses with respect to Treasury Trust Shares and Dollar Shares were .18% and
.43% (net of fee waivers of .11% and .11%, respectively) of the average net
assets of the Treasury Trust Shares and Treasury Trust Dollar Shares,
respectively. With regard to fees paid exclusively by Dollar Shares, see
"Service Organizations" above.
BANKING LAWS
Banking laws and regulations presently prohibit a bank holding company
registered under the Federal Bank Holding Company Act of 1956 or any bank or
non-bank affiliate thereof from sponsoring, organizing or controlling a
registered, open-end investment company engaged continuously in the issuance of
its shares, and prohibit banks generally from issuing, underwriting,
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<PAGE> 176
selling or distributing securities such as Fund shares. Such banking laws and
regulations do not prohibit such a holding company or affiliate or banks
generally from acting as investment adviser, transfer agent or custodian to such
an investment company, or from purchasing shares of such a company for or upon
the order of customers. PNC Bank, PIMC and PFPC, as well as some Service
Organizations, are subject to such banking laws and regulations, but believe
they may perform the services for the Fund contemplated by their respective
agreements, this Prospectus and the Statement of Additional Information without
violating applicable banking laws or regulations.
Should future legislative, judicial or administrative action prohibit or
restrict the activities of bank Service Organizations in connection with the
provision of support services to their customers, the Fund might be required to
alter or discontinue its arrangements with Service Organizations and change its
method of operations with respect to Dollar shares. It is not anticipated,
however, that any change in the Fund's method of operations would affect its net
asset value per share or result in a financial loss to any customer.
DIVIDENDS
Shareholders of the Fund are entitled to dividends and distributions
arising only from the net investment income and capital gains, if any, earned on
investments held by the Fund. The Fund's net investment income is declared daily
as a dividend to its shareholders of record at the close of business on the day
of declaration. Shares begin accruing dividends on the day the purchase order
for the shares is executed and continue to accrue dividends through, and
including, the day before such shares are redeemed. Dividends are paid monthly
by check, or by wire transfer if requested in writing by the shareholder, within
five business days after the end of the month or within five business days after
a redemption of all of a shareholder's shares of a particular class. The Fund
does not expect to realize net long-term capital gains.
Dividends are determined in the same manner for each class of shares of the
Fund. Dollar Shares bear all the expense of fees paid to Service Organizations
and as a result, at any given time, the net yield on Dollar Shares will be
approximately .25% lower than the net yield on Treasury Trust Shares.
Institutional shareholders may elect to have their dividends reinvested in
additional full and fractional shares of the same class of shares with respect
to which such dividends are declared at the net asset value of such shares on
the payment date. Reinvested dividends receive the same tax treatment as
dividends paid in cash. Such election, or any revocation thereof, must be made
in writing to PFPC at P.O. Box 8950, Wilmington, Delaware 19885-9628, and will
become effective after its receipt by PFPC with respect to dividends paid.
PFPC, as transfer agent, will send each Fund shareholder or its authorized
representative an annual statement designating the amount, if any, of any
dividends and distributions made during each year and their Federal tax
qualification.
TAXES
The Fund qualified in its last taxable year and intends to qualify in
future years as a "regulated investment company" under the Internal Revenue Code
of 1986, as amended (the
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<PAGE> 177
"Code"). A regulated investment company is generally exempt from federal income
tax on amounts distributed to its shareholders.
Qualification as a regulated investment company under the Code for a
taxable year requires, among other things, that the Fund distribute to its
shareholders at least 90% of its investment company taxable income for such
year. In general, the Fund's investment company taxable income will be its
taxable income (including interest and short-term capital gains, if any),
subject to certain adjustments and excluding the excess of any net long-term
capital gain for the taxable year over the net short-term capital loss, if any,
for such year. The Fund intends to distribute substantially all of its
investment company taxable income each year. Such distributions will be taxable
as ordinary income to the Fund's shareholders that are not currently exempt from
federal income taxes, whether such income is received in cash or reinvested in
additional shares. (Federal income taxes for distributions to an IRA or a
qualified retirement plan are deferred under the Code.) It is anticipated that
none of the Fund's distributions will be eligible for the dividends received
deduction for corporations. The Fund does not expect to realize long-term
capital gains and, therefore, does not contemplate payment of any "capital gains
dividends" as described in the Code.
Dividends declared in October, November or December of any year payable to
shareholders of record on a specified date in such months will be deemed to have
been received by the shareholders and paid by the Fund on December 31 of such
year, in the event such dividends are actually paid during January of the
following year.
TO THE EXTENT PERMISSIBLE BY FEDERAL AND STATE LAW, THE FUND IS STRUCTURED
TO PROVIDE SHAREHOLDERS WITH INCOME THAT IS EXEMPT OR EXCLUDED FROM TAXATION AT
THE STATE AND LOCAL LEVEL. SUBSTANTIALLY ALL DIVIDENDS PAID TO SHAREHOLDERS
RESIDING IN CERTAIN STATES WILL BE EXEMPT OR EXCLUDED FROM STATE INCOME TAX.
MANY STATES, BY STATUTE, JUDICIAL DECISION OR ADMINISTRATIVE ACTION, HAVE TAKEN
THE POSITION THAT DIVIDENDS OF A REGULATED INVESTMENT COMPANY SUCH AS THE FUND
THAT ARE ATTRIBUTABLE TO INTEREST ON DIRECT U.S. TREASURY OBLIGATIONS ARE THE
FUNCTIONAL EQUIVALENT OF INTEREST FROM SUCH OBLIGATIONS AND ARE, THEREFORE,
EXEMPT FROM STATE AND LOCAL INCOME TAXES. INVESTORS SHOULD BE AWARE OF THE
APPLICATION OF THEIR STATE AND LOCAL TAX LAWS TO INVESTMENTS IN THE FUND.
The foregoing discussion is only a brief summary of some of the important
federal tax considerations generally affecting the Fund and its shareholders. As
indicated above, IRAs receive special tax treatment. No attempt is made to
present a detailed explanation of the federal, state or local income tax
treatment of the Fund or its shareholders, and this discussion is not intended
as a substitute for careful tax planning. Accordingly, potential investors in
the Fund should consult their tax advisors with specific reference to their own
tax situations.
YIELDS
From time to time, in advertisements or in reports to shareholders, the
"yields" and "effective yields" for Treasury Trust Shares and Dollar Shares may
be quoted. Yield quotations are computed for Treasury Trust Shares separately
from those for Dollar Shares. The "yield" for a particular class or sub-class of
Fund shares refers to the income generated by an investment in such shares over
a specified period (such as a seven-day period). This income is then
"annualized"; that is, the amount of income generated by the investment during
that period is
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<PAGE> 178
assumed to be generated for each such period over a 52-week or one-year period
and is shown as a percentage of the investment. The "effective yield" is
calculated similarly but, when annualized, the income earned by an investment in
a class or sub-class of Fund shares is assumed to be reinvested. The "effective
yield" will be slightly higher than the "yield" because of the compounding
effect of this assumed reinvestment.
The Fund's yields may be compared to those of other mutual funds with
similar objectives, to stock or other relevant indices, or to rankings prepared
by independent services or other financial or industry publications that monitor
the performance of mutual funds. For example, such data are reported in national
financial publications such as IBC/Donoghue's Money Fund Report(R), The Wall
Street Journal, and The New York Times, reports prepared by Lipper Analytical
Services, Inc., and publications of a local or regional nature.
The Fund's yield figures for Treasury Trust Fund Shares and Treasury Trust
Fund Dollar Shares represent the Fund's past performance, will fluctuate, and
should not be considered as representative of future results. The yield of any
investment is generally a function of portfolio quality and maturity, type of
investment and operating expenses. Any fees charged by Service Organizations or
other institutional investors directly to their customers in connection with
investments in Fund shares are not reflected in the Fund's yields; and, such
fees, if charged, would reduce the actual return received by customers on their
investments. The methods used to compute the Fund's yields are described in more
detail in the Statement of Additional Information. Investors may call
800-821-6006 (Treasury Trust Shares code: 62; Treasury Trust Dollar Shares code:
63) to obtain current yield information.
DESCRIPTION OF SHARES AND MISCELLANEOUS
The Company is a Pennsylvania business trust established on May 14, 1975.
Effective March 2, 1987, the Company's name was changed from Trust for
Short-Term Federal Securities to Trust for Federal Securities. The Company
commenced operations of the Fund in May, 1989.
The Company's Declaration of Trust authorizes the Board of Trustees to
issue an unlimited number of full and fractional shares of beneficial interest
in the Company and to classify or reclassify any unissued shares into one or
more additional classes of shares. Pursuant to such authority, the Board of
Trustees has authorized the issuance of twelve classes of shares designated as
Treasury Trust, Treasury Trust Dollar, FedFund, FedFund Dollar, T-Fund, T-Fund
Dollar, FedCash, FedCash Dollar, T-Cash, T-Cash Dollar, Federal Trust and
Federal Trust Dollar. The Declaration of Trust further authorizes the trustees
to classify or reclassify any class of shares into one or more sub-classes.
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<PAGE> 179
THIS PROSPECTUS AND THE STATEMENT OF ADDITIONAL INFORMATION INCORPORATED
HEREIN RELATE PRIMARILY TO THE FUND AND DESCRIBE ONLY THE INVESTMENT OBJECTIVE
AND POLICIES, OPERATIONS, CONTRACTS AND OTHER MATTERS RELATING TO THE FUND.
INVESTORS WISHING TO OBTAIN SIMILAR INFORMATION REGARDING THE FUND'S OTHER CLASS
OF SHARES OR THE COMPANY'S FEDFUND, T-FUND, FEDCASH, T-CASH AND FEDERAL TRUST
FUND PORTFOLIOS MAY OBTAIN SEPARATE PROSPECTUSES DESCRIBING THESE PORTFOLIOS BY
CALLING THE DISTRIBUTOR AT 800-998-7633.
The Company does not presently intend to hold annual meetings of
shareholders except as required by the 1940 Act or other applicable law. The
Company will call a meeting of shareholders for the purpose of voting upon the
question of removal of a member of the Board of Trustees upon written request of
shareholders owning at least 10% of the outstanding shares of the Company
entitled to vote.
Each Fund Share represents an equal proportionate interest in the assets
belonging to the Fund. Each share is without par value and has no preemptive or
conversion rights. When issued for payment as described in this Prospectus,
shares will be fully paid and non-assessable.
Holders of the Company's Treasury Trust Shares and Treasury Trust Dollar
Shares will vote in the aggregate and not by class or sub-class on all matters,
except where otherwise required by law and except that only Dollar Shares will
be entitled to vote on matters submitted to a vote of shareholders pertaining to
the Fund's arrangements with Service Organizations. Further, shareholders of all
of the Company's portfolios will vote in the aggregate and not by portfolio
except as otherwise required by law or when the Board of Trustees determines
that the matter to be voted upon affects only the interests of the shareholders
of a particular portfolio. (See the Statement of Additional Information under
"Additional Description Concerning Fund Shares" for examples where the 1940 Act
requires voting by portfolio.) Shareholders of the Company are entitled to one
vote for each full share held (irrespective of class, sub-class, or portfolio)
and fractional votes for fractional shares held. Voting rights are not
cumulative and, accordingly, the holders of more than 50% of the aggregate
shares of the Company may elect all of the trustees.
For information concerning the redemption of Fund shares and possible
restrictions on their transferability, see "Purchase and Redemption of Shares."
As stated above, the Company is organized as a trust under the laws of the
Commonwealth of Pennsylvania. Shareholders of such a trust may, under certain
circumstances, be held personally liable (as if they were partners) for the
obligations of the trust. The Company's Declaration of Trust provides for
indemnification out of the trust property of any shareholder of the Fund held
personally liable solely by reason of being or having been a shareholder and not
because of any acts or omissions or some other reason.
15
<PAGE> 180
NO PERSON HAS BEEN AUTHORIZED
TO GIVE ANY INFORMATION OR TO
MAKE ANY REPRESENTATIONS NOT
CONTAINED IN THIS PROSPECTUS,
OR IN THE FUND'S STATEMENT OF
ADDITIONAL INFORMATION
INCORPORATED HEREIN BY
REFERENCE, IN CONNECTION WITH
THE OFFERING MADE BY THIS
PROSPECTUS AND, IF GIVEN OR
MADE, SUCH INFORMATION OR
REPRESENTATIONS MUST NOT BE
RELIED UPON AS HAVING BEEN
AUTHORIZED BY THE COMPANY OR
ITS DISTRIBUTOR. THIS
PROSPECTUS DOES NOT
CONSTITUTE AN OFFERING BY THE
COMPANY OR BY THE DISTRIBUTOR
IN ANY JURISDICTION IN WHICH
SUCH OFFERING MAY NOT
LAWFULLY BE MADE.
---------------------------------------------------------------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
------
<S> <C>
Background and Expense
Information................... 2
Financial Highlights............ 3
Investment Objective and
Policies...................... 5
Purchase and Redemption of
Shares........................ 7
Management of the Fund.......... 8
Dividends....................... 12
Taxes........................... 12
Yields.......................... 13
Description of Shares and
Miscellaneous................. 14
</TABLE>
PIF-P-008
TREASURY
TRUST FUND
AN INVESTMENT PORTFOLIO
OFFERED BY
TRUST FOR FEDERAL SECURITIES
[PROVIDENT INSTITUTIONAL FUNDS LOGO]
Prospectus
February 28, 1996
<PAGE> 181
TRUST FOR FEDERAL SECURITIES
(Treasury Trust Fund Dollar Shares Portfolio)
Cross Reference Sheet
<TABLE>
<CAPTION>
Form N-1A Item Prospectus Caption
-------------- ------------------
<S> <C> <C>
1. Cover Page . . . . . . . . . . . . . . . . . Cover Page
2. Synopsis . . . . . . . . . . . . . . . . . Background and
Expense Information
3. Condensed Financial Information . . . . . . Financial Highlights;
Yields
4. General Description of
Registrant . . . . . . . . . . . . . . . . Cover Page; Financial
Highlights; Investment
Objective and Policies
5. Management of the Fund . . . . . . . . . . . Management of the Fund;
Dividends
6. Capital Stock and Other
Securities . . . . . . . . . . . . . . . . Cover Page; Financial
Highlights; Dividends;
Taxes; Description of
Shares and
Miscellaneous
7. Purchase of Securities Being
Offered . . . . . . . . . . . . . . . Management of the Fund;
Purchase and Redemption
of Shares
8. Redemption or Repurchase . . . . . . . . . . Purchase and Redemption
of Shares
9. Pending Legal Proceedings . . . . . . . . . Inapplicable
</TABLE>
<PAGE> 182
Treasury Trust Fund
Dollar Shares
An Investment Portfolio Offered By
Trust for Federal Securities
<TABLE>
<S> <C>
Bellevue Park Corporate Center For purchase and redemption orders only call:
400 Bellevue Parkway 800-441-7450 (in Delaware: 302-791-5350).
Suite 100 For yield information call: 800-821-6006
Wilmington, DE 19809 (Dollar Shares code: 63).
For other information call: 800-821-7432.
</TABLE>
Trust for Federal Securities (the "Company") is a no-load, diversified,
open-end investment company that currently offers shares in six separate
investment portfolios. This Prospectus describes one class of shares ("Dollar
Shares") in the Treasury Trust Fund portfolio (the "Fund"), a money market
portfolio.
To the extent permissible by federal and state law, the Fund is structured
to provide shareholders with income that is exempt or excluded from taxation at
the state and local level. See "Taxes." The Fund is also designed to provide an
economical and convenient means for the investment of short-term funds held by
banks, trust companies, corporations, employee benefit plans and other
institutional investors. The investment objective of the Fund is to seek current
income with liquidity and security of principal. The Fund invests solely in U.S.
Treasury bills, notes and direct obligations of the U.S. Treasury.
PNC Institutional Management Corporation ("PIMC") and PNC Bank, National
Association ("PNC Bank") serve as the Fund's adviser and sub-adviser,
respectively. PFPC Inc. ("PFPC") and Provident Distributors, Inc. ("PDI") serve
as the Fund's administrators. PDI also serves as the Fund's distributor. Dollar
Shares are sold exclusively to and must be purchased through Service
Organizations. Service Organizations provide various shareholder services to
their Customers in connection with their investment in Dollar Shares. (See
"Management of the Fund--Service Organizations.")
------------------------
SHARES OF THE FUND ARE NOT DEPOSITS OR OBLIGATIONS OF OR GUARANTEED, ENDORSED,
OR OTHERWISE SUPPORTED BY PNC BANK CORP. OR ITS AFFILIATES, OR THE U.S.
GOVERNMENT, AND ARE NOT FEDERALLY INSURED BY THE FEDERAL DEPOSIT
INSURANCE CORPORATION, THE FEDERAL RESERVE BOARD OR ANY OTHER
AGENCY. AN INVESTMENT IN THE FUND INVOLVES INVESTMENT RISKS,
INCLUDING THE POSSIBLE LOSS OF PRINCIPAL. THERE CAN BE NO
ASSURANCE THAT IT WILL BE ABLE TO MAINTAIN ITS NET ASSET
VALUE OF $1.00 PER SHARE.
------------------------
This Prospectus briefly sets forth certain information about the Fund that
investors should know before investing. Investors are advised to read this
Prospectus and retain it for future reference. Additional information about the
Fund, contained in a Statement of Additional Information currently dated
February 28, 1996, has been filed with the Securities and Exchange Commission
and is available to investors without charge by calling the Fund at
800-821-7432. The Statement of Additional Information, as amended from time to
time, is incorporated in its entirety by reference into this Prospectus.
------------------------
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.
------------------------
February 28, 1996
<PAGE> 183
BACKGROUND AND EXPENSE INFORMATION
The Company offers two classes of shares in the Fund: Treasury Trust Shares
and Treasury Trust Dollar Shares ("Dollar Shares"). Shares of each class
represent equal, pro rata interests in the Fund and accrue daily dividends in
the same manner except that the Dollar Shares bear fees payable by the Fund (at
the rate of .25% per annum) to Service Organizations for administrative support
services they provide to the beneficial owners of such shares. (See "Management
of the Fund-Service Organizations.")
EXPENSE SUMMARY--DOLLAR SHARES
<TABLE>
<CAPTION>
DOLLAR
SHARES
-------------
<S> <C> <C>
ANNUAL FUND OPERATING EXPENSES
- ------------------------------
(as a percentage of average net assets)
Management Fees (net of waivers)....................................... .07%
Other Expenses......................................................... .38%
Administration Fees (net of waivers).............................. .07%
Shareholder Servicing Fees........................................ .25%
Miscellaneous..................................................... .04%
----
Total Fund Operating Expenses (net of waivers)......................... .45%
=====
</TABLE>
- ------------
<TABLE>
<CAPTION>
EXAMPLE 1 YEAR 3 YEARS 5 YEARS 10 YEARS
- ------- ------ ------- ------- --------
<S> <C> <C> <C> <C>
You would pay the following expenses on a $1,000
investment, assuming (1) a 5% annual return and (2)
redemption at the end of each time period with
respect to Dollar Shares: $5 $14 $25 $57
</TABLE>
THE FOREGOING SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR FUTURE
EXPENSES OR RATE OF RETURN. ACTUAL EXPENSES AND RATE OF RETURN MAY BE GREATER OR
LESSER THAN THOSE SHOWN.
The purpose of the foregoing table is to assist an investor in
understanding the various costs and expenses that an investor in the Fund will
bear directly or indirectly. The table is based on expenses incurred by the
Treasury Trust Dollar Shares during the last fiscal year, restated to reflect
the expenses which it expects to incur during the current fiscal year. In
addition, institutional investors may charge fees for providing administrative
services in connection with their customers' investment in Dollar Shares. Absent
fee waivers, Management and Administration fees for Dollar Shares each would
have been .13% and Total Fund Operating Expenses would have been .54%. (For more
complete descriptions of the various costs and expenses, see "Management of the
Fund" in this Prospectus and the Statement of Additional Information and the
financial statements and related notes contained in the Statement of Additional
Information.) The investment adviser and administrators may from time to time
waive the advisory and administration fees otherwise payable to them or may
reimburse the Fund for its operating expenses. The foregoing table has not been
audited by the Fund's independent accountants.
2
<PAGE> 184
FINANCIAL HIGHLIGHTS
The following financial highlights for Treasury Trust Fund Shares and for
Treasury Trust Fund Dollar Shares for the fiscal year ended October 31, 1995 and
for each of the five preceding fiscal years and the fiscal period ended October
31, 1989 (commencement of operations). The financial highlights for the fiscal
years set forth below have been audited by Coopers & Lybrand L.L.P. independent
accountants whose report on the financial statements and financial highlights
(for the most recent five years) of the Fund is included in the Statement of
Additional Information. The tables should be read in conjunction with the
financial statements and related notes included in the Statement of Additional
Information. Further information about the performance of the Fund is available
in the annual report to shareholders, which may be obtained without charge by
calling 800-821-7432.
TRUST FOR FEDERAL SECURITIES
FINANCIAL HIGHLIGHTS
(FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)
TREASURY TRUST SHARES
<TABLE>
<CAPTION>
TREASURY TRUST SHARES
YEAR ENDED OCTOBER 31, MAY 1, 19893
----------------------------------------------------------------------------------- TO
1995 1994 1993 1992 1991 1990 OCTOBER 31, 1989
---------- ---------- ---------- ---------- ---------- -------- ----------------
<S> <C> <C> <C> <C> <C> <C> <C>
Net Asset Value, Beginning
of Period................. $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
---------- ---------- ---------- ---------- ---------- -------- --------
Income from Investment
Operations:
Net Investment Income..... .0545 .0359 .0292 .0380 .0612 .0777 .0422
---------- ---------- ---------- ---------- ---------- -------- --------
Total from Investment
Operations.............. .0545 .0359 .0292 .0380 .0612 .0777 .0422
---------- ---------- ---------- ---------- ---------- -------- --------
Less Distributions:
Dividends to Shareholders
from:
Net Investment Income..... (.0545) (.0359) (.0292) (.0380) (.0612) (.0777) (.0422)
---------- ---------- ---------- ---------- ---------- -------- --------
Total Distributions....... (.0545) (.0359) (.0292) (.0380) (.0612) (.0777) (.0422)
---------- ---------- ---------- ---------- ---------- -------- --------
Net Asset Value, End of
Period.................... $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
=========== =========== =========== =========== =========== ========== =================
Total Returns............. 5.59% 3.65% 2.96% 3.85% 6.30% 8.05% 4.29%4
Ratios/Supplemental Data
Net Assets, End of Period
(in 000s)............... $1,101,834 $1,016,635 $1,188,412 $1,552,207 $1,275,545 $692,404 $111,556
Ratio of Expenses to
Average Net Assets1..... .18% .18% .18% .20% .20% .20% .20%2
Ratio of Net Investment
Income to Average Net
Assets.................. 5.45% 3.57% 2.92% 3.78% 6.00% 7.74% 8.29%2
</TABLE>
- ------------
(1) Without the waiver of advisory and administration fees, the ratio of
expenses to average daily net assets would have been .29%, .29%, .28%, .27%,
.32% and .37%, respectively, for each of the years ended October 31, 1995,
1994, 1993, 1992, 1991 and 1990, and .43% (annualized) for the period ended
October 31, 1989 for Treasury Trust Shares.
(2) Annualized.
(3) Commencement of operations.
(4) Total returns are not annualized for periods of less than one year.
3
<PAGE> 185
TRUST FOR FEDERAL SECURITIES
FINANCIAL HIGHLIGHTS
(FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)
TREASURY TRUST DOLLAR SHARES
<TABLE>
<CAPTION>
TREASURY TRUST DOLLAR SHARES
YEAR ENDED OCTOBER 31, JUNE 14, 1989(3)
----------------------------------------------------------------------- TO
1995 1994 1993 1992 1991 1990 OCTOBER 31, 1989
-------- -------- -------- -------- ------- ------- ----------------
<S> <C> <C> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of
Period.............................. $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
-------- -------- -------- -------- ------- ------- -------
Income from Investment Operations:
Net Investment Income............... .0520 .0334 .0267 .0355 .0587 .0752 .0309
-------- -------- -------- -------- ------- ------- -------
Total from Investment Operations.... .0520 .0334 .0267 .0355 .0587 .0752 .0309
-------- -------- -------- -------- ------- ------- -------
Less Distributions:
Dividends to Shareholders from:
Net Investment Income............... (.0520) (.0334) (.0267) (.0355) (.0587) (.0752) (.0309)
-------- -------- -------- -------- ------- ------- -------
Total Distributions................. (.0520) (.0334) (.0267) (.0355) (.0587) (.0752) (.0309)
-------- -------- -------- -------- ------- ------- -------
Net Asset Value, End of Period....... $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
========== ========== ========== ========== ======== ======== ==================
Total Return........................ 5.34% 3.40% 2.71% 3.60% 6.05% 7.80% 3.13%(4)
Ratios/Supplemental Data
Net Assets, End of Period (in
000s)............................. $223,272 $181,934 $258,206 $218,320 $50,729 $61,270 $ 1,448
Ratio of Expenses to Average Net
Assets(1)......................... .43% .43% .43% .45% .45% .45% .45%(2)
Ratio of Net Investment Income to
Average Net Assets................ 5.20% 3.32% 2.67% 3.53% 5.75% 7.49% 8.19%(2)
</TABLE>
- ------------
(1) Without the waiver of advisory and administration fees, the ratio of
expenses to average daily net assets would have been .54%, .54%, .53%, .52%,
.57% and .62%, respectively, for each of the years ended October 31, 1995,
1994, 1993, 1992, 1991 and 1990, and .68% (annualized) for the period ended
October 31, 1989 for Treasury Trust Dollar Shares.
(2) Annualized.
(3) First issuance of shares.
(4) Total returns are not annualized for periods of less than one year.
INVESTMENT OBJECTIVE AND POLICIES
IN GENERAL
The Fund's investment objective is to seek current income with liquidity
and security of principal. The Fund invests solely in direct obligations of the
U.S. Treasury, such as Treasury bills and notes. The Fund does not enter into
repurchase agreements nor does the Fund purchase obligations of agencies or
instrumentalities of the U.S. Government. Because the Fund invests exclusively
in direct U.S. Treasury obligations, investors may benefit from income tax
exclusions or exemptions that are available in certain states and localities.
See "Taxes." As a fundamental policy, the Fund will invest only in those
instruments which will permit Fund shares to qualify as "short-term liquid
assets" for federally regulated thrifts.
Portfolio obligations held by the Fund have remaining maturities of one
year or less (with certain exceptions), subject to the quality, diversification,
and other requirements of Rule 2a-7
4
<PAGE> 186
under the Investment Company Act of 1940, as amended (the "1940 Act") and other
rules of the Securities and Exchange Commission (the "SEC"). Certain government
securities held by the Fund may have remaining maturities exceeding one year if
such securities provide for adjustments in their interest rates not less
frequently than annually.
Securities issued or guaranteed by the U.S. Government have historically
involved little risk of loss of principal if held to maturity. However, due to
fluctuations in interest rates, the market value of such securities may vary
during the period a shareholder owns shares of the Fund. The Fund may from time
to time engage in portfolio trading for liquidity purposes, in order to enhance
its yield or if otherwise deemed advisable. In selling portfolio securities
prior to maturity, the Fund may realize a price higher or lower than that paid
to acquire any given security, depending upon whether interest rates have
decreased or increased since its acquisition. To the extent consistent with its
investment objectives, the Fund may invest in Treasury receipts and other
"stripped" securities issued or guaranteed by the U.S. Government, where the
principal and interest components are traded independently under the Separate
Trading of Registered Interest and Principal of Securities program ("STRIPS").
Under the STRIPS program, the principal and interest components are individually
numbered and separately issued by the U.S. Treasury at the request of depository
financial institutions, which then trade the component parts independently.
Currently, the Fund only invests in "stripped" securities issued or guaranteed
by the U.S. Government which are registered under the STRIPS program. The
principal and interest components may exhibit greater price volatility than
ordinary debt securities because of the manner in which their principal and
interest are returned to investors.
The Fund may purchase securities on a "when-issued" basis. When-issued
securities are securities purchased for delivery beyond the normal settlement
date at a stated price and yield. The Fund will generally not pay for such
securities or start earning interest on them until they are received. Securities
purchased on a when-issued basis are recorded as an asset and are subject to
changes in value based upon changes in the general level of interest rates. The
Fund expects that commitments to purchase when-issued securities will not exceed
25% of the value of its total assets absent unusual market conditions. The Fund
does not intend to purchase when-issued securities for speculative purposes but
only in furtherance of its investment objective.
SUITABILITY
The Fund is designed as an economical and convenient vehicle for those
institutional investors seeking to obtain current income with liquidity and
security of principal. The Fund is designed for banks and other institutions
seeking investment of monies held in accounts for which the institution acts in
a fiduciary, advisory, agency, custodial or other similar capacity. The Fund may
also be suitable for the investment of funds held or managed by corporations,
employee benefit plans, insurance companies, unions, hospitals, investment
counselors, professional firms, educational, religious and charitable
organizations, investment bankers, brokers, and others, if consistent with the
objectives of the particular account and any applicable state and federal laws
and regulations.
The Fund offers the advantage of diversification and economies of scale,
thereby avoiding the generally greater expense of executing a large number of
small transactions. Moreover, investment in the Fund relieves the investor of
many management and administrative burdens associated with the direct purchase
and sale of income obligations. These include the selection of
5
<PAGE> 187
investments; surveying the market for the best terms at which to buy and sell;
receipt, delivery and safekeeping of securities; and recordkeeping.
The Fund's investment policies are intended to qualify Fund shares for the
investment of funds of federally regulated thrifts. The Fund intends to qualify
its shares as "short-term liquid assets" as established in the published
rulings, interpretations, and regulations of the Office of Thrift Supervision.
However, investing institutions are advised to consult their primary regulator
for concurrence that Fund shares qualify under applicable regulations and
policies.
INVESTMENT LIMITATIONS
The Fund's investment objective described above is not fundamental and may
be changed by the Company's Board of Trustees without a vote of shareholders. If
there is a change in the investment objective, shareholders should consider
whether the Fund remains an appropriate investment in light of their then
current financial position and needs. The Fund's investment limitations
summarized below may not be changed without the affirmative vote of the holders
of a majority of its outstanding shares. (A complete list of the investment
limitations that cannot be changed without a vote of shareholders is contained
in the Statement of Additional Information under "Investment Objective and
Policies.")
The Fund may not:
1. Purchase securities other than direct obligations of the U.S. Treasury
such as Treasury bills and notes which will permit Fund shares to qualify as
"short-term liquid assets" for federally regulated thrifts.
2. Borrow money except from banks for temporary purposes and then in an
amount not exceeding 10% of the value of the Fund's total assets, or mortgage,
pledge or hypothecate its assets except in connection with any such borrowing
and in amounts not in excess of the lesser of the dollar amounts borrowed or 10%
of the value of the Fund's total assets at the time of such borrowing.
3. Make loans except that the Fund may purchase or hold debt obligations in
accordance with its investment objective and policies.
PURCHASE AND REDEMPTION OF SHARES
PURCHASE PROCEDURES
Dollar Shares are sold exclusively to institutional investors, such as
banks and savings and loan associations and other financial institutions,
including affiliates of PNC Financial Corp ("Service Organizations"), acting on
behalf of themselves or their customers and customers of their affiliates
("customers"). The customers, which may include individuals, trusts,
partnerships and corporations, must maintain accounts (such as demand deposit,
custody, trust or escrow accounts) with the Service Organization. Service
Organizations (or their nominees) will normally be the holders of record of
Dollar Shares, and will reflect their customers' beneficial ownership of shares
in the account statements provided by them to their customers. The exercise of
voting rights and the delivery to customers of shareholder communications from
the Fund will be governed by the customers' account agreements with the Service
Organizations. Investors wishing to purchase Dollar Shares should contact their
account representatives.
6
<PAGE> 188
Purchase orders must be transmitted by a Service Organization directly to
PFPC, the Fund's transfer agent. All such transactions are effected pursuant to
procedures established by the Service Organization in connection with a
customer's account. Shares are sold at the net asset value per share next
determined after receipt of a purchase order by PFPC.
Purchase orders for shares are accepted by the Fund only on days on which
both the New York Stock Exchange and the Federal Reserve Bank of Philadelphia
are open for business (a "Business Day") and must be transmitted to PFPC in
Wilmington, Delaware, by telephone (800-441-7450; in Delaware: 302-791-5350) or
through the Fund's computer access program. Orders received before 12:00 noon,
Eastern time, for which payment has been received by PNC Bank, the Fund's
custodian, will be executed at 12:00 noon. Orders received after 12:00 noon and
before 2:30 P.M., Eastern time (or orders received earlier in the same day for
which payment has not been received by 12:00 noon) will be executed at 4:00
P.M., Eastern time, if payment has been received by PNC Bank by that time.
Orders received at other times, and orders for which payment has not been
received by 4:00 P.M., Eastern time, will not be accepted, and notice thereof
will be given to the Service Organization placing the order. (Payment for orders
which are not received or accepted will be returned after prompt inquiry to the
sending institution.) The Fund may in its discretion reject any order for
shares.
Payment for Dollar Shares may be made only in federal funds or other funds
immediately available to PNC Bank. The minimum initial investment by a Service
Organization is $5,000; however, Service Organizations may set higher minimums
for their customers. There is no minimum subsequent investment.
Conflict of interest restrictions may apply to a Service Organization's
receipt of compensation paid by the Fund in connection with the investment of
fiduciary funds in Dollar Shares. (See also "Management of the Fund-Service
Organizations.") Institutions, including banks regulated by the Comptroller of
the Currency and investment advisers and other money managers subject to the
jurisdiction of the SEC, the Department of Labor or state securities
commissions, should consult their legal advisors before investing fiduciary
funds in Dollar Shares. (See also "Management of the Fund-Banking Laws.")
REDEMPTION PROCEDURES
Redemption orders must be transmitted by the Service Organization to PFPC
in Wilmington, Delaware in the manner described under "Purchase Procedures."
Shares are redeemed at the net asset value per share next determined after
PFPC's receipt of the redemption order. While the Fund intends to use its best
efforts to maintain its net asset value per share at $1.00, the proceeds paid to
a shareholder upon redemption may be more or less than the amount invested
depending upon a share's net asset value at the time of redemption.
Payment for redeemed shares for which a redemption order is received by
PFPC by 2:30 P.M., Eastern time, on a Business Day is normally made in federal
funds wired to the redeeming shareholder on the same day. Payment for redemption
orders which are received between 2:30 P.M. and 4:00 P.M., Eastern time, or on a
day when PNC Bank is closed, is normally wired in federal funds on the next day
following redemption that PNC Bank is open for business.
The Fund shall have the right to redeem shares in any account if the value
of the account is less than $1,000 after sixty-days' prior written notice to the
shareholder. Any such redemption shall be effected at the net asset value per
share next determined after the redemption order is
7
<PAGE> 189
entered. If during the sixty-day period the shareholder increases the value of
its account to $1,000 or more, no such redemption shall take place. In addition,
the Fund may also redeem shares involuntarily or suspend the right of redemption
under certain special circumstances described in the Statement of Additional
Information under "Additional Purchase and Redemption Information."
OTHER MATTERS
The Fund's net asset value per share for purposes of pricing purchase and
redemption orders is determined by PIMC as of 12:00 noon and 4:00 P.M., Eastern
time, on each day on which both the Federal Reserve Bank of Philadelphia and the
New York Stock Exchange are open for business. Currently, one or both of these
institutions are closed on the customary national business holidays of New
Year's Day, Martin Luther King, Jr. Day, Presidents' Day, Good Friday, Memorial
Day (observed), Independence Day, Labor Day, Columbus Day (observed), Veteran's
Day, Thanksgiving Day and Christmas Day. The net asset value per share of each
class of the Fund is calculated by adding the value of all securities and other
assets belonging to the Fund, subtracting liabilities attributable to each class
and dividing the result by the total number of the outstanding shares of each
class. In computing net asset value, the Fund uses the amortized cost method of
valuation as described in the Statement of Additional Information under
"Additional Purchase and Redemption Information." The Fund's net asset value per
share for purposes of pricing purchase and redemption orders is determined
independently of the net asset values of the shares of the Company's other
investment portfolios.
Fund shares are sold and redeemed without charge by the Fund. Service
Organizations purchasing or holding Dollar Shares for their customer accounts
may charge customer fees for cash management and other services provided in
connection with their accounts. In addition, if a customer has agreed with a
particular Service Organization to maintain a minimum balance in its account
with the Service Organization and the balance in such account falls below that
minimum, the customer may be obliged by the Service Organization to redeem all
or part of its shares in the Fund to the extent necessary to maintain the
required minimum balance in such account. A customer should, therefore, consider
the terms of its account with a Service Organization before purchasing Dollar
Shares. A Service Organization purchasing or redeeming Fund shares on behalf of
its customers is responsible for transmitting orders to the Fund in accordance
with its customer agreements, and to provide customers with account statements
with respect to share transactions for their accounts.
MANAGEMENT OF THE FUND
BOARD OF TRUSTEES
The business and affairs of the Fund are managed under the direction of the
Company's Board of Trustees. The trustees of the Company are as follows:
Philip E. Coldwell is an economic consultant and a former Member of
the Board of Governors of the Federal Reserve System.
Robert R. Fortune is a financial consultant and former Chairman,
President and Chief Executive Officer of Associated Electric & Gas
Insurance Services Limited.
Rodney D. Johnson is President of Fairmount Capital Advisors, Inc.
8
<PAGE> 190
G. Willing Pepper, Chairman of the Board and President of the Company,
is a retired President of Scott Paper Company.
Mr. Pepper is considered by the Company to be an "interested person" of the
Company as defined in the 1940 Act.
The other officers of the Company are as follows:
Edward J. Roach is Vice President and Treasurer of the Company.
W. Bruce McConnel, III, Secretary of the Company, is a partner of the
law firm of Drinker Biddle & Reath, Philadelphia, Pennsylvania.
INVESTMENT ADVISER AND SUB-ADVISER
PIMC, a wholly-owned subsidiary of PNC Bank, serves as the Fund's
investment adviser. PIMC was organized in 1977 by PNC Bank to perform advisory
services for investment companies and has its principal offices at 400 Bellevue
Parkway, Wilmington, Delaware 19809. PNC Bank serves as the Fund's sub-adviser.
PNC Bank is one of the largest bank managers of investments for individuals in
the United States, and together with its predecessors has been in the business
of managing the investments of fiduciary and other accounts since 1847. PNC Bank
is a wholly-owned, indirect subsidiary of PNC Bank Corp. and has its principal
offices at Broad and Chestnut Streets, Philadelphia, Pennsylvania 19102. PNC
Bank Corp. is a multi-bank holding company. PIMC and PNC Bank also serve as
adviser and sub-adviser, respectively, to the Company's FedFund, T-Fund,
FedCash, T-Cash and Federal Trust Fund portfolios.
PNC Bank Corp., headquartered in Pittsburgh, Pennsylvania, is one of the
largest financial services organizations in the United States with banking
subsidiaries in Pennsylvania, New Jersey, Delaware, Ohio, Kentucky, Indiana,
Massachusetts and Florida. Its major businesses include corporate banking,
consumer banking, mortgage banking and asset management.
PNC Financial Services Group is PNC Bank Corp.'s mutual fund complex,
headquartered in Wilmington, Delaware. This group includes PIMC, PFPC and PNC
Bank. In 1973, Provident National Bank (predecessor to PNC Bank) commenced
advising the first institutional money market mutual fund -- a U.S.
dollar-denominated constant net asset value fund -- offered in the United
States.
The PNC Financial Services Group is one of the largest U.S. bank managers
of mutual funds with assets currently under management in excess of $30 billion.
This group, through PFPC and PFPC International Ltd., is also a leading mutual
fund service provider having contractual relationships with approximately 370
mutual funds with 3.5 million shareholders and in excess of $101 billion in
assets, including some $2 billion in non-U.S. assets. This group, through its
PNC Institutional Investment Service, provides investment research to some 250
financial institutions located in the United States and abroad. PNC Bank
provides custodial services for approximately $210 billion in assets, including
$160 billion in mutual fund assets.
As adviser, PIMC manages the Fund's portfolio and is responsible for all
purchases and sales of the Fund's portfolio securities. PIMC also maintains
certain of the Fund's financial accounts and records and computes the Fund's net
asset value and net income. For the advisory services provided and expenses
assumed by it, PIMC is entitled to receive a fee, computed daily and payable
monthly, based on the Fund's average net assets. PIMC and the administrators may
from
9
<PAGE> 191
time to time reduce the advisory and administration fees otherwise payable to
them or may reimburse the Fund for its operating expenses. Any fees waived or
expenses reimbursed by PIMC and the administrators with respect to a particular
fiscal year are not recoverable. For the fiscal year ended October 31, 1995, the
Fund paid investment advisory fees with respect to Dollar Shares aggregating
.07% of Dollar Shares' average net assets.
As sub-adviser, PNC Bank provides research, credit analysis and
recommendations with respect to the Fund's investments, and supplies PIMC with
certain computer facilities, personnel and other services. For its sub-advisory
services, PNC Bank is entitled to receive from PIMC an amount equal to 75% of
the advisory fee paid by the Fund to PIMC (subject to adjustment in certain
circumstances). The sub-advisory fees paid by PIMC to PNC Bank have no effect on
the advisory fees payable by the Fund to PIMC. PNC Bank also serves as the
Fund's custodian. The services provided by PNC Bank and PIMC and the fees
payable by the Fund for these services are described further in the Statement of
Additional Information under "Management of the Funds."
ADMINISTRATORS
PFPC, whose principal business address is 400 Bellevue Parkway, Wilmington,
Delaware 19809, and PDI, whose principal business address is 259 Radnor-Chester
Road, Suite 120, Radnor, Pennsylvania 19087, serve as administrators. PFPC is an
indirect wholly-owned subsidiary of PNC Bank Corp. A majority of the outstanding
stock of PDI is owned by its officers. The administrative services provided by
the administrators, which are described more fully in the Statement of
Additional Information, include providing and supervising the operation of an
automated data processing system to process purchase and redemption orders;
assisting in maintaining the Fund's Wilmington, Delaware office; performing
administrative services in connection with the Fund's computer access program
maintained to facilitate shareholder access to the Fund; accumulating
information for and coordinating the preparation of reports to the Fund's
shareholders and the Securities and Exchange Commission; and maintaining the
registration or qualification of the Fund's shares for sale under state
securities laws. PFPC and PDI are each responsible for carrying out the duties
undertaken pursuant to the Administration Agreement with the Fund.
For their administrative services, the administrators are entitled jointly
to receive a fee computed daily and payable monthly. (For information regarding
the administrators' waivers and expense reimbursements, see "Investment Adviser
and Sub-Adviser" above.) The Fund also reimburses each administrator for its
reasonable out-of-pocket expenses incurred in connection with the Funds'
computer access program. For the fiscal year ended October 31, 1995, the Fund
paid administration fees aggregating .07% of its average net assets.
PFPC also serves as transfer agent, registrar and dividend disbursing
agent. PFPC's address is P.O. Box 8950, Wilmington, Delaware 19885-9628. The
services provided by PFPC and PDI and the fees payable by the Fund for these
services are described further in the Statement of Additional Information under
"Management of the Funds."
DISTRIBUTOR
PDI serves as distributor of the Fund's shares. Its principal offices are
located at 259 Radnor-Chester Road, Suite 120, Radnor, Pennsylvania 19087. Fund
shares are sold on a continuous basis by the distributor as agent. The
distributor pays the cost of printing and distributing prospectuses to persons
who are not shareholders of the Fund (excluding preparation and printing
expenses necessary for the continued registration of the Fund's shares) and of
printing and distributing all
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<PAGE> 192
sales literature. No compensation is payable by the Fund to the distributor for
its distribution services.
SERVICE ORGANIZATIONS
As stated above, Service Organizations may purchase Dollar Shares. Dollar
Shares are identical in all respects to the Company's Treasury Trust Shares
except that Dollar Shares bear the service fees described below and enjoy
certain exclusive voting rights on matters relating to these fees. The Fund will
enter into an agreement with each Service Organization which purchases Dollar
Shares requiring it to provide support services to its customers who are the
beneficial owners of such shares in consideration of the Fund's payment of .25%
(on an annualized basis) of the average daily net asset value of the Dollar
Shares held by the Service Organization for the benefit of customers. Such
services, which are described more fully in the Statement of Additional
Information under "Management of the Funds--Service Organizations," include
aggregating and processing purchase and redemption requests from customers and
placing net purchase and redemption orders with PFPC; processing dividend
payments from the Fund on behalf of customers; providing information
periodically to customers showing their positions in Dollar Shares; and
providing sub-accounting or the information necessary for sub-accounting with
respect to Dollar Shares beneficially owned by customers. Under the terms of the
agreements, Service Organizations are required to provide to their customers a
schedule of any fees that they may charge customers in connection with their
investments in Dollar Shares.
EXPENSES
Except as noted above and in the Statement of Additional Information, the
Fund's service contractors bear all expenses in connection with the performance
of their services. Similarly, the Fund bears the expenses incurred in its
operations. For the fiscal year ended October 31, 1995, the Fund's total
expenses (net of fee waivers of .11%) with respect to Dollar Shares were .43% of
the average net assets of the Dollar Shares. With regard to fees paid
exclusively by Dollar Shares, see "Service Organizations" above.
BANKING LAWS
Banking laws and regulations presently prohibit a bank holding company
registered under the Federal Bank Holding Company Act of 1956 or any bank or
non-bank affiliate thereof from sponsoring, organizing or controlling a
registered, open-end investment company engaged continuously in the issuance of
its shares, and prohibit banks generally from issuing, underwriting, selling or
distributing securities such as Fund shares. Such banking laws and regulations
do not prohibit such a holding company or affiliate or banks generally from
acting as investment adviser, transfer agent or custodian to such an investment
company, or from purchasing shares of such a company for or upon the order of
customers. PNC Bank, PIMC and PFPC, as well as some Service Organizations, are
subject to such banking laws and regulations, but believe they may perform the
services for the Fund contemplated by their respective agreements, this
Prospectus and the Statement of Additional Information without violating
applicable banking laws or regulations.
Should future legislative, judicial or administrative action prohibit or
restrict the activities of bank Service Organizations in connection with the
provision of support services to their customers, the Fund might be required to
alter or discontinue its arrangements with Service Organizations and change its
method of operations with respect to Dollar Shares. It is not
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<PAGE> 193
anticipated, however, that any change in the Fund's method of operations would
affect its net asset value per share or result in a financial loss to any
customer.
DIVIDENDS
Shareholders of the Fund are entitled to dividends and distributions
arising only from the net investment income and capital gains, if any, earned on
investments held by the Fund. The Fund's net investment income is declared daily
as a dividend to its shareholders of record at the close of business on the day
of declaration. Dividends are determined in the same manner and are paid in the
same amount for each share of the Fund irrespective of class, except that Dollar
Shares bear all the expense of fees paid to Service Organizations. As a result,
at any given time, the net yield on Treasury Trust Dollar Shares will be
approximately .25% lower than the net yield on Treasury Trust Shares. Shares
begin accruing dividends on the day the purchase order for the shares is
executed and continue to accrue dividends through, and including, the day before
such shares are redeemed. Dividends are paid monthly by check, or by wire
transfer if requested in writing by the shareholder, within five business days
after the end of the month or within five business days after a redemption of
all of a shareholder's shares of a particular class. The Fund does not expect to
realize net long-term capital gains.
Institutional shareholders may elect to have their dividends reinvested in
additional full and fractional shares of the same class of shares with respect
to which such dividends are declared at the net asset value of such shares on
the payment date. Reinvested dividends receive the same tax treatment as
dividends paid in cash. Such election, or any revocation thereof, must be made
in writing to PFPC at P.O. Box 8950, Wilmington, Delaware 19885-9628, and will
become effective after its receipt by PFPC with respect to dividends paid.
PFPC, as transfer agent, will send each Fund shareholder or its authorized
representative an annual statement designating the amount, if any, of any
dividends and distributions made during each year and their federal tax
qualification.
TAXES
The Fund qualified in its last taxable year and intends to qualify in
future years as a "regulated investment company" under the Internal Revenue Code
of 1986, as amended (the "Code"). A regulated investment company is generally
exempt from federal income tax on amounts distributed to its shareholders.
Qualification as a regulated investment company under the Code for a
taxable year requires, among other things, that the Fund distribute to its
shareholders at least 90% of its investment company taxable income for such
year. In general, the Fund's investment company taxable income will be its
taxable income (including interest and short-term capital gains, if any),
subject to certain adjustments and excluding the excess of any net long-term
capital gain for the taxable year over the net short-term capital loss, if any,
for such year. The Fund intends to distribute substantially all of its
investment company taxable income each year. Such distributions will be taxable
as ordinary income to the Fund's shareholders that are not currently exempt from
federal income taxes, whether such income is received in cash or reinvested in
additional shares. (Federal income taxes for distributions to an Individual IRA
or a qualified retirement plan are deferred under the Code.) It is anticipated
that none of the Fund's distributions will be eligible for the
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<PAGE> 194
dividends received deduction for corporations. The Fund does not expect to
realize long-term capital gains and, therefore, does not contemplate payment of
any "capital gain dividends", as described in the Code.
Dividends declared in October, November or December of any year payable to
shareholders of record on a specified date in such months will be deemed to have
been received by the shareholders and paid by the Fund on December 31 of such
year, in the event such dividends are actually paid during January of the
following year.
TO THE EXTENT PERMISSIBLE BY FEDERAL AND STATE LAW, THE FUND IS STRUCTURED
TO PROVIDE SHAREHOLDERS WITH INCOME THAT IS EXEMPT OR EXCLUDED FROM TAXATION AT
THE STATE AND LOCAL LEVEL. SUBSTANTIALLY ALL DIVIDENDS PAID TO SHAREHOLDERS
RESIDING IN CERTAIN STATES WILL BE EXEMPT OR EXCLUDED FROM STATE INCOME TAX.
MANY STATES, BY STATUTE, JUDICIAL DECISION OR ADMINISTRATIVE ACTION, HAVE TAKEN
THE POSITION THAT DIVIDENDS OF A REGULATED INVESTMENT COMPANY SUCH AS THE FUND
THAT ARE ATTRIBUTABLE TO INTEREST ON DIRECT U.S. TREASURY OBLIGATIONS ARE THE
FUNCTIONAL EQUIVALENT OF INTEREST FROM SUCH OBLIGATIONS AND ARE, THEREFORE,
EXEMPT FROM STATE AND LOCAL INCOME TAXES. INVESTORS SHOULD BE AWARE OF THE
APPLICATION OF THEIR STATE AND LOCAL TAX LAWS TO INVESTMENTS IN THE FUND.
The foregoing discussion is only a brief summary of some of the important
federal tax considerations generally affecting the Fund and its shareholders. As
indicated above, IRAs receive special tax treatment. No attempt is made to
present a detailed explanation of the federal, state or local income tax
treatment of the Fund or its shareholders and this discussion is not intended as
a substitute for careful tax planning. Accordingly, potential investors in the
Fund should consult their tax advisors with specific reference to their own tax
situations.
YIELDS
From time to time, in advertisements or in reports to shareholders, the
"yields" and "effective yields" for Treasury Trust Shares and Dollar Shares may
be quoted. Yield quotations are computed for Dollar Shares separately from those
for Treasury Trust Shares. The "yield" for a particular class or sub-class of
Fund shares refers to the income generated by an investment in such shares over
a particular period (such as a seven-day period). This income is then
"annualized"; that is, the amount of income generated by an investment during
that period is assumed to be generated for each such period over a 52-week or
one year period and is shown as a percentage of the investment. The "effective
yield" is calculated similarly but, when annualized, the income earned by an
investment in a class or sub-class of Fund shares is assumed to be reinvested.
The "effective yield" will be slightly higher than the "yield" because of the
compounding effect of this assumed reinvestment.
The Fund's yields may be compared to those of other mutual funds with
similar objectives, to stock or other relevant indices, or to rankings prepared
by independent services or other financial or industry publications that monitor
the performance of mutual funds. For example, such data are reported in national
financial publications such as IBC/Donoghue's Money Fund Report(R), The Wall
Street Journal, and The New York Times, reports prepared by Lipper Analytical
Services, Inc., and publications of a local or regional nature.
The Fund's yield figures for Treasury Trust Fund Shares and Treasury Trust
Fund Dollar Shares represent the Fund's past performance, will fluctuate, and
should not be considered as representative
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<PAGE> 195
of future results. The yield of any investment is generally a function of
portfolio quality and maturity, type of investment and operating expenses. Any
fees charged by Service Organizations directly to their customers in connection
with investments in Dollar Shares are not reflected in the Dollar Shares'
yields; and, such fees, if charged, would reduce the actual return received by
Customers on their investments. The methods used to compute the Fund's yields
are described in more detail in the Statement of Additional Information.
Investors may call 800-821-6006 (Treasury Trust Shares code: 62; Treasury Trust
Dollar Shares code: 63) to obtain current yield information.
DESCRIPTION OF SHARES AND MISCELLANEOUS
The Company is a Pennsylvania business trust established on May 14, 1975.
Effective March 2, 1987, the Company's name was changed from Trust for
Short-Term Federal Securities to Trust for Federal Securities. The Company
commenced operations of the Fund in May, 1989.
The Company's Declaration of Trust authorizes the Board of Trustees to
issue an unlimited number of full and fractional shares of beneficial interest
in the Company and to classify or reclassify any unissued shares into one or
more additional classes of shares. Pursuant to such authority, the Board of
Trustees has authorized the issuance of twelve classes of shares designated as
Treasury Trust, Treasury Trust Dollar, FedFund, FedFund Dollar, T-Fund, T-Fund
Dollar, FedCash, FedCash Dollar, T-Cash, T-Cash Dollar, Federal Trust and
Federal Trust Dollar. The Declaration of Trust further authorizes the trustees
to classify or reclassify any class of shares into one or more sub-classes.
THIS PROSPECTUS RELATES PRIMARILY TO THE DOLLAR SHARES OF THE FUND AND
DESCRIBES ONLY THE INVESTMENT OBJECTIVE AND POLICIES, OPERATIONS, CONTRACTS AND
OTHER MATTERS RELATING TO THE FUND. INVESTORS WISHING TO OBTAIN SIMILAR
INFORMATION REGARDING THE FUND'S OTHER CLASS OF SHARES OR THE COMPANY'S FEDFUND,
T-FUND, FEDCASH, T-CASH AND FEDERAL TRUST FUND PORTFOLIOS MAY OBTAIN SEPARATE
PROSPECTUSES BY CALLING THE DISTRIBUTOR AT 800-998-7633.
The Company does not presently intend to hold annual meetings of
shareholders except as required by the 1940 Act or other applicable law. The
Company will call a meeting of shareholders for the purpose of voting upon the
question of removal of a member of the Board of Trustees upon written request of
shareholders owning at least 10% of the outstanding shares of the Company
entitled to vote.
Each Fund Share represents an equal proportionate interest in the assets
belonging to the Fund. Each share is without par value and has no preemptive or
conversion rights. When issued for payment as described in this Prospectus,
shares will be fully paid and non-assessable.
Holders of the Company's Treasury Trust Shares and Dollar Shares will vote
in the aggregate and not by class on all matters, except where otherwise
required by law and except that only Dollar Shares will be entitled to vote on
matters submitted to a vote of shareholders pertaining to the Fund's
arrangements with Service Organizations. Further, shareholders of all of the
Company's portfolios will vote in the aggregate and not by portfolio except as
otherwise required by law or when the Board of Trustees determines that the
matter to be voted upon affects only the interests of the shareholders of a
particular portfolio. (See the Statement of Additional Information under
"Additional Description Concerning Fund Shares" for examples where the
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<PAGE> 196
1940 Act requires voting by portfolio.) Shareholders of the Company are entitled
to one vote for each full share held (irrespective of class, sub-class, or
portfolio) and fractional votes for fractional shares held. Voting rights are
not cumulative and, accordingly, the holders of more than 50% of the aggregate
shares of the Company may elect all of the trustees.
For information concerning the redemption of Fund shares and possible
restrictions on their transferability, see "Purchase and Redemption of Shares."
As stated above, the Company is organized as a trust under the laws of the
Commonwealth of Pennsylvania. Shareholders of such a trust may, under certain
circumstances, be held personally liable (as if they were partners) for the
obligations of the trust. The Company's Declaration of Trust provides for
indemnification out of the trust property of any shareholder of the Fund held
personally liable solely by reason of being or having been a shareholder and not
because of his acts or omissions or some other reason.
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<PAGE> 197
NO PERSON HAS BEEN AUTHORIZED
TO GIVE ANY INFORMATION OR TO
MAKE ANY REPRESENTATIONS NOT
CONTAINED IN THIS PROSPECTUS,
OR IN THE FUND'S STATEMENT OF
ADDITIONAL INFORMATION
INCORPORATED HEREIN BY
REFERENCE, IN CONNECTION WITH
THE OFFERING MADE BY THIS
PROSPECTUS AND, IF GIVEN OR
MADE, SUCH INFORMATION OR
REPRESENTATIONS MUST NOT BE
RELIED UPON AS HAVING BEEN
AUTHORIZED BY THE COMPANY OR
ITS DISTRIBUTOR. THIS
PROSPECTUS DOES NOT
CONSTITUTE AN OFFERING BY THE
COMPANY OR BY THE DISTRIBUTOR
IN ANY JURISDICTION IN WHICH
SUCH OFFERING MAY NOT
LAWFULLY BE MADE.
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TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
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<S> <C>
Background and Expense
Information................... 2
Financial Highlights............ 3
Investment Objective and
Policies...................... 4
Purchase and Redemption of
Shares........................ 6
Management of the Fund.......... 8
Dividends....................... 12
Taxes........................... 12
Yields.......................... 13
Description of Shares and
Miscellaneous................. 14
</TABLE>
PIF-P-022
TREASURY
TRUST FUND
DOLLAR SHARES
AN INVESTMENT PORTFOLIO
OFFERED BY
TRUST FOR FEDERAL SECURITIES
[PROVIDENT INSTITUTIONAL FUNDS LOGO]
Prospectus
February 28, 1996
<PAGE> 198
FEDERAL TRUST FUND
TREASURY TRUST FUND
Investment Portfolios Offered By
Trust for Federal Securities
Statement of Additional Information
February __, 1996
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
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<S> <C>
THE COMPANY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
INVESTMENT OBJECTIVES AND POLICIES . . . . . . . . . . . . . . . . . . . 2
ADDITIONAL PURCHASE AND REDEMPTION INFORMATION . . . . . . . . . . . . . 5
MANAGEMENT OF THE FUNDS . . . . . . . . . . . . . . . . . . . . . . . . . 8
ADDITIONAL INFORMATION CONCERNING TAXES . . . . . . . . . . . . . . . . . 19
DIVIDENDS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
ADDITIONAL YIELD INFORMATION . . . . . . . . . . . . . . . . . . . . . . 21
ADDITIONAL DESCRIPTION CONCERNING FUND SHARES . . . . . . . . . . . . . . 23
COUNSEL . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
AUDITORS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
MISCELLANEOUS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
FINANCIAL STATEMENTS . . . . . . . . . . . . . . . . . . . . . . . . . . FS-1
</TABLE>
This Statement of Additional Information is meant to be read in
conjunction with the Prospectuses for Federal Trust Fund and Treasury Trust
Fund dated February __, 1996 and is incorporated by reference in its entirety
into those Prospectuses. Because this Statement of Additional Information is
not itself a prospectus, no investment in shares of Federal Trust Fund or
Treasury Trust Fund should be made solely upon the information contained
herein. Copies of the Prospectuses for Federal Trust Fund and Treasury Trust
Fund may be obtained by calling 800-821-7432. Capitalized terms used but not
defined herein have the same meanings as in the Prospectuses.
<PAGE> 199
THE COMPANY
Trust for Federal Securities (Trust for Short-Term Federal Securities
prior to March 2, 1987) is a no-load, diversified, open-end investment company
designed primarily as a vehicle by which institutional investors can invest
cash reserves in a choice of portfolios consisting of government securities.
Trust for Federal Securities (the "Company") consists of six separate
investment portfolios--Federal Trust Fund, Treasury Trust Fund, FedFund,
T-Fund, FedCash and T-Cash. This Statement of Additional Information relates
primarily to the Company's Federal Trust Fund and Treasury Trust Fund
portfolios (the "Funds").
The obligations held by Federal Trust Fund are limited to obligations
issued or guaranteed by the U.S. Government, its agencies or instrumentalities.
The obligations held by Treasury Trust Fund are limited to U.S. Treasury bills,
notes and other direct obligations of the U.S. Treasury. Although the Funds
and the Company's FedFund, T-Fund, FedCash and T-Cash portfolios have the same
investment adviser and have comparable investment objectives, the Funds differ
in that they may not engage in repurchase agreements; their yields normally
will differ due to their differing cash flows and differences in the specific
portfolio securities held.
THIS STATEMENT OF ADDITIONAL INFORMATION AND THE FUNDS' PROSPECTUSES
RELATE PRIMARILY TO THE FUNDS AND DESCRIBE ONLY THE INVESTMENT OBJECTIVE AND
POLICIES, OPERATIONS, CONTRACTS, AND OTHER MATTERS RELATING TO THE FUNDS.
INVESTORS WISHING TO OBTAIN SIMILAR INFORMATION REGARDING THE COMPANY'S
FEDFUND, T-FUND, FEDCASH OR T-CASH PORTFOLIOS MAY OBTAIN SEPARATE PROSPECTUSES
DESCRIBING THOSE PORTFOLIOS BY CALLING THE DISTRIBUTOR AT 800-998-7633.
INVESTMENT OBJECTIVES AND POLICIES
As stated in the Funds' Prospectuses, the investment objective of
each Fund is to seek current income with liquidity and security of principal.
The following policies supplement the description in the Prospectuses of the
investment objectives and policies of the Funds.
PORTFOLIO TRANSACTIONS
Subject to the general control of the Company's Board of Trustees,
PNC Institutional Management Corporation ("PIMC"), the Funds' investment
adviser, is responsible for, makes decisions with respect to and places orders
for all purchases and sales of portfolio securities for the Funds. Purchases
and sales of portfolio securities are usually principal transactions
-2-
<PAGE> 200
without brokerage commissions. In making portfolio investments, PIMC seeks to
obtain the best net price and the most favorable execution of orders. To the
extent that the execution and price offered by more than one dealer are
comparable, PIMC may, in its discretion, effect transactions in portfolio
securities with dealers who provide the Company with research advice or other
services.
Investment decisions for the Funds are made independently from those
for other investment company portfolios or accounts advised or managed by PIMC.
Such other portfolios may invest in the same securities as the Funds. When
purchases or sales of the same security are made at substantially the same time
on behalf of such other portfolios, transactions are averaged as to price, and
available investments allocated as to amount, in a manner which PIMC believes
to be equitable to each portfolio, including either Fund. In some instances,
this investment procedure may adversely affect the price paid or received by a
Fund or the size of the position obtained for a Fund. To the extent permitted
by law, PIMC may aggregate the securities to be sold or purchased for a Fund
with those to be sold or purchased for such other investment company portfolios
in order to obtain best execution.
Portfolio securities will not be purchased from or sold to PIMC, PNC
Bank, National Association ("PNC Bank"), PFPC Inc. ("PFPC"), Provident
Distributors, Inc. ("PDI") or any affiliated person (as such term is defined in
the Investment Company Act of 1940 (the "1940 Act") of any of them, except to
the extent permitted by the Securities and Exchange Commission (the "SEC").
Furthermore, with respect to such transactions, the Funds will not give
preference to Service Organizations with whom the Funds enter into agreements
concerning the provision of support services to customers who beneficially own
Federal Trust Dollar shares or Treasury Trust Dollar shares ("Dollar shares").
(See the Prospectuses, "Management of the Fund--Service Organizations.")
As stated in the Funds' Prospectuses, the Funds may purchase
securities on a "when-issued" basis (i.e., for delivery beyond the normal
settlement date at a stated price and yield). When a Fund agrees to purchase
when-issued securities, its custodian will set aside cash or liquid portfolio
securities equal to the amount of the commitment in a separate account.
Normally, the custodian will set aside portfolio securities to satisfy a
purchase commitment, and in such a case such Fund may be required subsequently
to place additional assets in the separate account in order to ensure that the
value of the account remains equal to the amount of such Fund's commitment. It
may be expected that a Fund's net assets will fluctuate to a greater degree
when it sets aside portfolio securities to cover such purchase commitments than
when it sets aside cash. Because the Funds will set aside cash or liquid
assets to satisfy their
-3-
<PAGE> 201
respective purchase commitments in the manner described, such a Fund's
liquidity and ability to manage its portfolio might be affected in the event
its commitments to purchase when-issued securities ever exceeded 25% of the
value of its assets. Neither Fund intends to purchase when-issued securities
for speculative purposes but only in furtherance of its investment objectives.
The Funds reserve the right to sell the securities before the settlement date
if it is deemed advisable.
When a Fund engages in when-issued transactions, it relies on the
seller to consummate the trade. Failure of the seller to do so may result in a
Fund's incurring a loss or missing an opportunity to obtain a price considered
to be advantageous.
The Funds may seek profits through short-term trading and engage in
short-term trading for liquidity purposes. Increased trading may provide
greater potential for capital gains and losses, and also involves
correspondingly greater trading costs which are borne by the Fund involved.
PIMC will consider such costs in determining whether or not a Fund should
engage in such trading. The portfolio turnover rate for the Funds is expected
to be zero for regulatory reporting purposes.
Neither Fund will invest more than 10% of the value of its assets in
investments which are not readily marketable at the time of purchase of a not
readily marketable security. Securities for purposes of this limitation do not
include securities which have been determined to be liquid by the Fund's Board
of Trustees based upon the trading markets for such securities.
Currently, Treasury Trust Fund does not invest in securities with
maturities in excess of one year, as the U.S. Treasury does not currently issue
securities with maturities of such lengths. However, if such securities ever
become available, Treasury Trust Fund may purchase them under provisions
consistent with Rule 2a-7 under the 1940 Act and 12 C.F.R. Section 566.1(h) of
the regulations that govern federally regulated thrifts.
INVESTMENT LIMITATIONS
The Funds' Prospectuses summarize certain investment limitations that
may not be changed without the affirmative vote of the holders of a "majority
of the outstanding shares" of the respective Fund (as defined below under
"Miscellaneous"). Below is a complete list of the Funds' investment
limitations that may not be changed without such a vote of shareholders.
1. Federal Trust Fund may not purchase securities other than U.S.
Treasury bills, notes and other obligations
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issued or guaranteed by the U.S. Government, its agencies or
instrumentalities.
2. Treasury Trust Fund may not purchase securities other than
direct obligations of the U.S. Treasury such as Treasury bills and notes, which
will permit Fund shares to qualify as "short-term liquid assets" for federally
regulated thrifts.
Federal Trust Fund and Treasury Trust Fund may not:
3. Borrow money except from banks for temporary purposes and then
in an amount not exceeding 10% of the value of the particular Fund's total
assets, or mortgage, pledge or hypothecate its assets except in connection with
any such borrowing and in amounts not in excess of the lesser of the dollar
amounts borrowed or 10% of the value of the particular Fund's total assets at
the time of such borrowing. (This borrowing provision is not for investment
leverage, but solely to facilitate management of the Funds by enabling the
Company to meet redemption requests where the liquidation of portfolio
securities is deemed to be inconvenient or disadvantageous.) Interest paid on
borrowed funds will not be available for investment.
4. Act as an underwriter.
5. Make loans except that the Funds may purchase or hold debt
obligations in accordance with their respective investment objective and
policies.
ADDITIONAL PURCHASE AND REDEMPTION INFORMATION
IN GENERAL
Information on how to purchase and redeem a Fund's shares is included
in its Prospectus. The issuance of shares is recorded on the books of the
Funds, and share certificates are not issued unless expressly requested in
writing. Certificates are not issued for fractional shares.
The regulations of the Comptroller of the Currency provide that funds
held in a fiduciary capacity by a national bank approved by the Comptroller to
exercise fiduciary powers must be invested in accordance with the instrument
establishing the fiduciary relationship and local law. The Company believes
the purchase of Federal Trust shares and Treasury Trust shares by such national
banks acting on behalf of their fiduciary accounts is not contrary to
applicable regulations if consistent with the particular account and proper
under the law governing the administration of the account.
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<PAGE> 203
Prior to effecting a redemption of shares represented by
certificates, PFPC, the Funds' transfer agent, must have received such
certificates at its principal office. All such certificates must be endorsed
by the redeeming shareholder or accompanied by a signed stock power, in each
instance with the signature guaranteed by a commercial bank, a member of a
major stock exchange or other eligible guarantor organization, unless other
arrangements satisfactory to the Funds have previously been made. The Funds
may require any additional information reasonably necessary to evidence that a
redemption has been duly authorized.
Under the 1940 Act, the Funds may suspend the right of redemption or
postpone the date of payment upon redemption for any period during which the
New York Stock Exchange is closed, other than customary weekend and holiday
closings, or during which trading on said Exchange is restricted, or during
which (as determined by the SEC by rule or regulation) an emergency exists as a
result of which disposal or valuation of portfolio securities is not reasonably
practicable, or for such other periods as the SEC may permit. (The Funds may
also suspend or postpone the recordation of the transfer of their shares upon
the occurrence of any of the foregoing conditions.)
In addition, the Funds may redeem shares involuntarily in certain
other instances if the Board of Trustees determines that failure to redeem may
have material adverse consequences to a Fund's shareholders in general. Each
Fund is obligated to redeem shares solely in cash up to $250,000 or 1% of the
Fund's net asset value, whichever is less, for any one shareholder within a
90-day period. Any redemption beyond this amount will also be in cash unless
the Board of Trustees determines that conditions exist which make payment of
redemption proceeds wholly in cash unwise or undesirable. In such a case, the
Fund may make payment wholly or partly in securities or other property, valued
in the same way as the Fund determines net asset value. (See "Net Asset Value"
below for an example of when such redemption or form of payment might be
appropriate.) Redemption in kind is not as liquid as a cash redemption.
Shareholders who receive a redemption in kind may incur transaction costs if
they sell such securities or property, and may receive less than the redemption
value of such securities or property upon sale, particularly where such
securities are sold prior to maturity.
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Any institution purchasing shares on behalf of separate accounts will
be required to hold the shares in a single nominee name (a "Master Account").
Institutions investing in more than one of the Company's portfolios or classes
of shares must maintain a separate Master Account for each portfolio and class
of shares. Sub-accounts may be established by name or number either when the
Master Account is opened or later.
NET ASSET VALUE
As stated in each Fund's Prospectus, each Fund's net asset value per
share is calculated by adding the value of all of the Fund's portfolio
securities and other assets belonging to that Fund, subtracting the liabilities
charged to that Fund, and dividing the result by the total number of that
Fund's shares outstanding (by class). "Assets belonging to" a Fund consist of
the consideration received upon the issuance of shares together with all
income, earnings, profits and proceeds derived from the investment thereof,
including any proceeds from the sale, exchange or liquidation of such
investments, any funds or payments derived from any reinvestment of such
proceeds, and a portion of any general assets of the Company not belonging to a
particular portfolio. Assets belonging to a particular Fund are charged with
the direct liabilities of that Fund and with a share of the general liabilities
of the Company allocated in proportion to the relative net assets of such Fund
and the Company's other portfolios. Determinations made in good faith and in
accordance with generally accepted accounting principles by the Board of
Trustees as to the allocations of any assets or liabilities with respect to a
Fund are conclusive.
As stated in the Funds' Prospectuses, in computing the net asset
value of shares of the Funds for purposes of sales and redemptions, the Funds
use the amortized cost method of valuation. Under this method, the Funds value
each of their portfolio securities at cost on the date of purchase and
thereafter assume a constant proportionate amortization of any discount or
premium until maturity of the security. As a result, the value of a portfolio
security for purposes of determining net asset value normally does not change
in response to fluctuating interest rates. While the amortized cost method
provides certainty in portfolio valuation, it may result in valuations for the
Funds' securities which are higher or lower than the market value of such
securities.
In connection with their use of amortized cost valuation, each of the
Funds limits the dollar-weighted average maturity of its portfolio to not more
than 90 days. Federal Trust Fund and Treasury Trust Fund do not purchase any
instrument with a remaining maturity of more than thirteen months and one year,
respectively (with certain exceptions). In determining the average weighted
portfolio maturity of each Fund, a variable rate
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obligation that is issued or guaranteed by the U.S. Government, or an agency or
instrumentality thereof, is deemed to have a maturity equal to the period
remaining until the obligation's next interest rate adjustment. The Company's
Board of Trustees has also established procedures, pursuant to rules
promulgated by the SEC, that are intended to stabilize the net asset value per
share of each Fund for purposes of sales and redemptions at $1.00. Such
procedures include the determination at such intervals as the Board deems
appropriate, of the extent, if any, to which each Fund's net asset value per
share calculated by using available market quotations or a matrix believed to
provide reliable values deviates from $1.00 per share. In the event such
deviation exceeds 1/2 of 1% with respect to either Fund, the Board will
promptly consider what action, if any, should be initiated. If the Board
believes that the amount of any deviation from the $1.00 amortized cost price
per share of a Fund may result in material dilution or other unfair results to
investors or existing shareholders, it will take such steps as it considers
appropriate to eliminate or reduce to the extent reasonably practicable any
such dilution or unfair results. These steps may include selling portfolio
instruments prior to maturity; shortening the Fund's average portfolio
maturity; withholding or reducing dividends; redeeming shares in kind; or
utilizing a net asset value per share determined by using available market
quotations.
MANAGEMENT OF THE FUNDS
TRUSTEES AND OFFICERS
The Company's trustees and executive officers, their addresses,
principal occupations during the past five years and other affiliations are
provided below. In addition to the information set forth below, the trustees
serve in the following capacities:
Each trustee of the Company serves as a director of Temporary
Investment Fund, Inc. ("Temp") and as a trustee of Municipal Fund for Temporary
Investment ("Muni"). In addition, Messrs. Fortune and Pepper are directors of
Independence Square Income Securities, Inc. ("ISIS") and Managing General
Partners of Chestnut Street Exchange Fund ("Chestnut"); Messrs. Pepper and
Johnson are directors of Municipal Fund for California Investors, Inc. ("Cal
Muni"); and Mr. Johnson is a director of Municipal Fund for New York Investors,
Inc. ("New York Muni") and the International Dollar Reserve Fund ("IDR").
Each of the Company's officers, with the exception of Mr. McConnel,
holds like offices with Temp and Muni. In addition, Mr. McConnel is Secretary
of Temp; Mr. Roach is Treasurer of Chestnut, President and Treasurer of The RBB
Fund,
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<PAGE> 206
Inc. and New York Muni and Vice President and Treasurer of ISIS and Cal Muni;
Mr. Pepper is President and Chairman of the Board of Muni, and Cal Muni; and Mr.
Fortune is President and Chairman of the Board of ISIS and Chestnut.
<TABLE>
<CAPTION>
Principal Occupations
Position with the During Past 5 Years
Name and Address Company and Other Affiliations
- ---------------- ----------------- ----------------------
<S> <C> <C>
PHILIP E. COLDWELL(3),(4) Trustee Economic Consultant;
Coldwell Financial Chairman, Coldwell
Consultants Financial Consultants,
3330 Southwestern Blvd. Member of the Board of
Dallas, Texas 75225 Governors of the
Federal Reserve
System, 1974 to 1980;
President, Federal
Reserve Bank of
Dallas, 1968 to 1974;
Director, Maxus Energy
Corporation (energy
products) 1989 - 1993;
Director, Diamond
Shamrock Corp. (energy
and chemical products)
until 1987.
ROBERT R. FORTUNE(2),(3),(4) Trustee Financial Consultant;
2920 Ritter Lane Chairman, President
Allentown, PA 18104 and Chief Executive
Officer of Associated
Electric & Gas
Insurance Services
Limited, 1984-1993;
Member of the
Financial Executives
Institute and American
Institute of Certified
Public Accountants;
Director, Prudential
Utility Fund, Inc.
and Prudential
Structured Maturity
Fund, Inc.
RODNEY D. JOHNSON Trustee President, Fairmount
Fairmount Capital Capital Advisors, Inc.
Advisors, Inc. (financial advising)
1435 Walnut Street since 1987; Treasurer,
Drexel Building North Philadelphia
Philadelphia, PA 19102 Health System
(formerly Girard
Medical Center), 1988
to 1992; Member, Board
of Education, School
District of
Philadelphia, 1983 to
1988; Treasurer,
Cascade Aphasia
Center, 1984 to 1988.
</TABLE>
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<PAGE> 207
<TABLE>
<CAPTION>
Principal Occupations
Position with the During the Past 5 Years
Name and Address Company and Other Affiliations
- ---------------- ----------------- -----------------------
<S> <C> <C>
G. WILLING PEPPER(1),(2) Chairman of Retired; Chairman of
128 Springton Lake Road the Board, the Board, The
Media, PA 19063 President and Institute for Cancer
Trustee Research until 1979;
Director, Philadelphia
National Bank until
1978; President, Scott
Paper Company, 1971 to
1973; Chairman of the
Board, Specialty
Composites Corp. until
May 1984.
EDWARD J. ROACH President and Certified Public
Bellevue Park Corporate Treasurer Accountant; Partner of
Center the accounting firm of
400 Bellevue Parkway Main Hurdman until
Suite 100 1981; Vice Chairman of
Wilmington, DE 19809 the Board, Fox Chase
Cancer Center; Trustee
Emeritus, Pennsylvania
School for the Deaf;
Trustee Immaculata
College, 1983-1984;
Director, The Bradford
Funds, Inc.
W. BRUCE McCONNEL, III Secretary Partner of the law
1345 Chestnut Street firm of Drinker Biddle
Philadelphia, PA & Reath, Philadelphia,
19107-3496 Pennsylvania.
</TABLE>
- -----------------------
(1) This trustee is considered by the Company to be an "interested person"
of the Company as defined in the 1940 Act.
(2) Executive Committee Member.
(3) Audit Committee Member.
(4) Nominating Committee Member.
During intervals between meetings of the Board, the Executive
Committee may exercise the authority of the Board of Trustees in the management
of the Company's business to the extent permitted by law.
Each of the investment companies named above receives various
advisory and other services from PIMC and PNC Bank. Of the above-mentioned
funds, PDI provides distribution services to Temp, Muni, Cal Muni and New York
Muni. Of the above-mentioned funds, the administrators provide administration
services to Temp, Muni, Cal Muni and New York Muni.
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<PAGE> 208
For the fiscal year ended October 31, 1995, the Company paid a total
of $100,887 to its officers and trustees in all capacities of which $31,968 was
allocated to the Funds. In addition, the Company contributed $2,715 during its
last fiscal year to its retirement plan for employees (which included Mr.
Roach) of which $845 was allocated to the Funds. Drinker Biddle & Reath, of
which Mr. McConnel is a partner, receives legal fees as counsel to the Company.
No employee of PDI, PIMC, PFPC or PNC Bank receives any compensation from the
Company for acting as an officer or trustee of the Company. The trustees and
officers of the Company as a group beneficially own less than 1% of the shares
of the Company's FedFund, T-Fund, FedCash, T-Cash, Federal Trust Fund and
Treasury Trust Fund portfolios.
By virtue of the responsibilities assumed by PDI, PIMC, PFPC and PNC
Bank under their respective agreements with the Company, the Company itself
requires only one part-time employee in addition to its officers.
The table below sets forth the compensation actually received from
the Fund Complex of which the Fund is a part by the trustees for the fiscal
year ended October 31, 1995:
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<PAGE> 209
<TABLE>
<CAPTION>
Total
Pension or Compensation
Retirement from Registrant
Aggregate Benefits Accrued Estimated Annual and Fund
Name of Person, Compensation as Part of Fund Benefits Upon Complex(1) Paid to
Position from Registrant Expenses Retirement Trustees
<S> <C> <C> <C> <C>
Philip E. Coldwell, $ 10,800.00 0 N/A (3)(2) $43,600.00
Trustee
Robert R. Fortune, 10,800.00 0 N/A (5)(2) 63,600.00
Trustee
Rodney D. Johnson, 10,800.00 0 N/A (5)(2) 55,850.00
Trustee
G. Willing Pepper, 19,100.00 0 N/A (6)(2) 96,250.00
Trustee and Chairman
David R. Wilmerding, 12,466.68 0 N/A (5)(2) 60,600.04
Jr.,(3) Trustee
Anthony M. 10,800.00 0 N/A (4)(2) 49,900.00
Santomero,(4) Trustee ---------- ---------
$74,766.68 $369,800.04
</TABLE>
- --------------------
1. A Fund Complex means two or more investment companies that hold themselves
out to investors as related companies for purposes of investment and
investor services, or have a common investment adviser or have an
investment adviser that is an affiliated person of the investment adviser
of any of the other investment companies.
2. Total number of such other investment companies trustee serves on within
the Fund Complex.
3. Mr. Wilmerding resigned as Trustee of the Company on January 4, 1996.
4. Mr. Santomero resigned as Trustee of the Company on January 4, 1996.
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<PAGE> 210
INVESTMENT ADVISER AND SUB-ADVISER
The advisory and sub-advisory services provided by PIMC and PNC Bank
are described in the Funds' Prospectuses. For the advisory services provided
and expenses assumed by it, PIMC is entitled to receive a fee, computed daily
and payable monthly, based on the combined average net assets of the Funds as
follows:
<TABLE>
<CAPTION>
Annual Fee The Funds' Combined
---------- Average Net Assets
--------------------
<S> <C>
.175% . . . . . . . . . of the first $1 billion
.150% . . . . . . . . . of the next $1 billion
.125% . . . . . . . . . of the next $1 billion
.100% . . . . . . . . . of the next $1 billion
.095% . . . . . . . . . of the next $1 billion
.090% . . . . . . . . . of the next $1 billion
.085% . . . . . . . . . of the next $1 billion
.080%. . . . . . of amounts in excess of $7 billion.
</TABLE>
The advisory fee is allocated between these Funds in proportion to their
relative net assets.
PIMC and the administrators have each agreed that if, in any fiscal
year, the expenses borne by a Fund exceed the applicable expense limitations
imposed by the securities regulations of any state in which shares of the
particular Fund are registered or qualified for sale to the public, they will
each reimburse such Fund for one-half of any excess to the extent required by
such regulations. Unless otherwise required by law, such reimbursement would
be accrued and paid on the same basis that the advisory and administration fees
are accrued and paid by such Fund. To the Funds' knowledge, of the expense
limitations in effect on the date of this Statement of Additional Information,
none is more restrictive than two and one-half percent (2-1/2%) of the first
$30 million of a Fund's average annual net assets, two percent (2%) of the next
$70 million of the average annual net assets and one and one-half percent
(1-1/2%) of the remaining average annual net assets.
For the fiscal years ended October 31, 1993, 1994 and 1995 Treasury
Trust Fund paid fees (net of waivers) for advisory services aggregating
$1,158,339, $991,942 and $929,458 respectively. For the same periods, advisory
fees payable by Treasury Trust Fund of $750,375, $748,721 and $751,364
respectively, were voluntarily waived. For the fiscal years ended October 31,
1993, 1994 and 1995. Federal Trust Fund paid fees (net of waivers) for
advisory services aggregating $244,903, $175,896 and $161,037, respectively.
For the same periods, advisory fees payable by Federal Trust Fund of $202,045,
$197,112 and $192,033, respectively, were voluntarily
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<PAGE> 211
waived. Any fees waived by PIMC are not recoverable. PIMC and PNC Bank also
serve as the adviser and sub-adviser, respectively, to the Company's FedFund,
T-Fund, FedCash and T-Cash portfolios.
BANKING LAWS
Certain banking laws and regulations with respect to investment
companies are discussed in each Fund's Prospectus. PIMC, PNC Bank and PFPC
believe that they may perform the services for the Funds contemplated by their
respective agreements, Prospectuses and this Statement of Additional
Information without violation of applicable banking laws or regulations. It
should be noted, however, that future changes in legal requirements relating to
the permissible activities of banks and their affiliates, as well as further
interpretations of present requirements, could prevent PIMC and PFPC from
continuing to perform such services for the Funds and PNC Bank from continuing
to perform such services for PIMC and the Funds. If PIMC, PFPC, or PNC Bank
were prohibited from continuing to perform such services, it is expected that
the Company's Board of Trustees would recommend that the Funds enter into new
agreements with other qualified firms. Any new advisory agreement would be
subject to shareholder approval.
In addition, state securities laws on this issue may differ from the
interpretations of federal laws expressed herein and banks and financial
institutions may be required to register as dealers pursuant to state Law.
ADMINISTRATOR
As the Funds' administrators, PFPC and PDI have agreed to provide the
following services: (i) assist generally in supervising the Funds' operations,
including providing a Wilmington, Delaware order-taking facility with toll-free
IN-WATS telephone lines, providing for the preparing, supervising and mailing
of purchase and redemption order confirmations to shareholders of record,
providing and supervising the operation of an automated data processing system
to process purchase and redemption orders, maintaining a back-up procedure to
reconstruct lost purchase and redemption data, providing information concerning
the Funds to their shareholders of record, handling shareholder problems,
supervising the services of employees, provided by PDI, whose principal
responsibility and function is to preserve and strengthen shareholder
relations, and monitoring the arrangements pertaining to the Funds' agreements
with Service Organizations; (ii) assure that persons are available to receive
and transmit purchase and redemption orders; (iii) participate in the periodic
updating of the Funds' Prospectuses; (iv) assist in maintaining the Funds'
Wilmington, Delaware office; (v) perform administrative services in connection
with the Fund's computer
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<PAGE> 212
access program maintained to facilitate shareholder access to the Funds; (vi)
accumulate information for and coordinate the preparation of reports to the
Funds' shareholders and the SEC; and (vii) maintain the registration or
qualification of the Funds' shares for sale under state securities laws; (viii)
prepare or review, and provide advice with respect to, all sales literature
(advertisements, brochures and shareholder communications) for each of the
Funds and any class or sub-class thereof; and (ix) assist in the monitoring of
regulatory and legislative developments which may affect the Company,
participate in counseling and assisting the Company in relation to routine
regulatory examinations and investigations, and work with the Company's counsel
in connection with regulatory matters and litigation.
For their administrative services, the administrators are entitled
jointly to receive a fee from the six Funds referred to above determined and
allocated in the same manner as PIMC's advisory fee set forth above. As stated
in their Prospectuses, each administrator is also reimbursed for its reasonable
out-of-pocket expenses incurred in connection with the Fund's computer access
program. For the fiscal year ended October 31, 1995, Treasury Trust Fund and
Federal Trust Fund paid fees (net of waivers) for administrative services to
PFPC and PDI aggregating $929,458 and $161,037, respectively. For the same
fiscal year, PFPC and PDI voluntarily waived administration fees aggregating
$751,364 with respect to Treasury Trust Fund and $192,033 with respect to
Federal Trust Fund. For the fiscal year ended October 31, 1994, Treasury Trust
Fund and Federal Trust Fund paid fees (net of waivers) for administrative
services to PFPC and PDI aggregating $991,942 and $175,896, respectively. For
the period from October 1, 1992 through January 17, 1993, the Company paid fees
(net of waivers) to its former administrator, the Boston Company Advisors
totalling $66,520 with respect to Federal Trust Fund and $359,966 with respect
to Treasury Trust Fund. Administration fees totalling $46,130 and $141,059 for
Federal Trust Fund and Treasury Trust Fund, respectively, were waived by Boston
Advisors during this period. For the period from January 18, 1993 through
October 31, 1993, the Company paid fees (net of waivers) for administrative
services to PFPC and to PDI, its administrators, aggregating $103,838 with
respect to Federal Trust Fund and $1,158,339 with respect to Treasury Trust
Fund. For the same period, administration fees of $750,375 with respect to
Treasury Trust Fund and $343,110 with respect to Federal Trust Fund were
voluntarily waived.
For information regarding the administrators' obligations to
reimburse the Funds in the event their expenses exceed certain prescribed
limits, see "Investment Adviser and Sub-Adviser" above. PFPC, a wholly owned,
indirect subsidiary of PNC Bank, provides advisory, administrative or, in some
cases sub-advisory and/or sub-administrative services to investment
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<PAGE> 213
companies which are distributed by PDI. PFPC and PDI also serve as the
co-administrators of the Company's FedFund, T-Fund, FedCash and T-Cash
portfolios.
DISTRIBUTOR
PDI acts as the distributor of the Funds' shares. Each Fund's shares
are sold on a continuous basis by the distributor as agent, although it is not
obliged to sell any particular amount of shares. PDI will prepare or review,
provide advice with respect to, and file with the federal and state agencies or
other organization as required by federal, state, or other applicable laws and
regulations, all sales literature (advertisements, brochures and shareholder
communications) for each of the Funds and any class or sub-class thereof. The
distributor pays the cost of printing and distributing prospectuses to persons
who are not shareholders of the Funds (excluding preparation and printing
expenses necessary for the continued registration of Fund shares) and of
preparing, printing and distributing all sales literature. No compensation is
payable by the Funds to the distributor for its distribution services. PDI
also serves as the distributor for the Company's FedFund, T-Fund, FedCash and
T-Cash portfolios. PDI is a Delaware corporation, with its principal place of
business located at 259 Radnor-Chester Road, Suite 120, Radnor, Pennsylvania
19087.
CUSTODIAN AND TRANSFER AGENT
Pursuant to a Custodian Agreement, PNC Bank serves as the Funds'
custodian. Under the Agreement, PNC Bank has agreed to provide the following
services: (i) maintain a separate account or accounts in the name of the
Funds; (ii) hold and disburse portfolio securities on account of the Funds;
(iii) collect and make disbursements of money on behalf of the Funds; (iv)
collect and receive all income and other payments and distributions on account
of the Funds' portfolio securities; and (v) make periodic reports to the Board
of Trustees concerning the Funds' operations. The Custodian Agreement permits
PNC Bank, on 30 days' notice, to assign its rights and delegate its duties
thereunder to any other affiliate of PNC Bank or PNC Bank Corp., provided that
PNC Bank remains responsible for the performance of the delegate under the
Custodian Agreement.
The Funds reimburse PNC Bank for its direct and indirect costs and
expenses incurred in rendering custodial services. Under the Custodian
Agreement, each Fund pays PNC Bank an annual fee equal to $.25 for each $1,000
of such Fund's average daily gross assets, which fee declines as such Fund's
average daily gross assets increase. In addition, each Fund pays the custodian
a fee for each purchase, sale or delivery of a security, interest collection or
claim item, and reimburses PFPC
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<PAGE> 214
for out-of-pocket expenses incurred on behalf of the Fund. For the fiscal
years ended October 31, 1993, 1994 and 1995, Treasury Trust Fund paid fees for
custodian services aggregating $238,777, $220,900 and $216,081 respectively.
For fiscal years ended October 31, 1993, 1994 and 1995, Federal Trust Fund paid
fees for custodian services aggregating $85,941, $71,103 and $68,120,
respectively. PNC Bank also serves as Custodian for the Company's FedFund,
T-Fund, FedCash and T-Cash portfolios. PNC Bank's principal business address
is Broad and Chestnut Streets, Philadelphia, Pennsylvania 19102.
PFPC also serves as the Funds' transfer agent, registrar and dividend
disbursing agent pursuant to a Transfer Agency Agreement. Under the Agreement,
PFPC has agreed to provide the following services: (i) maintain a separate
account or accounts in the name of the Funds; (ii) issue, transfer and redeem
shares of the Funds; (iii) disburse dividends and distributions, in the manner
described in each Fund's Prospectus, to shareholders of the Fund; (iv) transmit
all communications by the Funds to their shareholders or their authorized
representatives, including reports to shareholders, distribution and dividend
notices and proxy materials for meetings of shareholders; (v) prepare and file
with the appropriate taxing authorities reports or notices relating to
dividends and distributions made by the Funds; (vi) respond to correspondence
by shareholders, security brokers and others relating to its duties; (vii)
maintain shareholder accounts; and (viii) make periodic reports to the
Company's Board of Trustees concerning the Funds' operations. The Transfer
Agency Agreement permits PFPC, on 30-days' notice, to assign its rights and
duties thereunder to any other affiliate of PNC Bank or PNC Bank Corp.,
provided that PFPC remains responsible for the performance of the delegate
under the Transfer Agency Agreement.
Under the Transfer Agency Agreement, each Fund pays PFPC fees at an
annual rate of $12.00 per account and sub-account maintained by PFPC plus $1.00
for each purchase or redemption transaction by an account (other than a
purchase transaction made in connection with the automatic reinvestment of
dividends). Payments to PFPC for sub-accounting services provided by others
are limited to the amount which PFPC pays to others for such services. In
addition, the Funds reimburse PFPC for out-of-pocket expenses related to such
services. For the fiscal years ended October 31, 1993, 1994 and 1995, Treasury
Trust Fund paid fees for transfer agency services aggregating $149,325,
$133,142 and $94,981, respectively. For the fiscal years ended October 31,
1993, 1994 and 1995, Federal Trust Fund paid fees for transfer agency services
aggregating $37,448, $36,244 and $44,229, respectively. PFPC also serves as
transfer agent, registrar and dividend disbursing agent for the Company's
FedFund, T-Fund, FedCash and T-Cash portfolios.
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<PAGE> 215
SERVICE ORGANIZATIONS
As stated in the Funds' Prospectuses, the Funds will enter into an
agreement with each Service Organization which purchases Dollar Shares
requiring it to provide support services to its customers who beneficially own
Dollar shares in consideration of the Funds' payment of .25% (on an annualized
basis) of the average daily net asset value of the Dollar shares held by the
Service Organization for the benefit of customers. Such services include: (i)
aggregating and processing purchase and redemption requests from customers and
placing net purchase and redemption orders with the transfer agent; (ii)
providing customers with a service that invests the assets of their accounts in
Dollar shares; (iii) processing dividend payments from the Funds on behalf of
customers; (iv) providing information periodically to customers showing their
positions in Dollar shares; (v) arranging for bank wires; (vi) responding to
customer inquiries relating to the services performed by the Service
Organization; (vii) providing sub-accounting with respect to Dollar shares
beneficially owned by customers or the information necessary for
sub-accounting; (viii) forwarding shareholder communications from the Funds
(such as proxies, shareholder reports, annual and semi-annual financial
statements and dividend, distribution and tax notices) to customers, if
required by law; and (ix) other similar services if requested by the Funds.
For the fiscal year ended October 31, 1995, the Company paid $100,976 in
servicing fees to an affiliate of the Company's adviser (representing 19.8% of
the aggregate servicing fees) of which $82,355 and $18,621 was allocated to the
Treasury Trust Fund and Federal Trust Fund, respectively, pursuant to service
agreements in effect during such period.
Each Fund's agreements with Service Organizations are governed by a
Shareholder Services Plan (the "Plan") that has been adopted by the Company's
Board of Trustees pursuant to an exemptive order granted by the SEC in
connection with the creation of the Dollar shares. Pursuant to each Plan, the
Board of Trustees reviews, at least quarterly, a written report of the amounts
expended under the Fund's agreements with Service Organizations and the
purposes for which the expenditures were made. In addition, the Funds'
arrangements with Service Organizations must be approved annually by a majority
of the Company's trustees, including a majority of the trustees who are not
"interested persons" of the Company as defined in the 1940 Act and have no
direct or indirect financial interest in such arrangements.
The Board of Trustees has approved the Funds' arrangements with
Service Organizations based on information provided by the Funds' service
contractors that there is a reasonable likelihood that the arrangements will
benefit the Funds and their shareholders by affording the Funds greater
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flexibility in connection with the servicing of the accounts of the beneficial
owners of their shares in an efficient manner. Any material amendment to the
Funds' arrangements with Service Organizations must be approved by a majority
of the Company's Board of Trustees (including a majority of the non-interested
Trustees). So long as the Funds' arrangements with Service Organizations are
in effect, the selection and nomination of the members of the Company's Board
of Trustees who are not "interested persons" (as defined in the 1940 Act) of
the Company will be committed to the discretion of such non-interested
trustees.
EXPENSES
The Funds' expenses include taxes, interest, fees and salaries of the
Company's trustees and officers, SEC fees, state securities qualification fees,
Standard & Poor's rating fees, costs of preparing and printing prospectuses for
regulatory purposes and for distribution to shareholders, advisory and
administration fees, charges of the custodian, transfer agent and dividend
disbursing agent, Service Organization fees, certain insurance premiums,
outside auditing and legal expenses, costs of the Funds' computer access
program, costs of shareholder reports and shareholder meetings and any
extraordinary expenses. The Funds also pay for brokerage fees and commissions
(if any) in connection with the purchase and sale of portfolio securities.
ADDITIONAL INFORMATION CONCERNING TAXES
The following summarizes certain additional tax considerations
generally affecting each Fund and its shareholders that are not described in
each Fund's Prospectus. No attempt is made to present a detailed explanation
of the tax treatment of the Funds or their shareholders or possible legislative
changes, and the discussion here and in each Fund's Prospectus is not intended
as a substitute for careful tax planning. Investors should consult their tax
advisors with specific reference to their own tax situations.
Each Fund of the Company is treated as a separate corporate entity
under the Code and intends to qualify each year as a regulated investment
company under the Code. In order to so qualify for a taxable year, each Fund
must satisfy the distribution requirement described in its Prospectus, derive
at least 90% of its gross income for the year from certain qualifying sources,
comply with certain diversification requirements, and derive less than 30% of
its gross income from the sale or other disposition of securities and certain
other investments held for less than three months. Interest (including
original issue discount and accrued market discount) received by a Fund upon
maturity or disposition of a security held for less
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than three months will not be treated as gross income derived from the sale or
other disposition of such security within the meaning of this requirement.
However, any other income that is attributable to realized market appreciation
will be treated as gross income from the sale or other disposition of
securities for this purpose.
A 4% nondeductible excise tax is imposed on regulated investment
companies that fail to distribute currently an amount equal to specified
percentages of their ordinary taxable income and capital gain net income
(excess of capital gains over capital losses). Each Fund intends to make
sufficient distributions or deemed distributions of its ordinary taxable income
and any capital gain net income each calendar year to avoid liability for this
excise tax.
If for any taxable year a Fund does not qualify for tax treatment as
a regulated investment company, all of its taxable income will be subject to
federal income tax at regular corporate rates, without any deduction for
distributions to Fund shareholders. In such event, dividend distributions
would be taxable as ordinary income to Fund shareholders to the extent of that
Fund's current and accumulated earnings and profits and would be eligible for
the dividends received deduction in the case of corporate shareholders.
Each Fund will be required in certain cases to withhold and remit to
the U.S. Treasury 31% of taxable dividends or gross sale proceeds paid to any
shareholder who has failed to provide a correct tax identification number in
the manner required, or who is subject to withholding by the Internal Revenue
Service for failure to properly include on his return payments of taxable
interest or dividends, or who has failed to certify to the Fund when required
to do so that he is not subject to backup withholding or that he is an "exempt
recipient."
Depending upon the extent of the Funds' activities in states and
localities in which their offices are maintained, in which their agents or
independent contractors are located or in which they are otherwise deemed to be
conducting business, the Funds may be subject to the tax laws of such states or
localities. In addition, in those states and localities which have income tax
laws, the treatment of the Funds and their shareholders under such laws may
differ from their treatment under federal income tax laws. Shareholders are
advised to consult their tax advisors concerning the application of state and
local taxes.
The foregoing discussion is based on federal tax laws and regulations
which are in effect on the date of this Statement of Additional Information;
such laws and regulations may be changed by legislative or administrative
action.
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DIVIDENDS
Net income of each of the Funds for dividend purposes consists of (i)
interest accrued and original issue discount earned on the Fund's assets, (ii)
plus the amortization of market discount and minus the amortization of market
premium on such assets, (iii) less accrued expenses directly attributable to
the Fund and the general expenses (e.g., legal, accounting and trustees' fees)
of the Company prorated to the Fund on the basis of its relative net assets.
In addition, Dollar shares bear exclusively the expense of fees paid to Service
Organizations. (See "Management of the Funds--Service Organizations.")
As stated, the Company uses its best efforts to maintain the net
asset value per share of Federal Trust Fund and Treasury Trust Fund at $1.00.
As a result of a significant expense or realized or unrealized loss incurred by
either Fund is possible that the Fund's net asset value per share may fall
below $1.00.
ADDITIONAL YIELD INFORMATION
The "yields" and "effective yields" are calculated separately for
each class of shares of each Fund and in accordance with the formulas
prescribed by the SEC. The seven-day yield for each class of shares is
calculated by determining the net change in the value of a hypothetical
pre-existing account in the particular Fund which has a balance of one share of
the class involved at the beginning of the period, dividing the net change by
the value of the account at the beginning of the period to obtain the base
period return, and multiplying the base period return by 365/7. The net change
in the value of an account in a Fund includes the value of additional shares
purchased with dividends from the original share and dividends declared on the
original share and any such additional shares, net of all fees charged to all
shareholder accounts in proportion to the length of the base period and the
Fund's average account size, but does not include gains and losses or
unrealized appreciation and depreciation. In addition, an effective annualized
yield quotation may be computed on a compounded basis with respect to each
class of its shares by adding 1 to the base period return for the class
involved (calculated as described above), raising that sum to a power equal to
365/7, and subtracting 1 from the result. Similarly, based on the calculations
described above, the Funds' 30-day (or one-month) yields and effective yields
may also be calculated.
For the seven-day period ended October 31, 1995, the yields on
Federal Trust shares and Treasury Trust shares were 5.51% and 5.27%,
respectively, and the compounded effective
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yields on Federal Trust shares and Treasury Trust shares were 5.66% and 5.41%,
respectively; the yields on Federal Trust Dollar shares and Treasury Trust
Dollar shares were 5.26% and 5.02%, respectively, and the compounded effective
yields on Federal Trust Dollar shares and Treasury Trust Dollar shares were
5.40% and 5.15%, respectively. During this seven-day period, the Funds'
adviser and administrator voluntarily waived a portion of the advisory and
administration fees payable by the Fund. Without these waivers, for the same
period the yields on Federal Trust shares and Treasury Trust shares would have
been 5.37% and 5.16%, respectively; the compounded effective yields on Federal
Trust shares and Treasury Trust shares would have been 5.51% and 5.29%,
respectively; the yields on Federal Trust Dollar shares and Treasury Trust
Dollar shares would have been 5.12% and 4.91%, respectively; and the compounded
effective yields on Federal Trust Dollar shares and Treasury Trust Dollar
shares would have been 5.25% and 5.03%, respectively.
For the 30-day period ended October 31, 1995, the yields on Federal
Trust shares and Treasury Trust shares were 5.51% and 5.29%, respectively, and
the compounded effective yields on Federal Trust shares and Treasury Trust
shares were 5.66% and 5.43%, respectively; the yields on Federal Trust Dollar
shares and Treasury Trust Dollar shares were 5.26% and 5.04%, respectively, and
the compounded effective yields on Federal Trust Dollar shares and Treasury
Trust Dollar shares were 5.40% and 5.17%, respectively. During this 30-day
period, the Funds' adviser and administrator voluntarily waived a portion of
the advisory and administration fees payable by the Fund. Without these
waivers, for the same period the yields on Federal Trust shares and Treasury
Trust shares would have been 5.37% and 5.18%, respectively; the compounded
effective yields on Federal Trust shares and Treasury Trust shares would have
been 5.51% and 5.31%, respectively; the yields on Federal Trust Dollar shares
and Treasury Trust Dollar shares would have been 5.12% and 4.93%, respectively;
and the compounded effective yields on Federal Trust Dollar shares and Treasury
Trust Dollar shares would have been 5.25% and 5.05%, respectively.
From time to time, in advertisements or in reports to shareholders,
the performance of the Funds may be quoted and compared to that of other money
market funds or accounts with similar investment objectives and to stock or
other relevant indices. For example, the yields of the Funds may be compared
to the Donoghue's Money Fund Average, which is an average compiled by
IBC/Donoghue's MONEY FUND REPORT(R) of Holliston, MA 01746, a widely recognized
independent publication that monitors the performance of money market funds, or
to the average yields reported by the Bank Rate Monitor from money market
deposit accounts offered by the 50 leading banks and thrift institutions in the
top five standard metropolitan statistical areas.
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<PAGE> 220
THE FUNDS' YIELDS WILL FLUCTUATE, AND ANY QUOTATION OF YIELD SHOULD
NOT BE CONSIDERED AS REPRESENTATIVE OF THE FUTURE PERFORMANCE OF THE FUNDS.
Since yields fluctuate, yield data cannot necessarily be used to compare an
investment in the Funds' shares with bank deposits, savings accounts, and
similar investment alternatives which often provide an agreed or guaranteed
fixed yield for a stated period of time. Shareholders should remember that
performance and yield are generally functions of the kind and quality of the
investments held in a Fund, portfolio maturity, operating expenses net of
waivers and expense reimbursements, and market conditions. Any fees charged by
Service Organizations or other institutional investors with respect to customer
accounts in investing in shares of the Funds will not be included in yield
calculations; such fees, if charged, would reduce the actual yield from that
quoted.
ADDITIONAL DESCRIPTION CONCERNING FUND SHARES
The Company does not presently intend to hold annual meetings of
shareholders except as required by the 1940 Act or other applicable law. Upon
the written request of shareholders owning at least twenty percent of the
Company's shares, the Company will call for a meeting of shareholders to
consider the removal of one or more trustees and other certain matters. To the
extent required by law, the Company will assist in shareholder communication in
such matters.
As stated in the Prospectuses for the Funds, holders of the Company's
Federal Trust shares and Federal Trust Dollar shares will vote in the aggregate
and not by class on all matters, except where otherwise required by law and
except that only Federal Trust Dollar shares will be entitled to vote on
matters submitted to a vote of shareholders pertaining to the Fund's
arrangements with Service Organizations. (See "Management of the
Funds--Service Organizations.") Holders of the Company's Treasury Trust and
Treasury Trust Dollar shares will also vote in the aggregate and not by class
except as described above. Further, shareholders of all of the Company's
portfolios will vote in the aggregate and not by portfolio except as otherwise
required by law or when the Board of Trustees determines that the matter to be
voted upon affects only the interests of the shareholders of a particular
portfolio. Rule 18f-2 under the 1940 Act provides that any matter required to
be submitted by the provisions of such Act or applicable state law, or
otherwise, to the holders of the outstanding securities of an investment
company such as the Company shall not be deemed to have been effectively acted
upon unless approved by the holders of a majority of the outstanding shares of
each portfolio affected by the matter. Rule 18f-2 further provides that a
portfolio shall be deemed to be affected by a matter unless it is clear that
the interests of each portfolio in the matter are identical or that
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the matter does not affect any interest of the portfolio. Under the Rule the
approval of an investment advisory agreement or any change in a fundamental
investment policy would be effectively acted upon with respect to a portfolio
only if approved by the holders of a majority of the outstanding voting
securities of such portfolio. However, the Rule also provides that the
ratification of the selection of independent accountants, the approval of
principal underwriting contracts and the election of trustees are not subject
to the separate voting requirements and may be effectively acted upon by
shareholders of the investment company voting without regard to portfolio.
COUNSEL
Drinker Biddle & Reath, Philadelphia National Bank Building, 1345
Chestnut Street, Philadelphia, Pennsylvania 19107-3496, of which W. Bruce
McConnel, III, Secretary of the Company, is a partner, serves as counsel to the
Company and will pass upon the legality of the shares offered hereby.
AUDITORS
The financial statements of the Funds which appear in this Statement
of Additional Information and the information included in the Financial
Highlights section which appears in the Funds' Prospectuses have been audited
by Coopers & Lybrand L.L.P. independent accountants, whose report thereon
appears elsewhere herein, and have been included herein and in the Funds'
Prospectuses in reliance upon the report of said firm of accountants given upon
their authority as experts in accounting and auditing. Coopers & Lybrand
L.L.P. has offices at 2400 Eleven Penn Center, Philadelphia, Pennsylvania
19103.
MISCELLANEOUS
SHAREHOLDER VOTE
As used in this Statement of Additional Information and the
Prospectuses for the Funds, a "majority of the outstanding shares" of a Fund or
of any other portfolio means, with respect to the approval of an investment
advisory agreement, a distribution plan or a change in a fundamental investment
policy, the vote of the lesser of (1) 67% of the shares of the Fund
(irrespective of class) or of the portfolio represented at a meeting at which
the holders of more than 50% of the outstanding shares of such Fund or
portfolio are present in person or by proxy, or (2) more than 50% of the
outstanding shares of such Fund (irrespective of class) or of the portfolio.
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CERTAIN RECORD HOLDERS
On January 10, 1996, the name, address and percentage of ownership of each
institutional investor that owned of record 5% or more of the outstanding
shares of the Company's Federal Trust Fund and Treasury Trust Fund portfolios
were as follows:
<TABLE>
<S> <C>
Federal Trust Fund
------------------
Saxon & Company 10.86%
PNC Bank
200 Stevens Drive
Lester, PA 19113
Cudd & Co. 29.27%
Chase Manhattan Bank
1211 Avenue of the Americas
New York, NY 10036
Green Mountain Bank 6.75%
Trust Operations Department
80 West Street, P.O. Box 669
Rutland, VT 05702
Painewebber Inc. 5.41%
Madison County Treasury Inv. Pool
8182 Maryland Avenue, Suite 700
St. Louis, MO 63105
Keystone Health Plan East Inc. 8.05%
1901 Market Street
Philadelphia, PA 19101
Union Trust Company 5.05%
Branch & Co.
66 Main Street
Ellsworth, ME 04605
Treasury Trust Fund
-------------------
Deutsche Bank Securities 5.29%
1290 Avenue of the Americas
New York, NY 10104
Rhode Island Hospital Trust 5.78%
Bank of Boston National Bank
150 Royal Street
Canton, MA 02021
</TABLE>
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<TABLE>
<S> <C>
First Interstate Bank/California 8.22%
26610 West Agoura Road
Calabasas, CA 91302
Bankers Trust Company 13.51%
210 West 10th Street, 8th Floor
Kansas City, MO 64105
</TABLE>
SHAREHOLDER AND TRUSTEE LIABILITY
The Company is organized as a "business trust" under the laws of the
Commonwealth of Pennsylvania. Shareholders of such a trust may, under certain
circumstances, be held personally liable (as if they were partners) for the
obligations of the trust. The Declaration of Trust of the Company provides
that shareholders of the Funds shall not be subject to any personal liability
for the acts or obligations of the Company and that every note, bond, contract,
order or other undertaking made by the Company shall contain a provision to the
effect that the shareholders are not personally liable thereunder. The
Declaration of Trust provides for indemnification out of the trust property of
any shareholder held personally liable solely by reason of being or having been
a shareholder and not because of any acts or omissions or some other reason.
The Declaration of Trust also provides that the Company shall, upon request,
assume the defense of any claim made against any shareholder for any act or
obligation of the Company and satisfy any judgment thereon. Thus, the risk of
a shareholder's incurring financial loss beyond its investment on account of
shareholder liability is limited to circumstances in which the Company itself
would be unable to meet its obligations.
The Company's Declaration of Trust provides further that no trustee,
officer or agent of the Company shall be personally liable for or on account of
any contract, debt, tort, claim, damage, judgment or decree arising out of or
connected with the administration or preservation of the trust estate or the
conduct of any business of the Company, nor shall any trustee be personally
liable to any person for any action or failure to act except by reason of bad
faith, willful misfeasance, gross negligence in the performance of any duties
or by reason of reckless disregard of the obligations and duties as trustee.
It also provides that all persons having any claim against the trustees or the
Company shall look solely to the trust property for payment. With the
exceptions stated, the Declaration of Trust provides that a trustee is entitled
to be indemnified against all liabilities and expenses reasonably incurred by
the trustee in connection with the defense or disposition of any proceeding in
which the trustee may be involved or with which the trustee may be threatened
by reason of being or having been a trustee, and that the trustees have the
power, but not the duty,
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<PAGE> 224
to indemnify officers and employees of the Company unless such person would not
be entitled to indemnification had he or she been a trustee.
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<PAGE> 225
APPENDIX A
COMMERCIAL PAPER RATINGS
A Standard & Poor's commercial paper rating is a current
assessment of the likelihood of timely payment of debt considered short-term in
the relevant market. The following summarizes the rating categories used by
Standard and Poor's for commercial paper:
"A-1" - Issue's degree of safety regarding timely payment is
strong. Those issues determined to possess extremely strong safety
characteristics are denoted "A-1+."
"A-2" - Issue's capacity for timely payment is satisfactory.
However, the relative degree of safety is not as high as for issues designated
"A-1."
"A-3" - Issue has an adequate capacity for timely payment. It
is, however, somewhat more vulnerable to the adverse effects of changes and
circumstances than an obligation carrying a higher designation.
"B" - Issue has only a speculative capacity for timely
payment.
"C" - Issue has a doubtful capacity for payment.
"D" - Issue is in payment default.
Moody's commercial paper ratings are opinions of the ability
of issuers to repay punctually promissory obligations not having an original
maturity in excess of 9 months. The following summarizes the rating categories
used by Moody's for commercial paper:
"Prime-1" - Issuer or related supporting institutions are
considered to have a superior capacity for repayment of short-term promissory
obligations. Prime-1 repayment capacity will normally be evidenced by the
following characteristics: leading market positions in well established
industries; high rates of return on funds employed; conservative capitalization
structures with moderate reliance on debt and ample asset protection; broad
margins in earning coverage of fixed financial
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<PAGE> 226
charges and high internal cash generation; and well established access to a
range of financial markets and assured sources of alternate liquidity.
"Prime-2" - Issuer or related supporting institutions are
considered to have a strong capacity for repayment of short-term promissory
obligations. This will normally be evidenced by many of the characteristics
cited above but to a lesser degree. Earnings trends and coverage ratios, while
sound, will be more subject to variation. Capitalization characteristics,
while still appropriate, may be more affected by external conditions. Ample
alternative liquidity is maintained.
"Prime-3" - Issuer or related supporting institutions have an
acceptable capacity for repayment of short-term promissory obligations. The
effects of industry characteristics and market composition may be more
pronounced. Variability in earnings and profitability may result in changes in
the level of debt protection measurements and the requirement for relatively
high financial leverage. Adequate alternate liquidity is maintained.
"Not Prime" - Issuer does not fall within any of the Prime
rating categories.
The three rating categories of Duff & Phelps for investment
grade commercial paper and short-term debt are "D-1," "D-2" and "D-3." Duff &
Phelps employs three designations, "D-1+," "D-1" and "D-1-," within the highest
rating category. The following summarizes the rating categories used by Duff &
Phelps for commercial paper:
"D-1+" - Debt possesses highest certainty of timely payment.
Short-term liquidity, including internal operating factors and/or access to
alternative sources of funds, is outstanding, and safety is just below
risk-free U.S. Treasury short-term obligations.
"D-1" - Debt possesses very high certainty of timely payment.
Liquidity factors are excellent and supported by good fundamental protection
factors. Risk factors are minor.
"D-1-" - Debt possesses high certainty of timely payment.
Liquidity factors are strong and supported by good fundamental protection
factors. Risk factors are very small.
"D-2" - Debt possesses good certainty of timely payment.
Liquidity factors and company fundamentals are sound. Although ongoing funding
needs may enlarge total financing requirements, access to capital markets is
good. Risk factors are small.
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<PAGE> 227
"D-3" - Debt possesses satisfactory liquidity, and other
protection factors qualify issue as investment grade. Risk factors are larger
and subject to more variation. Nevertheless, timely payment is expected.
"D-4" - Debt possesses speculative investment characteristics.
Liquidity is not sufficient to ensure against disruption in debt service.
Operating factors and market access may be subject to a high degree of
variation.
"D-5" - Issuer has failed to meet scheduled principal and/or
interest payments.
Fitch short-term ratings apply to debt obligations that are
payable on demand or have original maturities of up to three years. The
following summarizes the rating categories used by Fitch for short-term
obligations:
"F-1+" - Securities possess exceptionally strong credit
quality. Issues assigned this rating are regarded as having the strongest
degree of assurance for timely payment.
"F-1" - Securities possess very strong credit quality. Issues
assigned this rating reflect an assurance of timely payment only slightly less
in degree than issues rated "F-1+."
"F-2" - Securities possess good credit quality. Issues
assigned this rating have a satisfactory degree of assurance for timely
payment, but the margin of safety is not as great as the "F-1+" and "F-1"
categories.
"F-3" - Securities possess fair credit quality. Issues
assigned this rating have characteristics suggesting that the degree of
assurance for timely payment is adequate; however, near-term adverse changes
could cause these securities to be rated below investment grade.
"F-S" - Securities possess weak credit quality. Issues
assigned this rating have characteristics suggesting a minimal degree of
assurance for timely payment and are vulnerable to near-term adverse changes in
financial and economic conditions.
"D" - Securities are in actual or imminent payment default.
Fitch may also use the symbol "LOC" with its short-term
ratings to indicate that the rating is based upon a letter of credit issued by
a commercial bank.
A-3
<PAGE> 228
Thomson BankWatch short-term ratings assess the likelihood of
an untimely or incomplete payment of principal or interest of unsubordinated
instruments having a maturity of one year or less which is issued by United
States commercial banks, thrifts and non-bank banks; non-United States banks;
and broker-dealers. The following summarizes the ratings used by Thomson
BankWatch:
"TBW-1" - This designation represents Thomson BankWatch's
highest rating category and indicates a very high degree of likelihood that
principal and interest will be paid on a timely basis.
"TBW-2" - This designation indicates that while the degree of
safety regarding timely payment of principal and interest is strong, the
relative degree of safety is not as high as for issues rated "TBW-1."
"TBW-3" - This designation represents the lowest investment
grade category and indicates that while the debt is more susceptible to adverse
developments (both internal and external) than obligations with higher ratings,
capacity to service principal and interest in a timely fashion is considered
adequate.
"TBW-4" - This designation indicates that the debt is regarded
as non-investment grade and therefore speculative.
IBCA assesses the investment quality of unsecured debt with an
original maturity of less than one year which is issued by bank holding
companies and their principal bank subsidiaries. The following summarizes the
rating categories used by IBCA for short-term debt ratings:
"A1+" - Obligations supported by the highest capacity for
timely repayment.
"A1" - Obligations are supported by a strong capacity for
timely repayment.
"A2" - Obligations are supported by a satisfactory capacity
for timely repayment, although such capacity may be susceptible to adverse
changes in business, economic or financial conditions.
"A3" - Obligations are supported by a satisfactory capacity
for timely repayment. Such capacity is more susceptible to adverse changes in
business, economic or financial conditions than for obligations in higher
categories.
A-4
<PAGE> 229
"B" - Obligations for which the capacity for timely repayment
is susceptible to adverse changes in business, economic or financial
conditions.
"C" - Obligations for which there is an inadequate capacity to
ensure timely repayment.
"D" - Obligations which have a high risk of default or which
are currently in default.
CORPORATE AND MUNICIPAL LONG-TERM DEBT RATINGS
The following summarizes the ratings used by Standard & Poor's
for corporate and municipal debt:
"AAA" - This designation represents the highest rating
assigned by Standard & Poor's to a debt obligation and indicates an extremely
strong capacity to pay interest and repay principal.
"AA" - Debt is considered to have a very strong capacity to
pay interest and repay principal and differs from AAA issues only in small
degree.
"A" - Debt is considered to have a strong capacity to pay
interest and repay principal although such issues are somewhat more susceptible
to the adverse effects of changes in circumstances and economic conditions than
debt in higher-rated categories.
"BBB" - Debt is regarded as having an adequate capacity to pay
interest and repay principal. Whereas such issues normally exhibit adequate
protection parameters, adverse economic conditions or changing circumstances
are more likely to lead to a weakened capacity to pay interest and repay
principal for debt in this category than in higher-rated categories.
"BB," "B," "CCC," "CC" and "C" - Debt is regarded, on balance,
as predominantly speculative with respect to capacity to pay interest and repay
principal in accordance with the terms of the obligation. "BB" indicates the
lowest degree of speculation and "C" the highest degree of speculation. While
such debt will likely have some quality and protective characteristics, these
are outweighed by large uncertainties or major risk exposures to adverse
conditions.
"BB" - Debt has less near-term vulnerability to default than
other speculative issues. However, it faces major ongoing uncertainties or
exposure to adverse business, financial or economic conditions which could lead
to inadequate capacity to meet timely interest and principal payments. The
"BB" rating
A-5
<PAGE> 230
category is also used for debt subordinated to senior debt that is assigned an
actual or implied "BBB-" rating.
"B" - Debt has a greater vulnerability to default but
currently has the capacity to meet interest payments and principal repayments.
Adverse business, financial or economic conditions will likely impair capacity
or willingness to pay interest and repay principal. The "B" rating category is
also used for debt subordinated to senior debt that is assigned an actual or
implied "BB" or "BB-" rating.
"CCC" - Debt has a currently identifiable vulnerability to
default, and is dependent upon favorable business, financial and economic
conditions to meet timely payment of interest and repayment of principal. In
the event of adverse business, financial or economic conditions, it is not
likely to have the capacity to pay interest and repay principal. The "CCC"
rating category is also used for debt subordinated to senior debt that is
assigned an actual or implied "B" or "B-" rating.
"CC" - This rating is typically applied to debt subordinated
to senior debt that is assigned an actual or implied "CCC" rating.
"C" - This rating is typically applied to debt subordinated to
senior debt which is assigned an actual or implied "CCC-" debt rating. The "C"
rating may be used to cover a situation where a bankruptcy petition has been
filed, but debt service payments are continued.
"CI" - This rating is reserved for income bonds on which no
interest is being paid.
"D" - Debt is in payment default. This rating is used when
interest payments or principal payments are not made on the date due, even if
the applicable grace period has not expired, unless S & P believes such
payments will be made during such grace period. "D" rating is also used upon
the filing of a bankruptcy petition if debt service payments are jeopardized.
PLUS (+) OR MINUS (-) - The ratings from "AA" through "CCC"
may be modified by the addition of a plus or minus sign to show relative
standing within the major rating categories.
"r" - This rating is attached to highlight derivative, hybrid,
and certain other obligations that S & P believes may experience high
volatility or high variability in expected returns due to non-credit risks.
Examples of such obligations are: securities whose principal or interest return
is indexed to equities, commodities, or currencies; certain swaps and options;
and interest only and principal only mortgage securities.
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The following summarizes the ratings used by Moody's for corporate and
municipal long-term debt:
"Aaa" - Bonds are judged to be of the best quality. They
carry the smallest degree of investment risk and are generally referred to as
"gilt edged." Interest payments are protected by a large or by an
exceptionally stable margin and principal is secure. While the various
protective elements are likely to change, such changes as can be visualized are
most unlikely to impair the fundamentally strong position of such issues.
"Aa" - Bonds 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 in
"Aaa" securities.
"A" - Bonds possess many favorable investment attributes and
are to be considered as upper medium-grade obligations. Factors giving
security to principal and interest are considered adequate but elements may be
present which suggest a susceptibility to impairment sometime in the future.
"Baa" - Bonds 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," "B," "Caa," "Ca," and "C" - Bonds that possess one of
these ratings provide questionable protection of interest and principal ("Ba"
indicates some speculative elements; "B" indicates a general lack of
characteristics of desirable investment; "Caa" represents a poor standing; "Ca"
represents obligations which are speculative in a high degree; and "C"
represents the lowest rated class of bonds). "Caa," "Ca" and "C" bonds may be
in default.
Con. (---) - Bonds for which the security depends upon the
completion of some act or the fulfillment of some condition are rated
conditionally. These are bonds secured by (a) earnings of projects under
construction, (b) earnings of projects unseasoned in operation experience, (c)
rentals which begin when facilities are completed, or (d) payments to which
some other limiting condition attaches. Parenthetical rating denotes
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probable credit stature upon completion of construction or elimination of basis
of condition.
Moody's applies numerical modifiers 1, 2 and 3 in each generic
classification from "Aa" to "B" in its bond rating system. The modifier 1
indicates that the issuer ranks in the higher end of its generic rating
category; the modifier 2 indicates a mid-range ranking; and the modifier 3
indicates that the issuer ranks at the lower end of its generic rating
category.
The following summarizes the long-term debt ratings used by
Duff & Phelps for corporate and municipal long-term debt:
"AAA" - Debt is considered to be of the highest credit
quality. The risk factors are negligible, being only slightly more than for
risk-free U.S. Treasury debt.
"AA" - Debt is considered of high credit quality. Protection
factors are strong. Risk is modest but may vary slightly from time to time
because of economic conditions.
"A" - Debt possesses protection factors which are average but
adequate. However, risk factors are more variable and greater in periods of
economic stress.
"BBB" - Debt possesses below average protection factors but
such protection factors are still considered sufficient for prudent investment.
Considerable variability in risk is present during economic cycles.
"BB," "B," "CCC," "DD," and "DP" - Debt that possesses one of
these ratings is considered to be below investment grade. Although below
investment grade, debt rated "BB" is deemed likely to meet obligations when
due. Debt rated "B" possesses the risk that obligations will not be met when
due. Debt rated "CCC" is well below investment grade and has considerable
uncertainty as to timely payment of principal, interest or preferred dividends.
Debt rated "DD" is a defaulted debt obligation, and the rating "DP" represents
preferred stock with dividend arrearages.
To provide more detailed indications of credit quality, the
"AA," "A," "BBB," "BB" and "B" ratings may be modified by the addition of a
plus (+) or minus (-) sign to show relative standing within these major
categories.
The following summarizes the highest four ratings used by
Fitch for corporate and municipal bonds:
"AAA" - Bonds considered to be investment grade and of the
highest credit quality. The obligor has an exceptionally
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strong ability to pay interest and repay principal, which is unlikely to be
affected by reasonably foreseeable events.
"AA" - Bonds considered to be investment grade and of very
high credit quality. The obligor's ability to pay interest and repay principal
is very strong, although not quite as strong as bonds rated "AAA." Because
bonds rated in the "AAA" and "AA" categories are not significantly vulnerable
to foreseeable future developments, short-term debt of these issuers is
generally rated "F-1+."
"A" - Bonds considered to be investment grade and of high
credit quality. The obligor's ability to pay interest and repay principal is
considered to be strong, but may be more vulnerable to adverse changes in
economic conditions and circumstances than bonds with higher ratings.
"BBB" - Bonds considered to be investment grade and of
satisfactory credit quality. The obligor's ability to pay interest and repay
principal is considered to be adequate. Adverse changes in economic conditions
and circumstances, however, are more likely to have an adverse impact on these
bonds, and therefore, impair timely payment. The likelihood that the ratings
of these bonds will fall below investment grade is higher than for bonds with
higher ratings.
"BB," "B," "CCC," "CC," "C," "DDD," "DD," and "D" - Bonds that
possess one of these ratings are considered by Fitch to be speculative
investments. The ratings "BB" to "C" represent Fitch's assessment of the
likelihood of timely payment of principal and interest in accordance with the
terms of obligation for bond issues not in default. For defaulted bonds, the
rating "DDD" to "D" is an assessment of the ultimate recovery value through
reorganization or liquidation.
To provide more detailed indications of credit quality, the
Fitch ratings from and including "AA" to "C" may be modified by the addition of
a plus (+) or minus (-) sign to show relative standing within these major
rating categories.
IBCA assesses the investment quality of unsecured debt with an
original maturity of more than one year which is issued by bank holding
companies and their principal bank subsidiaries. The following summarizes the
rating categories used by IBCA for long-term debt ratings:
"AAA" - Obligations for which there is the lowest expectation
of investment risk. Capacity for timely repayment of principal and interest is
substantial such that adverse changes in business, economic or financial
conditions are unlikely to increase investment risk substantially.
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"AA" - Obligations for which there is a very low expectation
of investment risk. Capacity for timely repayment of principal and interest is
substantial. Adverse changes in business, economic or financial conditions may
increase investment risk albeit not very significantly.
"A" - Obligations for which there is a low expectation of
investment risk. Capacity for timely repayment of principal and interest is
strong, although adverse changes in business, economic or financial conditions
may lead to increased investment risk.
"BBB" - Obligations for which there is currently a low
expectation of investment risk. Capacity for timely repayment of principal and
interest is adequate, although adverse changes in business, economic or
financial conditions are more likely to lead to increased investment risk than
for obligations in higher categories.
"BB," "B," "CCC," "CC," and "C" - Obligations are assigned one
of these ratings where it is considered that speculative characteristics are
present. "BB" represents the lowest degree of speculation and indicates a
possibility of investment risk developing. "C" represents the highest degree
of speculation and indicates that the obligations are currently in default.
IBCA may append a rating of plus (+) or minus (-) to a rating
to denote relative status within major rating categories.
Thomson BankWatch assesses the likelihood of an untimely
repayment of principal or interest over the term to maturity of long term debt
and preferred stock which are issued by United States commercial banks, thrifts
and non-bank banks; non-United States banks; and broker-dealers. The following
summarizes the rating categories used by Thomson BankWatch for long-term debt
ratings:
"AAA" - This designation represents the highest category
assigned by Thomson BankWatch to long-term debt and indicates that the ability
to repay principal and interest on a timely basis is extremely high.
"AA" - This designation indicates a very strong ability to
repay principal and interest on a timely basis with limited incremental risk
compared to issues rated in the highest category.
"A" - This designation indicates that the ability to repay
principal and interest is strong. Issues rated "A" could
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be more vulnerable to adverse developments (both internal and external) than
obligations with higher ratings.
"BBB" - This designation represents Thomson BankWatch's lowest
investment grade category and indicates an acceptable capacity to repay
principal and interest. Issues rated "BBB" are, however, more vulnerable to
adverse developments (both internal and external) than obligations with higher
ratings.
"BB," "B," "CCC," and "CC," - These designations are assigned
by Thomson BankWatch to non-investment grade long-term debt. Such issues are
regarded as having speculative characteristics regarding the likelihood of
timely payment of principal and interest. "BB" indicates the lowest degree of
speculation and "CC" the highest degree of speculation.
"D" - This designation indicates that the long-term debt is in
default.
PLUS (+) OR MINUS (-) - The ratings from "AAA" through "CC"
may include a plus or minus sign designation which indicates where within the
respective category the issue is placed.
MUNICIPAL NOTE RATINGS
A Standard and Poor's rating reflects the liquidity concerns
and market access risks unique to notes due in three years or less. The
following summarizes the ratings used by Standard & Poor's Ratings Group for
municipal notes:
"SP-1" - The issuers of these municipal notes exhibit very
strong or strong capacity to pay principal and interest. Those issues
determined to possess overwhelming safety characteristics are given a plus (+)
designation.
"SP-2" - The issuers of these municipal notes exhibit
satisfactory capacity to pay principal and interest.
"SP-3" - The issuers of these municipal notes exhibit
speculative capacity to pay principal and interest.
Moody's ratings for state and municipal notes and other
short-term loans are designated Moody's Investment Grade ("MIG") and variable
rate demand obligations are designated Variable Moody's Investment Grade
("VMIG"). Such ratings recognize the differences between short-term credit
risk and long-term risk. The following summarizes the ratings by Moody's
Investors Service, Inc. for short-term notes:
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"MIG-1"/"VMIG-1" - Loans bearing this designation are of the
best quality, enjoying strong protection by established cash flows, superior
liquidity support or demonstrated broad-based access to the market for
refinancing.
"MIG-2"/"VMIG-2" - Loans bearing this designation are of high
quality, with margins of protection ample although not so large as in the
preceding group.
"MIG-3"/"VMIG-3" - Loans bearing this designation are of
favorable quality, with all security elements accounted for but lacking the
undeniable strength of the preceding grades. Liquidity and cash flow
protection may be narrow and market access for refinancing is likely to be less
well established.
"MIG-4"/"VMIG-4" - Loans bearing this designation are of
adequate quality, carrying specific risk but having protection commonly
regarded as required of an investment security and not distinctly or
predominantly speculative.
"SG" - Loans bearing this designation are of speculative
quality and lack margins of protection.
Fitch and Duff & Phelps use the short-term ratings described
under Commercial Paper Ratings for municipal notes.
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PART C
OTHER INFORMATION
ITEM 24. FINANCIAL STATEMENTS AND EXHIBITS
(a) Financial Statements:
(1) Included in Parts A and B of the Registration Statement for
the FedFund and T-Fund Portfolios:
Statement of Net Assets - October 31, 1995.
Statement of Operations for the year ended October 31,
1995.
Statement of Changes in Net Assets for the years ended
October 31, 1995 and 1994.
Notes to the Financial Statements.
* 1 moved from here; text not shown
Report of Independent Accountants -
December 15, 1995.
** 1 (2) Included in Parts A and B of the Registration
Statement for the FedCash and T-Cash Portfolios:
Statement of Net Assets - October 31, 1995.
Statement of Operations for the year ended October 31,
1995.
Statement of Changes in Net Assets for the FedCash
Portfolio and the T-Cash Portfolio for the years ended
October 31, 1995 and 1994.
Notes to the Financial Statements.
Report of Independent Accountants - December 15, 1995.
(3) Included in Parts A and B of the Registration Statement for
the Federal Trust Fund and Treasury Trust Fund Portfolios:
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Statement of Net Assets - October 31, 1995.
Statement of Operations for the period ended October 31,
1995.
Statement of Changes in Net Assets for the Federal Trust
Fund Portfolio and the Treasury Trust Fund Portfolio
for the years ended October 31, 1995 and 1994.
Notes to the Financial Statements.
Report of Independent Accountants December 15, 1995.
(4) Included in Parts A and B of the Registration Statement for
the Short Government Fund Portfolio:
Statement of Net Assets - October 31, 1995.
Statement of Operations for the year ended October 31,
1995.
Statement of Changes in Net Assets for the years ended
October 31, 1995 and 1994.
Notes to the Financial Statements.
Report of Independent Accountants -
December 15, 1995.
(5) All required financial statements relating to FedFund,
T-Fund, FedCash, T-Cash, Federal Trust Fund, Treasury Trust
Fund and Short Government Fund Portfolios are included in
Parts A and B hereof. All other financial statements are
inapplicable.
(b) Exhibits:
(1) Amended and Restated Declaration of Trust dated as of
August 9, 1993, relating to its FedFund, T-Fund, FedCash,
T-Cash, Federal Trust Fund and Treasury Trust Fund
Portfolios is incorporated herein by reference to Exhibit
(1) of Post-Effective Amendment No. 39 to Registrant's
Registration
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Statement on Form N-1A filed on January 28, 1994.
(2) Amended and Restated By-laws dated as of August 9, 1993,
relating to its FedFund, T-Fund, FedCash, T-Cash, Federal
Trust Fund and Treasury Trust Fund Portfolios is
incorporated herein by reference to Exhibit (2) of
Post-Effective Amendment No. 39 to Registrant's
Registration Statement on Form N-1A filed on January 28,
1994.
(3) None.
(4) (a) Specimen copy of share certificate for FedFund shares
of beneficial interest in the FedFund portfolio is
incorporated herein by reference to Exhibit (4)(a) of
Post-Effective Amendment No. 26 to Registrant's
Registration Statement on Form N-1A filed on December
2, 1987.
(b) Specimen copy of share certificate for FedFund Dollar
shares of beneficial interest in the FedFund portfolio
is incorporated herein by reference to Exhibit (4)(b)
of Post-Effective Amendment No. 26 to Registrant's
Registration Statement on Form N-1A filed on December
2, 1987.
(c) Specimen copy of share certificate for T-Fund shares
of beneficial interest in the T-Fund portfolio is
incorporated herein by reference to Exhibit (4)(c) of
Post-Effective Amendment No. 26 to Registrant's
Registration Statement on Form N-1A filed on December
2, 1987.
(d) Specimen copy of share certificate for T-Fund Dollar
shares of beneficial interest in the T-Fund portfolio
is incorporated herein by reference to Exhibit (4)(d)
of Post-Effective Amendment No. 26 to Registrant's
Registration Statement on Form N-1A filed on December
2, 1987.
(e) Specimen copy of share certificate for Treasury Trust
shares of beneficial interest in the Treasury Trust
Fund portfolio is incorporated herein by
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reference to Exhibit (4)(g) of Post-Effective
Amendment No. 31 to Registrant's Registration
Statement on Form N-1A filed on May 26, 1989.
(f) Specimen copy of share certificate for Treasury Trust
Dollar shares of beneficial interest in the Treasury
Trust Fund portfolio is incorporated herein by
reference to Exhibit (4)(h) of Post-Effective
Amendment No. 31 to Registrant's Registration
Statement on Form N-1A filed on May 26, 1989.
(g) Specimen copy of share certificate for Federal Trust
shares of beneficial interest in the Federal Trust
Fund portfolio is incorporated by reference to Exhibit
(4)(o) of Post-Effective Amendment No. 34 to
Registrant's Registration Statement on Form N-1A filed
on September 28, 1990.
(h) Specimen copy of share certificate for Federal Trust
Dollar shares of beneficial interest in the Federal
Trust Fund portfolio is incorporated by reference to
Exhibit (4)(p) of Post-Effective Amendment No. 34 to
Registrant's Registration Statement on Form N-1A filed
on September 28, 1990.
(i) Specimen copy of share certificate for FedCash shares
of beneficial interest in the FedCash portfolio is
incorporated herein by reference to Exhibit (4)(q) of
Post-Effective Amendment No. 37 to Registrant's
Registration Statement on Form N-1A filed on November
21, 1991.
(j) Specimen copy of share certificate for FedCash Dollar
shares of beneficial interest in the FedCash portfolio
is incorporated herein by reference to Exhibit (4)(r)
of Post-Effective Amendment No. 37 to Registrant's
Registration Statement on Form N-1A filed on November
21, 1991.
(k) Specimen copy of share certificate for T-Cash shares
of beneficial interest in the T-Cash portfolio is
incorporated
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<PAGE> 241
herein by reference to Exhibit (4)(s) of
Post-Effective Amendment No. 37 to Registrant's
Registration Statement on Form N-1A filed on November
21, 1991.
(1) Specimen copy of share certificate for T-Cash Dollar
shares of beneficial interest in the T-Cash portfolio
is incorporated herein by reference to Exhibit (4)(t)
of Post-Effective Amendment No. 37 to Registrant's
Registration Statement on Form N-1A filed on November
21, 1991.
(5) (a) Investment Advisory Agreement dated March 11, 1987
between Registrant and PNC Institutional Management
Corporation relating to its FedFund and T-Fund
portfolios is incorporated herein by reference to
Exhibit (5)(a) of Post-Effective Amendment No. 26 to
Registrant's Registration Statement on Form N-1A filed
on December 2, 1987.
(b) Addendum No. 1 to Investment Advisory Agreement dated
June 30, 1988 between Registrant and PNC Institutional
Management Corporation relating to its Treasury Trust
Fund portfolio is incorporated herein by reference to
Exhibit (5)(b) of Post-Effective Amendment No. 30 to
Registrant's Registration Statement on Form N-1A filed
on January 25, 1989.
(c) Addendum No. 2 to Investment Advisory Agreement dated
September 7, 1988 between Registrant and PNC
Institutional Management Corporation relating to its
Intermediate Government and Long Government Fund
portfolios is incorporated herein by reference to
Exhibit (5)(c) of Post-Effective Amendment No. 30 to
Registrant's Registration Statement on Form N-1A filed
on January 25, 1989.
(d) Addendum No. 3 to Investment Advisory Agreement dated
as of November 1, 1990 between Registrant and PNC
Institutional Management Corporation relating to its
Federal Trust Fund portfolio is
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<PAGE> 242
incorporated herein by reference to Exhibit (5)(d) of
Post-Effective Amendment No. 35 to Registrant's
Registration Statement on Form N-1A filed on February
28, 1991.
(e) Addendum No. 4 to Investment Advisory Agreement dated
May 9, 1991 between Registrant and PNC Institutional
Management Corporation relating to its FedCash and
T-Cash portfolios is incorporated herein by reference
to Exhibit (5)(e) of Post-Effective Amendment No. 37
to Registrant's Registration Statement on Form N-1A
filed on November 21, 1991.
(f) Sub-Advisory Agreement dated March 11, 1987 between
PNC Institutional Management Corporation and PNC Bank,
National Association relating to Registrant's FedFund
and T-Fund portfolios is incorporated herein by
reference to Exhibit (5)(c) of Post-Effective
Amendment No. 26 to Registrant's Registration
Statement on Form N-1A filed on December 2, 1987.
(g) Addendum No. 1 to Sub-Advisory Agreement dated June
30, 1988 between PNC Institutional Management
Corporation and PNC Bank, National Association
relating to Registrant's Treasury Trust Fund portfolio
is incorporated herein by reference to Exhibit (5)(e)
of Post-Effective Amendment No. 30 to Registrant's
Registration Statement on Form N-1A filed on January
25, 1989.
(h) Addendum No. 2 to Sub-Advisory Agreement dated
September 7, 1988 between PNC Institutional Management
Corporation and PNC Bank, National Association
relating to Registrant's Intermediate Government and
Long Government Fund portfolios is incorporated herein
by reference to Exhibit (5)(f) of Post-Effective
Amendment No. 30 to Registrant's Registration
Statement on Form N-1A filed on January 25, 1989.
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(i) Addendum No. 3 to Sub-Advisory Agreement dated as of
November 1, 1990 between PNC Institutional Management
Corporation and PNC Bank, National Association
relating to its Federal Trust Fund portfolio is
incorporated herein by reference to Exhibit (5)(h) of
Post-Effective Amendment No. 35 to Registrant's
Registration Statement on Form N-1A filed on February
28, 1991.
(j) Addendum No. 4 to Sub-Advisory Agreement dated May 9,
1991 between PNC Institutional Management Corporation
and PNC Bank, National Association relating to
Registrant's FedCash and T-Cash portfolios is
incorporated herein by reference to Exhibit (5)(j) of
Post Effective Amendment No. 37 to Registrant's
Registration Statement on Form N-1A filed on November
21, 1991.
(6) Distribution Agreement dated January 31, 1994 between
Registrant and Provident Distributors, Inc. relating to its
FedFund, T-Fund, FedCash, T-Cash, Federal Trust Fund and
Treasury Trust Fund portfolios is incorporated herein by
reference to Exhibit (6) of Post-Effective Amendment No. 39
to Registrant's Registration Statement on Form N-1A filed
on January 28, 1994.
(7) Trust for Federal Securities Fund Office Retirement
Profit-Sharing Plan and Trust Agreement as approved Fall of
1990 is incorporated herein by reference to Exhibit (7) of
Post-Effective Amendment No. 49 to Temporary Investment
Fund, Inc.'s Registration Statement on Form N-1A filed on
December 12, 1990.
(8) (a) Custodian Fee Agreement dated May 9, 1991 between
Registrant and PNC Bank, National Association relating
to its FedFund, T-Fund, FedCash, T-Cash, Federal Trust
Fund and Treasury Trust Fund portfolios is
incorporated herein by reference to Exhibit (8)(b) of
Post-Effective Amendment No. 37 to Registrant's
Registration Statement on Form N-1A filed on November
21, 1991.
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(b) Custodian Agreement dated June 1, 1989 between
Registrant and PNC Bank, National Association relating
to its FedFund, T-Fund and Treasury Trust Fund
portfolios is incorporated herein by reference to
Exhibit (8) of Post-Effective Amendment No. 32 to
Registrant's Registration Statement on Form N-1A filed
on November 21, 1991.
(c) Addendum No. 1 to Custodian Fee Agreement dated
November 1, 1990 between Registrant and PNC Bank,
National Association relating to its Federal Trust
Fund portfolio is incorporated herein by reference to
Exhibit (8)(d) of Post-Effective Amendment No. 35 to
Registrant's Registration Statement on Form N-1A filed
on November 21, 1991.
(d) Addendum No. 2 to Custodian Fee Agreement dated May 9,
1991 between Registrant and PNC Bank, National
Association relating to its FedCash and T-Cash
portfolios is incorporated herein by reference to
Exhibit (8)(e) of Post-Effective Amendment No. 37 to
Registrant's Registration Statement on Form N-1A filed
on November 21, 1991.
(9) (a) Administration Agreement dated January 18, 1993
between Registrant and PFPC Inc. and Provident
Distributors, Inc. as co-administrators, relating to
its FedFund, T-Fund, FedCash, T-Cash, Federal Trust
Fund and Treasury Trust Fund portfolios is
incorporated herein by reference to Exhibit (9)(a) of
Post-Effective Amendment No. 39 to Registrant's
Registration Statement on Form N-1A filed on January
28, 1994.
(b) Transfer Agency Fee Agreement dated May 9, 1991
between Registrant and PFPC Inc. relating to its
FedFund, T-Fund, FedCash, T-Cash, Federal Trust Fund
and Treasury Trust Fund portfolios is incorporated
herein by reference to Exhibit (9)(e) of
Post-Effective Amendment No. 37 to Registrant's
Registration Statement on Form N-1A filed on November
21, 1991.
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(c) Transfer Agency Agreement dated June 1, 1989 between
Registrant and PFPC Inc. relating to its FedFund,
T-Fund and Treasury Trust Fund portfolios is
incorporated herein by reference to Exhibit (9)(e) of
Post-Effective Amendment No. 33 to Registrant's
Registration Statement on Form N-1A filed on January
15, 1990.
(d) Addendum No. 1 to Transfer Agency Agreement dated as
of November 1, 1990 between the Registrant and PFPC
Inc. relating to its Federal Trust Fund portfolio is
incorporated herein by reference to Exhibit (9)(i) of
Post-Effective Amendment No. 35 to Registrant's
Registration Statement on Form N-1A filed on February
28, 1991.
(e) Addendum No. 2 to Transfer Agency Agreement dated May
9, 1991 between the Registrant and PFPC Inc. relating
to its FedCash and T-Cash portfolios is incorporated
herein by reference to Exhibit (9)(h) of
Post-Effective Amendment No. 37 to Registrant's
Registration Statement on Form N-1A filed on November
21, 1991.
(10)(a) Opinion and Consent of Counsel*.
(b) Opinion of Drinker Biddle & Reath with respect to Rule
24e-2 shares.
(11)(a) Consent of Coopers & Lybrand.
(b) Consent of Drinker Biddle & Reath.
(12) None.
(13) Inapplicable.
(14) None.
(15) None.
- --------------------
* Filed pursuant to Rule 24f-2 as part of Registrant's Rule 24f-2
Notice on December 28, 1995.
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(16)(a) Schedules of Performance Computations with respect to
FedFund, T-Fund and Treasury Trust Fund portfolios are
incorporated herein by reference to Exhibit (16)(a) of
Post-Effective Amendment No. 35 to Registrant's
Registration Statement on Form N-1A filed on February
28, 1991.
(b) Schedules of Performance Computations with respect to
the FedCash, T-Cash and Federal Trust Fund portfolios
is incorporated herein by reference to Exhibit (16)(b)
of Post-Effective Amendment No. 37 to Registrant's
Registration Statement on Form N-1A filed on November
21, 1991.
ITEM 25. PERSONS CONTROLLED BY OR UNDER COMMON CONTROL WITH REGISTRANT
Registrant is controlled by its Board of Trustees. Each of
Registrant's trustees serves on the board of directors/trustees of certain
other registered investment companies. See "Management of the Fund - Trustees
and Officers" in Part B hereof.
ITEM 26. NUMBER OF HOLDERS OF SECURITIES
The following information is as of January 10, 1996:
<TABLE>
<CAPTION>
Number of
Title of Class Record Holders
-------------- --------------
<S> <C>
Shares of beneficial interest in FedFund . . . 274
Shares of beneficial interest in FedFund
Dollar shares . . . . . . . . . . . . . . 25
Shares of beneficial interest in T-Fund . . . . 249
Shares of beneficial interest in T-Fund
Dollar shares . . . . . . . . . . . . . . 15
Shares of beneficial interest in FedCash . . . 27
Shares of beneficial interest in FedCash
Dollar shares . . . . . . . . . . . . . 1
Shares of beneficial interest in T-Cash . . . . 29
Shares of beneficial interest in T-Cash
Dollar shares . . . . . . . . . . . . . 3
</TABLE>
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<TABLE>
<S> <C>
Shares of beneficial interest in Federal
Trust Fund . . . . . . . . . . . . . . . 79
Shares of beneficial interest in Federal
Trust Fund Dollar shares . . . . . . . . 18
Shares of beneficial interest in Treasury
Trust Fund . . . . . . . . . . . . . . . 169
Shares of beneficial interest in Treasury
Trust Fund Dollar shares . . . . . . . . 19
</TABLE>
ITEM 27. INDEMNIFICATION
Indemnification of Registrant's Principal Underwriter, Custodian and
Transfer Agent against certain stated liabilities is provided for in Section 6
of the Distribution Agreement, included herein as Exhibit (6), and in Section
22 of the Custodian Agreement and in Section 17 of the Transfer Agency
Agreement, incorporated herein by reference as Exhibits (8)(b) and (9)(e),
respectively. Registrant has obtained from at least one major insurance
carrier a directors' and officers' liability policy covering certain types of
errors and omissions. In addition, Section 2 of Article X of Registrant's
Amended and Restated Declaration of Trust dated August 9, 1994 incorporated
herein by reference as Exhibit (l), provides as follows:
10.2 Indemnification of Trustees, Officers and Employees. The
Trust shall indemnify each of its Trustees against all liabilities
and expenses (including amounts paid in satisfaction of judgments, in
compromise, as fines and penalties, and as counsel fees) reasonably
incurred by him in connection with the defense or disposition of any
action, suit or other proceeding, whether civil or criminal, in which
he may be involved or with which he may be threatened, while in
office or thereafter, by reason of his being or having been such a
Trustee except with respect to any matter as to which, he shall have
been adjudicated to have acted in bad faith, willful misfeasance,
gross negligence or reckless disregard of his duties; provided,
however, that as to any matter disposed of by a compromise payment by
such person, pursuant to a consent decree or otherwise, no
indemnification either for said payment or for any other expenses
shall be provided unless the Trust shall have received a written
opinion from independent legal counsel approved by the Trustees to
the effect that if either the matter of willful misfeasance, gross
negligence or reckless disregard of duty, or the matter of bad faith
had been adjudicated, it would in his opinion have been
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<PAGE> 248
adjudicated in favor of such person. The rights accruing to any
person under these provisions shall not exclude any other right to
which he may be lawfully entitled; provided that no person may
satisfy any right of indemnity or reimbursement except out of the
property of the Trust. The Trustees may make advance payments in
connection with the indemnification under this Section 10.2, provided
that the indemnified person shall have given a written undertaking to
reimburse the Trust in the event it is subsequently determined that
he is not entitled to such indemnification.
The Trustees shall have the power, but not the duty, in their
sole discretion, to indemnify representatives and employees of the
Trust to the same extent that Trustees are entitled to
indemnification hereunder.
In addition to such rights of indemnification as may be provided
hereunder, the Trustees may purchase insurance against the risk of
liability imposed against Trustees, officers or employees by reason
of their services on behalf of the Trust.
Insofar as indemnification for liability arising under the Securities
Act of 1933 may be permitted to trustees, officers and controlling persons of
Registrant pursuant to the foregoing provisions, or otherwise, Registrant has
been advised that in the opinion of the Securities and Exchange Commission such
indemnification is against public policy as expressed in the Act and is,
therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by Registrant of expenses
incurred or paid by a trustee, officer or controlling person of Registrant in
the successful defense of any action, suit or proceeding) is asserted by such
trustee, officer or controlling person in connection with the securities being
registered, 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
PIMC performs investment advisory services for Registrant and certain
other investment companies. PNC and its predecessors have been in the business
of managing the investments of fiduciary and other accounts in the Philadelphia
area since 1847. In addition to its trust business, PNC provides commercial
banking services.
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<PAGE> 249
(a) To Registrant's knowledge, none of the directors or
officers of PIMC, except those set forth below, is, or has been at any time
during Registrant's past two fiscal years, engaged in any other business,
profession, vocation or employment of a substantial nature, except that certain
directors and officers and certain executives of PIMC also hold various
positions with, and engage in business for, PNC Bank Corp, which owns all the
outstanding stock of PIMC, or other subsidiaries of PNC Bank Corp. Set forth
below are the names and principal businesses of the directors and certain
executives of PIMC who are engaged in any other business, profession, vocation
or employment of a substantial nature.
(b) To Registrant's knowledge, none of the directors or
officers of PNC Bank, N.A., except those set forth below, is, or has been at
any time during Registrant's past two fiscal years, engaged in any other
business, profession, vocation or employment of a substantial nature, except
that certain directors and officers and certain executives of PNC Bank, N.A.
also hold various positions with, and engage in business for, PNC Bank Corp.,
which owns all the outstanding stock of PNC Bank, N.A. or other subsidiaries of
PNC Bank Corp. Set forth below are the names and principal businesses of the
directors and certain executives of PNC Bank, N.A. who are engaged in any other
business, profession, vocation or employment of a substantial nature.
PNC INSTITUTIONAL MANAGEMENT CORPORATION
DIRECTORS AND OFFICERS
<TABLE>
<CAPTION>
POSITION WITH OTHER BUSINESS TYPE OF
PIMC NAME CONNECTIONS BUSINESS
- ------------- ------------------ -------------- --------
<S> <C> <C> <C>
Chairman and J. Richard Carnall Executive Vice President Banking
Director PNC Bank, National
Association (1)
Director Banking
PNC National Bank (2)
Chairman and Director
Financial- PFPC Inc. (3) Related
Services
Director Fiduciary
PNC Trust Company
Activities of New York (11)
Director Equipment
Hayden Bolts, Inc.*
</TABLE>
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<PAGE> 250
<TABLE>
<CAPTION>
POSITION WITH OTHER BUSINESS TYPE OF
PIMC NAME CONNECTIONS BUSINESS
- ------------- ------------------ -------------- --------
<S> <C> <C> <C>
Director Real
Parkway Real Estate Company* Estate
Director
Investment Provident Capital Management Advisory
Inc. (5)
Director Richard C. Caldwell Executive Vice President Banking
PNC Bank, National
Association (1)
Director Banking
PNC National Bank (2)
Director Fiduciary
PNC Trust Company
Activities of New York (11)
Director
Investment Provident Capital Management Advisory
Inc. (5)
Executive Vice President Bank
PNC Bank Corp. (14) Holding
Company
Director Banking
PNC Bank, New Jersey,
National Association (16)
Director
Financial- PFPC Inc. (3) Related
Services
Director Richard L. Smoot President and Chief Banking
Executive Officer
PNC Bank, National
Association (1)
Senior Vice President Bank
PNC Bank Corp. (14) Holding
Company
Director
Financial- PFPC Inc. (3) Related
Services
Director Fiduciary
PNC Trust Company of NY (11)
Activities
Director, Chairman and President Banking
</TABLE>
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<PAGE> 251
<TABLE>
<CAPTION>
POSITION WITH OTHER BUSINESS TYPE OF
PIMC NAME CONNECTIONS BUSINESS
- ------------- ------------------ -------------- --------
<S> <C> <C> <C>
PNC Bank, New Jersey, National
Association (16)
Director, Chairman, and CEO Banking
PNC National Bank (2)
Chairman & Director Leasing
PNC Credit Corp (13)
Secretary Insurance
Millsboro Insurance
Activities Agency, Inc. (24)
Secretary Insurance
Roney-Richards, Inc. (25)
Activities
President and Thomas H. Nevin None.
Chief Investment
Officer
Chief Financial Nicholas M. Marsini,Jr. Senior Vice President Banking
Officer PNC Bank, National
Association (1)
Director Financial
PFPC Inc. (3) Related
Services
Senior Vice President and Banking
Chief Financial Officer
PNC Bank, Delaware (20)
Director, Vice President and Banking
Treasurer
PNC National Bank (2)
Director Banking
PNC Bank, New Jersey
National Association (16)
Director Fiduciary
PNC Trust Company of
Activities New York (11)
Director and Treasurer Holding
PNC Bancorp, Inc. (9) Company
Director and Treasurer
Investment PNC Capital Corp. (17)
Activities
Director and Treasurer Banking
</TABLE>
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<PAGE> 252
<TABLE>
<CAPTION>
POSITION WITH OTHER BUSINESS TYPE OF
PIMC NAME CONNECTIONS BUSINESS
- ------------- ------------------ -------------- --------
<S> <C> <C> <C>
PNC Holding Corp. (18)
Director and Treasurer
Investment PNC Venture Corp. (19)
Activities
Executive Vice Charles B. Landreth Vice President
President PNC Bank, National Association (1) Banking
Senior Vice Vincent J. Ciavardini President and Chief Financial-
President Financial Officer Related
PFPC Inc. (3)Services
Senior Vice Scott Moss None.
President
Senior Vice John N. Parthemore None.
President
Senior Vice Dushyant Pandit None.
President
Senior Vice James R. Smith None.
President
Group Vice William F. Walsh None.
President
Vice President, Stephen M. Wynne Executive Vice President and Financial-
Chief Chief Accounting Officer Related
Accounting PFPC Inc. (3) Services
Officer and
Assistant Secretary
Controller Pauline M. Heintz Vice President Financial-
PFPC Inc. (3) Related
Services
Vice President John R. Antczak None.
Vice President Jeffrey W. Carson None.
Vice President Katherine A. Chuppe None.
Vice President Mary J. Coldren None.
Vice President Michele C. Dillion None.
Vice President Patrick J. Ford None.
Vice President Richard Hoerner None.
Vice President Michael S. Hutchinson None.
</TABLE>
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<PAGE> 253
<TABLE>
<CAPTION>
POSITION WITH OTHER BUSINESS TYPE OF
PIMC NAME CONNECTIONS BUSINESS
- ------------- ------------------ -------------- --------
<S> <C> <C> <C>
Vice President Michael J. Milligan None.
Vice President Allyn Plambeck None.
Vice President W. Don Simmons None.
Vice President Charles Allen Stiteler None.
</TABLE>
- -------
*Information regarding this corporation can be obtained from the office of the
Secretary.
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<PAGE> 254
PNC Bank, National Association
Directors
<TABLE>
<CAPTION>
Position with Other Business Type of
PNC Bank Name Connections Business
-------- ---- ----------- --------
<S> <C> <C> <C>
Director B.R. Brown President and C.E.O. of Coal
Consol, Inc.
Consol Plaza
Pittsburgh, PA 15241
Director Constance E. Clayton Chief, Division of Community Health Care Medical College of Medical
Pennsylvania
3300 Hinley Avenue, Office 4338
Philadelphia, PA 19129
Director Eberhard Faber, IV Chairman and C.E.O. Manufacturing
E.F.L., Inc.
450 Hedge Road
P.O. Box 49
Bearcreek, PA 18602
Director Dr. Stuart Heydt President and C.E.O. Medical
Geisinger Foundation
100 N. Academy Avenue
Danville, PA 17822
Director Edward P. Junker, III Vice Chairman Banking
PNC Bank, N.A.
Ninth and State Streets
Erie, PA 16553
Director Thomas A. McConomy President, C.E.O. and Manufacturing
Chairman, Calgon Carbon
Corporation
P.O. Box 717
Pittsburgh, PA 15230-0717
Director Robert C. Milsom Retired
PNC Bank, National Association
One PNC Plaza, Suite 2310
Pittsburgh, PA 15265
Director Thomas H. O'Brien Chairman Banking
PNC Bank, National Association
One PNC Plaza, 30th Floor
Pittsburgh, PA 15265
Director Dr. J. Dennis O'Connor Chancellor, University Education
of Pittsburgh
107 Cathedral of Learning
Pittsburgh, PA 15260
Director Rocco A. Ortenzio Chairman and C.E.O. Medical
Continental Medical
Systems, Inc.
P.O. Box 715
Mechanicsburg, PA 17055
</TABLE>
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<PAGE> 255
<TABLE>
<S> <C> <C> <C>
Director Jane G. Pepper President Horticulture
Pennsylvania Horticultural Society
325 Walnut Street
Philadelphia, PA 19106
Director Robert C. Robb, Jr. President, Lewis, Eckert, Financial and
Robb & Company Management Consultants
425 One Plymouth Meeting
Plymouth Meeting, PA 19462
Director James E. Rohr President and C.E.O. Bank Holding Company
PNC Bank, National Association
One PNC Plaza, 30th Floor
Pittsburgh, PA 15265
Director Daniel M. Rooney President, Pittsburgh Steelers Football
Football Club of the National Football League
300 Stadium Circle
Pittsburgh, PA 15212
Director Seth E. Schofield Chairman, President and C.E.O. Airline
USAir Group, Inc. and
USAir, Inc.
2345 Crystal Drive
Arlington, VA 22227
Director Robert M. Valentini President and C.E.O. Communications
Bell Atlantic - Pennsylvania, Inc.
One Parkway, 18th Floor
Philadelphia, PA 19102
</TABLE>
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<PAGE> 256
PNC BANK, NATIONAL ASSOCIATION OFFICERS
<TABLE>
<CAPTION>
POSITION
WITH
NAME PNC BANK OTHER BUSINESS CONNECTIONS
---- -------- --------------------------
<S> <C> <C>
John E. Alden Senior Vice President
John W. Atkinson Executive Vice President None
D. Paul Beard Senior Vice President
Peter R. Begg Senior Vice President
James S. Best Senior Vice President
Eva T. Blum Senior Vice President
Susan B. Bohn Senior Vice President
Michael S. Borocz Senior Vice President
George Brikis Senior Vice President,
Manager of Credit Policy
Russell P. Brooks Senior Vice President
Anthony J. Cacciatore Senior Vice President
Richard C. Caldwell Executive Vice President Director, D.R. Corp.
Investment Officer, J.L. Caldwell Company
Council Member, Pennsylvania
Horticultural Society
Director, PFPC
Executive Vice President, Investment
Management and Trust, PNC Bank Corp.
Craig T. Campbell Senior Vice President
</TABLE>
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<PAGE> 257
<TABLE>
<CAPTION>
POSITION
WITH
NAME PNC BANK OTHER BUSINESS CONNECTIONS
---- -------- --------------------------
<S> <C> <C>
J. Richard Carnall Executive Vice President Director, Franklin Institute (The)
Director, Hayden Bolts, Inc.
Director, Parkway Real Estate Company
Director, PNC Trust Company of New York
Director, Provident Capital Management,
Inc.
Chairman and Director, PFPC
Chairman and Director, PIMC
Peter K. Classen Senior Vice President
James P. Conley Senior Vice
President/Credit Policy
Robert Crouse Senior Vice President
W. Herbert Crowder, III Executive Vice President
John J. Daggett Senior Vice President
Victor M. DiBattista General Counsel
Thomas C. Dilworth Senior Vice President
James Dionise Senior Vice President and
CFO
Patrick S. Doran Vice President, Head of
Consumer Lending
Robert D. Edwards Senior Vice President
David J. Egan Senior Vice President
J. Lynn Evans Senior Vice President and
Controller
William E. Fallon Senior Vice President
James M. Ferguson, III Senior Vice President
</TABLE>
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<PAGE> 258
<TABLE>
<CAPTION>
POSITION
WITH
NAME PNC BANK OTHER BUSINESS CONNECTIONS
---- -------- --------------------------
<S> <C> <C>
Frederick C. Frank, III Executive Vice President Director, PNC National Bank
Director, PNC National Bank of New Jersey
William J. Friel Executive Vice President Director, Cedarbrook Country Club
Advisory Board Member, Chicago Title &
Abstract
Director, National Adoption Agency
George D. Gonczar Senior Vice President
Richard C. Grace Senior Vice President
James S. Graham Senior Vice President
Joseph C. Guyaux Senior Vice President
Michael J. Hannon Senior Vice President
Stephen G. Hardy Senior Vice President
Marva H. Harris Senior Vice President
G. Robert Hoffman Executive Vice President Director, J.W. Pepper & Sons, Inc.
Director, Land Holding Corp. of PA
Chairman, President and Director,
Provident Realty Management, Inc.
Chairman, President and Director,
Provident Realty, Inc.
Sylvan M. Holzer Senior Vice President
John M. Infield Senior Vice President
</TABLE>
C-22
<PAGE> 259
<TABLE>
<CAPTION>
WITH
NAME PNC BANK OTHER BUSINESS CONNECTIONS
---- -------- --------------------------
<S> <C> <C>
Joe R. Irwin Executive Vice President Member of the Executive Committee and
Director
Blue Cross of Western Pennsylvania
Director
Civic Light Opera
(Non-Profit Enterprise)
Chairman of the Board
Dinamo
(Non-Profit Enterprise)
Treasurer and Director
Girls' Hope
(Non-Profit Organization)
Member of the Executive Committee and
Director
Greater Pittsburgh Chamber of Commerce
Member of the Governing Council
Pennsylvania Bankers Association
Chairman
Pennsylvania Economy League, Inc.
Chairman, Annual Sustaining Fund Campaign
Pittsburgh Opera
Executive Vice President and Chief
Investment Officer
PNC Bank Corp.
Chairman, Chief Executive Officer and
Director
PNC Funding Corp.
Chairman and Director
PNC International Bank
Chairman and Director
PNC International Bank (New York)
Chairman and Director
PNC International Investment Corporation
Director
PNC Mortgage Bank, N.A.
</TABLE>
C-23
<PAGE> 260
<TABLE>
<CAPTION>
POSITION
WITH
NAME PNC BANK OTHER BUSINESS CONNECTIONS
---- -------- --------------------------
<S> <C> <C>
Joe R. Irwin (Cont'd.) Director
PNC Mortgage Corp. of America
Director
Ruffed Grouse Society, The
(Non-Profit Enterprise)
Philip C. Jackson Senior Vice President
William R. Johnson Audit Director
Edward P. Junker, III Vice Chairman Vice Chairman, PNC Bank Corp.
and Director
Director, PNC Mortgage Bank, N.A.
Director, PNC Mortgage Corp. of America
John F. Karaszewski Senior Vice President, PNC
Mortgage Company
Michael D. Kelsey Chief Compliance Officer
Randall C. King Senior Vice President
Joseph E. Kloecker Senior Vice President and
Controller
Christopher M. Knoll Senior Vice President
Frank R. Krepp Senior Vice President
Kenneth P. Leckey Senior Vice President
Marilyn R. Levins Senior Vice President
William H. Lochman Senior Vice President
George Lula Senior Vice President
Jane E. Madio Senior Vice President
Nicholas M. Marsini, Jr. Senior Vice
President/Finance
J. William Mills Senior Vice President
</TABLE>
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<PAGE> 261
<TABLE>
<CAPTION>
POSITION
WITH
NAME PNC BANK OTHER BUSINESS CONNECTIONS
---- -------- --------------------------
<S> <C> <C>
Marlene D. Mosco Senior Vice President
Peter F. Moylan Senior Vice President
Louis J. Myers President and CEO, PNC None
Bank, Northeast, PA
Michael B. Nelson Senior Vice President
</TABLE>
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<PAGE> 262
<TABLE>
<CAPTION>
POSITION
WITH
NAME PNC BANK OTHER BUSINESS CONNECTIONS
---- -------- --------------------------
<S> <C> <C>
Thomas H. O'Brien Chairman Director, Allegheny Club (Non-Profit
Corporation)
Chairman and Director, Allegheny
Conference on Community Development (Non-
Profit Organization)
Director, Alpine Indemnity Limited
Director, Bell Atlantic Corporation
Trustee, Carnegie (The)
Director, Central Bancorporation, Inc.
(The)
Director, Children's Hospital (Non-Profit
Corporation)
Director, Governor Casey's Pennsylvania
Economic Development Partnership
Director, Hilb, Rogal and Hamilton Co.
Chairman - Board of Visitors, Katz
Graduate School of Business
Director, Laurel Valley Golf Club
Director, Pittsburgh Baseball, Inc.
Co-Chairman of the Board of Directors,
Pittsburgh Opera (The)
President, PNC Bancorp, Inc.
Chairman, CEO & Director, PNC Bank Corp.
Director, PNC Investment Corp.
Chairman and Director, PNC Trust Company
of Florida, N.A.
Director, United Way of S.W. PA (Non-
Profit Organization)
</TABLE>
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<PAGE> 263
<TABLE>
<CAPTION>
POSITION
WITH
NAME PNC BANK OTHER BUSINESS CONNECTIONS
---- -------- --------------------------
<S> <C> <C>
Trustee, University of Pittsburgh
James F. O'Day Senior Vice President
George R. Partridge Senior Vice
President/Human Resources
David M. Payne Senior Vice President
Charles C. Pearson, Jr. President and CEO, PNC Director and Chairman, Chamber of
Bank, Central, PA Business and Industry of Centre County
Partner, Charrob Investments
Trustee, Juniata College
Partner, LPNS c/o Cir Realty
Director, Second Mile
Director, Uni-Marts, Inc.
Partner, University Drive Associates
John V. Petrycki President and CEO, PNC Director, Allied Arts Fund, Inc. (of
Bank, Southcentral, PA Harrisburg)
Director, Capital Region Economic
Development Corporation
Director, Channels
Director, Keystone Sports Foundation
Director, West Short YMCA
Donald G. Poppelton Senior Vice President
Helen P. Pudlin Senior Vice President
Joseph E. Quinnan Senior Vice President
</TABLE>
C-27
<PAGE> 264
<TABLE>
<CAPTION>
POSITION
WITH
NAME PNC BANK OTHER BUSINESS CONNECTIONS
---- -------- --------------------------
<S> <C> <C>
Edward V. Randall, Jr. President and CEO, PNC Board of Trustees, Carlow College
Bank, Pittsburgh
Board Member, Cities in Schools
Board of Trustees, Landmarks Financial
Corporation
Board of Trustees, Landmarks Real Estate
Corporation
Board Member, Pittsburgh Downtown
Partnership
Board Member, Pittsburgh History &
Landmarks Foundation
Director Emeritus, Pittsburgh Partnership
for Neighborhood Development
Member, Advisory Committee Transportation
& Technology Museum
Member, Board of Visitors University of
Pittsburgh School of Social Work (Non-
Profit Organization)
</TABLE>
C-28
<PAGE> 265
<TABLE>
<CAPTION>
POSITION
WITH
NAME PNC BANK OTHER BUSINESS CONNECTIONS
---- -------- --------------------------
<S> <C> <C>
James E. Rohr President, CEO and Director, Allegheny Ludlum Corporation
Director
Director, Alpine Indemnity Limited
Committee Member, American Bankers
Association Commercial Lending Div. Exec.
Com.
Director, American Cancer Society
Director, Boy Scouts of America
Business Advisory Council, Graduate
School of Industrial Adm. Carnegie Mellon
University
Trustee, Penn's Southwest Association
President and Director, Pittsburgh
National Bank Foundation
Chairman and Director, PNB Holdings, Inc.
President and Director, PNC Bank Corp.
Director, PNC International Bank (New
York)
Chairman, President, CEO and Director,
PNC Mortgage Bank, N.A.
Director, PNC Mortgage Corp. of America
Director, River City Brass Bank (Non-
Profit Corporation)
Chairman - Advisory Board, Salvation Army
(Non-Profit Organization)
Director, Shady Side Health, Education
and Research Center
Director, St. Vincent College
</TABLE>
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<PAGE> 266
<TABLE>
<CAPTION>
POSITION
WITH
NAME PNC BANK OTHER BUSINESS CONNECTIONS
---- -------- --------------------------
<S> <C> <C>
Gary Royer Senior Vice President
A. William Schenck, III Vice Chairman Board of Directors, Allegheny General
Hospital (Non-Profit Organization)
Director, Consumer Bankers Association
Board of Directors, Forward Products,
Inc.
Board of Directors, Health & Welfare
Planning Association (Non-Profit
Organization)
Chairman, Leadership Pittsburgh Steering
Committee
Director, Massachusetts Company, (The)
Board of Directors, Metropolitan
Pittsburgh Public Broadcasting, Inc.
(Non-Profit Organization)
Joint Ownership with wife Mikell Schenck,
Mikell Schenck Associates
1989 PBA Convention Committee Member,
Pennsylvania Bankers Association Group 8
(Non-Profit Organization)
Chairman and Director, Pinaco, Inc.
Board of Trustees, Pittsburgh Ballet
Theater (Non-Profit Organization)
Regional Advisory Council Member,
Pittsburgh Cancer Institute (Non-Profit
Organization)
Board of Trustees, Pittsburgh Center for
the Arts (Non-Profit Organization)
</TABLE>
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<PAGE> 267
<TABLE>
<CAPTION>
POSITION
WITH
NAME PNC BANK OTHER BUSINESS CONNECTIONS
---- -------- --------------------------
<S> <C> <C>
A. William Schenck, III (Cont'd) Vice President and Director, Pittsburgh
National Bank Foundation
Chairman and Director, Pittsburgh
National Life Insurance Co.
Director, Pittsburgh Theological Seminary
Committee Member, Pittsburgh Trust for
Cultural Resources (Non-Profit
Organization)
Executive Vice President -PNC Retail
Banking, PNC Bank Corp.
Director, PNC Mortgage Bank, N.A.
Director, PNC Mortgage Corp. of America
Board of Trustee, Three Rivers
Shakespeare Festival (Non-Profit
Organization)
Board of Directors, Urban League of
Pittsburgh, Inc. (Non-Profit
Organization)
Director, Visa U.S.A., Inc.
Director, Wiser Oil Company
Board of Trustee, YMCA of Pittsburgh
(Non-Profit Organization)
Timothy G. Shack Senior Vice President
George R. Simon Senior Vice President
</TABLE>
C-31
<PAGE> 268
<TABLE>
<CAPTION>
POSITION
WITH
NAME PNC BANK OTHER BUSINESS CONNECTIONS
---- -------- --------------------------
<S> <C> <C>
Richard L. Smoot President and CEO of PNC Trustee, Agnes Irwin School
Bank, Philadelphia
Board of Council, Episcopal Community
Services
Director, Greater Philadelphia Chamber of
Commerce
Director, Greater Philadelphia First
Corporation (The)
Director, Greater Philadelphia Urban
Affairs Coalition (The)
Director, Pennsylvania Ballet
Director, Philadelphia Orchestra (The)
Chairman and Director, PNC Credit Corp.
Chairman, CEO and Director, PNC National
Bank
Chairman, President and Director, PNC
National Bank of New Jersey
Director, PNC Service Corp.
Director, PNC Trust Company of New York
Director, Police Athletic League of
Philadelphia
Director, PFPC
Director, PIMC
Director, Settlement Music School
Director, St. John's College
Director, United Negro College Fund
Director, Widener University
Director, World Affairs Council of
Philadelphia
</TABLE>
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<PAGE> 269
<TABLE>
<CAPTION>
Position
with
Name PNC Bank Other Business Connections
- ---- -------- --------------------------
<S> <C> <C>
Timothy N. Smyth Senior Vice
President
Kenneth S. Spatz Senior Vice
President
William F. Strome Senior Vice
President and
Secretary
Herbert G. Summerfield, Executive Vice
Jr. President Director, CBM-Old York
Associates, Inc.
Director, CBM-Walnut Hill,
Inc.
Director, Pennsylvania
Mountain, Inc.
Executive Vice President -PNC
Real Estate, PNC Bank Corp.
Chairman and Director, PNC
Realty Holding Corp.
Director, PNC Realty Holding
Corp. of Georgia
Director, PNC Realty Holding
Corp. of Florida
Director, PNC Realty Holding
Corp. of Kentucky
Director, PNC Realty Holding
Corp. of Mississippi
Director, PNC Realty Holding
Corp. of New Jersey
Director, PNC Realty Holding
Corp. of Ohio
Director, PNC Realty Holding
Corp. of Pennsylvania
Director, PNC Realty Holding
Corp. of Texas
Director, PNC Realty Mortgage
Company
</TABLE>
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<PAGE> 270
<TABLE>
<CAPTION>
Position
with
Name PNC Bank Other Business Connections
- ---- -------- --------------------------
<S> <C> <C>
Herbert G. Summerfield, Jr. (Cont'd) Director, Regional Industrial
Development Corp. of
Southwestern, PA
Director, Special Asset Holdings
of Michigan, Inc.
Stephen L. Swanson Senior Vice
President
Jane B. Tompkins Senior Vice
President
Robert E. Trempe Senior vice
President
Alan P. Vail Senior Vice
President
Annette M. Ward-Kredel Senior Vice
President
Malcolm C. Wilson Executive Vice Board of Trustees, People's
President Light & Theatre Company
Senior Vice President and
Director, PNC National Bank of
New Jersey
Craig A. Wolfanger Senior Vice
President
</TABLE>
- -------------------------------------
* For more information, contact the office of the Secretary of PNC Bank,
National Association, 5th and Wood Streets, Pittsburg, PA 15265.
ITEM 29. PRINCIPAL UNDERWRITER
(a) Provident Distributors, Inc. currently acts as distributor for,
in addition to the Company, Temporary Investment Fund, Inc., Municipal Fund for
Temporary Investment, Portfolios for Diversified Investment, Municipal Fund for
California Investors, Inc., Municipal Fund for New York Investors, Inc. and The
PNC(R) Fund.
(b) The information required by this Item 29 with respect to each
director, officer or partner of Provident Distributors, Inc. is incorporated by
reference to Schedule A of FORM BD filed by Provident Distributors, Inc. with
the Securities and Exchange Commission pursuant to the Securities Exchange Act
of 1934 (SEC File No. 8-36892).
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<PAGE> 271
ITEM 30. LOCATION OF ACCOUNTS AND RECORDS
(1) PNC Bank, National Association, Broad and Chestnut Streets,
Philadelphia, Pennsylvania 19102 (records relating to its
functions as sub-investment adviser).
(2) PNC Bank, National Association, 200 Stevens Drive, Suite 440,
Lester, Pennsylvania 19113 (records relating to its functions as
custodian).
(3) PNC Institutional Management Corporation, Bellevue Park
Corporate Center, 400 Bellevue Parkway, 4th Floor, Wilmington,
Delaware 19809 (records relating to its functions as investment
adviser).
(4) PFPC Inc., Bellevue Park Corporate Center, 400 Bellevue Parkway,
Wilmington, Delaware 19809 (records relating to its functions as
administrator).
(5) Provident Distributors, Inc., 259 Radnor-Chester Road, Suite 120
Radnor, Pennsylvania 19087 (relating to its function as
administrator and distributor).
(6) PFPC Inc., Bellevue Park Corporate Center, 400 Bellevue Parkway,
Wilmington, Delaware 19809 (records relating to its functions as
transfer agent, registrar and dividend disbursing agent).
(7) Drinker Biddle & Reath, Philadelphia National Bank Building,
1345 Chestnut Street, Philadelphia, Pennsylvania 19107-3496
(Registrant's Declaration of Trust, Bylaws and Minutes Books).
ITEM 31. MANAGEMENT SERVICES
None.
ITEM 32. UNDERTAKINGS
Registrant undertakes to furnish each person to whom a
prospectus is delivered with a copy of Registrant's latest
annual report to shareholders upon request and without charge.
C-35
<PAGE> 272
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 Post-Effective Amendment No. 41 to
its Registration Statement pursuant to Rule 485(b) under the Securities Act of
1933 and has duly caused this Post-Effective Amendment No. 41 to its
Registration Statement to be signed on its behalf by the undersigned, thereto
duly authorized, in the City of Wilmington, and State of Delaware, on
February 27, 1996.
TRUST FOR FEDERAL SECURITIES
/s/ Edward J. Roach, Vice President and Treasurer
-------------------------------------------------
Edward J. Roach (Signature and Title)
Pursuant to the requirements of the Securities Act of 1933, this
Post-Effective Amendment No. 41 to Registrant's Registration Statement has been
signed below by the following persons in the capacities and on the dates
indicated.
<TABLE>
<CAPTION>
Signature Title Date
- --------- ----- ----
<S> <C> <C>
* Philip E. Coldwell Trustee February 27, 1996
- --------------------------
Philip E. Coldwell
* Robert R. Fortune Trustee February 27, 1996
- --------------------------
Robert R. Fortune
* Rodney D. Johnson Trustee February 27, 1996
- --------------------------
Rodney D. Johnson
* G. Willing Pepper Chairman of February 27, 1996
- -------------------------- the Board and
G. Willing Pepper President
/s/ Edward J. Roach Vice President February 27, 1996
- -------------------------- and Treasurer
Edward J. Roach (Principal Financial
and Accounting
Officer)
*By:/s/ Edward J. Roach
----------------------
Edward J. Roach
Attorney-in-Fact
</TABLE>
<PAGE> 273
TEMPORARY INVESTMENT FUND, INC.
TRUST FOR FEDERAL SECURITIES
MUNICIPAL FUND FOR TEMPORARY INVESTMENT
PORTFOLIOS FOR DIVERSIFIED INVESTMENT
POWER OF ATTORNEY
G. Willing Pepper, whose signature appears below, hereby constitutes and
appoints G. Willing Pepper and Edward J. Roach, and either of them, his true
and lawful attorneys and agents, with power of substitution or resubstitution,
to do any and all acts and things and to execute any and all instruments which
said attorneys and agents, or either of them, may deem necessary or advisable
or which may be required to enable Temporary Investment Fund, Inc., Trust for
Federal Securities, Municipal Fund for Temporary Investment and Portfolios for
Diversified Investment (each a "Company") to comply with the Investment Company
Act of 1940 as amended, and the Securities Act of 1933, as amended ("Acts"),
and any rules, regulations or requirements of the Securities and Exchange
Commission in respect thereof, in connection with the filing and effectiveness
of any and all amendments (including post-effective amendments) to each
Company's Registration Statement(s) pursuant to said Acts, including
specifically, but without limiting the generality of the foregoing, the power
and authority to sign in the name and on behalf of the undersigned as director
or trustee and/or officer of the relevant Company any and all such amendments
filed with the Securities and Exchange Commission under said Acts, and any
other instruments or documents related thereto, and the undersigned does hereby
ratify and confirm all that said attorneys and agents, or either of them, shall
do or cause to be done by virtue hereof.
/s/ G. Willing Pepper
------------------------
G. Willing Pepper
Date: April 18, 1995
<PAGE> 274
TEMPORARY INVESTMENT FUND, INC.
TRUST FOR FEDERAL SECURITIES
MUNICIPAL FUND FOR TEMPORARY INVESTMENT
PORTFOLIOS FOR DIVERSIFIED INVESTMENT
POWER OF ATTORNEY
Philip E. Coldwell, whose signature appears below, hereby constitutes and
appoints G. Willing Pepper and Edward J. Roach, and either of them, his true
and lawful attorneys and agents, with power of substitution or resubstitution,
to do any and all acts and things and to execute any and all instruments which
said attorneys and agents, or either of them, may deem necessary or advisable
or which may be required to enable Temporary Investment Fund, Inc., Trust for
Federal Securities, Municipal Fund for Temporary Investment and Portfolios for
Diversified Investment (each a "Company") to comply with the Investment Company
Act of 1940 as amended, and the Securities Act of 1933, as amended ("Acts"),
and any rules, regulations or requirements of the Securities and Exchange
Commission in respect thereof, in connection with the filing and effectiveness
of any and all amendments (including post-effective amendments) to each
Company's Registration Statement(s) pursuant to said Acts, including
specifically, but without limiting the generality of the foregoing, the power
and authority to sign in the name and on behalf of the undersigned as director
or trustee and/or officer of the relevant Company any and all such amendments
filed with the Securities and Exchange Commission under said Acts, and any
other instruments or documents related thereto, and the undersigned does hereby
ratify and confirm all that said attorneys and agents, or either of them, shall
do or cause to be done by virtue hereof.
/s/ Philip E. Coldwell
-----------------------
Philip E. Coldwell
Date: April 18, 1995
<PAGE> 275
TEMPORARY INVESTMENT FUND, INC.
TRUST FOR FEDERAL SECURITIES
MUNICIPAL FUND FOR TEMPORARY INVESTMENT
PORTFOLIOS FOR DIVERSIFIED INVESTMENT
POWER OF ATTORNEY
Rodney D. Johnson, whose signature appears below, hereby constitutes and
appoints G. Willing Pepper and Edward J. Roach, and either of them, his true
and lawful attorneys and agents, with power of substitution or resubstitution,
to do any and all acts and things and to execute any and all instruments which
said attorneys and agents, or either of them, may deem necessary or advisable
or which may be required to enable Temporary Investment Fund, Inc., Trust for
Federal Securities, Municipal Fund for Temporary Investment and Portfolios for
Diversified Investment (each a "Company") to comply with the Investment Company
Act of 1940 as amended, and the Securities Act of 1933, as amended ("Acts"),
and any rules, regulations or requirements of the Securities and Exchange
Commission in respect thereof, in connection with the filing and effectiveness
of any and all amendments (including post-effective amendments) to each
Company's Registration Statement(s) pursuant to said Acts, including
specifically, but without limiting the generality of the foregoing, the power
and authority to sign in the name and on behalf of the undersigned as director
or trustee and/or officer of the relevant Company any and all such amendments
filed with the Securities and Exchange Commission under said Acts, and any
other instruments or documents related thereto, and the undersigned does hereby
ratify and confirm all that said attorneys and agents, or either of them, shall
do or cause to be done by virtue hereof.
/s/ Rodney D. Johnson
----------------------
Rodney D. Johnson
Date: April 18, 1995
<PAGE> 276
TEMPORARY INVESTMENT FUND, INC.
TRUST FOR FEDERAL SECURITIES
MUNICIPAL FUND FOR TEMPORARY INVESTMENT
PORTFOLIOS FOR DIVERSIFIED INVESTMENT
POWER OF ATTORNEY
Robert R. Fortune, whose signature appears below, hereby constitutes and
appoints G. Willing Pepper and Edward J. Roach, and either of them, his true
and lawful attorneys and agents, with power of substitution or resubstitution,
to do any and all acts and things and to execute any and all instruments which
said attorneys and agents, or either of them, may deem necessary or advisable
or which may be required to enable Temporary Investment Fund, Inc., Trust for
Federal Securities, Municipal Fund for Temporary Investment and Portfolios for
Diversified Investment (each a "Company") to comply with the Investment Company
Act of 1940 as amended, and the Securities Act of 1933, as amended ("Acts"),
and any rules, regulations or requirements of the Securities and Exchange
Commission in respect thereof, in connection with the filing and effectiveness
of any and all amendments (including post-effective amendments) to each
Company's Registration Statement(s) pursuant to said Acts, including
specifically, but without limiting the generality of the foregoing, the power
and authority to sign in the name and on behalf of the undersigned as director
or trustee and/or officer of the relevant Company any and all such amendments
filed with the Securities and Exchange Commission under said Acts, and any
other instruments or documents related thereto, and the undersigned does hereby
ratify and confirm all that said attorneys and agents, or either of them, shall
do or cause to be done by virtue hereof.
/s/ Robert R. Fortune
----------------------
Robert R. Fortune
Date: April 21, 1995
<PAGE> 277
EXHIBIT INDEX
<TABLE>
<CAPTION>
Exhibit Page
- ------- ----
<S> <C>
11(a) Consent of Coopers & Lybrand L.L.P.
11(b) Consent of Drinker Biddle & Reath
27.1 Financial Data Schedules - FedFund
27.2 Financial Data Schedules - T-Fund
27.3 Financial Data Schedules - FedCash
27.4 Financial Data Schedules - T-Cash
27.5 Financial Data Schedules - Federal Trust Fund
27.6 Financial Data Schedules - Treasury Trust Fund
27.7 Financial Data Schedules - Treasury Trust Dollar
Fund
</TABLE>
<PAGE> 1
EXHIBIT (1)
DECLARATION OF TRUST
TRUST FOR FEDERAL SECURITIES
AMENDED AND RESTATED AS OF AUGUST 9, 1993
The DECLARATION OF TRUST, made as of August 9, 1993 by the undersigned
Trustees, is hereby amended by restating the same in its entirety as follows:
I.
NAME
This trust shall be known as Trust for Federal Securities (hereinafter
called the "Trust").
II.
PURPOSE OF TRUST
The purpose for which the Trust is formed is to act as a management
investment company under the Investment Company Act of 1940.
III.
DEFINITIONS
3.1 Definition of Certain Terms. As used in this Declaration of
Trust, the terms set forth below shall mean:
A. "Shareholder" means a record owner of Shares of the Trust.
B. "Shares" means the equal proportionate units of interest of each
class into which the beneficial interest in the Trust may be classified or
reclassified from time to time by the Trustees acting under this Declaration of
Trust, or in the absence of such action, means the equal proportionate units of
interest into which the entire beneficial interest in the Trust shall be divided
from time to time, and includes fractions of Shares as well as whole Shares.
C. "Person" shall mean a natural person a corporation, a partnership
an association, a joint-stock company, a trust, a fund or any organized group of
persons whether incorporated or not.
<PAGE> 2
D. The "Trustees" refers to the individual trustees of the Trust in
their capacity as trustees hereunder and to their successor or successors while
serving in office as a trustee of the Trust.
E. The "Act" refers to the Investment Company Act of 1940, as now or
hereafter amended, and to the rules and regulations adopted thereunder.
F. The terms "assignment" and "Interested Person" shall have the
respective meanings set forth in the Act. The term "Vote by a majority of
outstanding Shares" shall mean the "vote of a majority of the outstanding voting
securities" as defined in the Act.
IV.
OWNERSHIP OF ASSETS OF THE TRUST
The assets of the Trust shall be held separate and apart from any
assets now or hereafter held in any capacity other than as Trustee hereunder by
the Trustees or any successor Trustees. All the assets of the Trust shall at all
times be considered as vested in the Trustees. Except to the extent otherwise
required by Article V hereof, no Shareholder shall be deemed to have severable
ownership in any individual asset of the Trust or any right of partition or
possession thereof, but each Shareholder shall have a proportionate undivided
beneficial interest in the Trust.
V.
SHAREHOLDERS: BENEFICIAL INTEREST IN THE TRUST:
PURCHASE AND REDEMPTION OF SHARES
5.1 Shares of Beneficial Interest.
A. The beneficial interests in the Trust shall at all times be
divided into an unlimited number of transferable Shares, without par value. All
Shares shall be of one class, provided, however, that subject to this
Declaration of Trust, the Trustees shall have the power to classify or
reclassify any unissued Shares into a second class of Shares and any additional
classes of Shares by setting or changing in any one or more respects, from time
to time before the issuance thereof, their preferences, designations, conversion
or other rights, restrictions, limitations as to dividends, conditions of
redemption, qualifications or other terms provided, that the investment
objective, policies and restrictions governing the management of the Trust,
including the management of assets belonging to any
-2-
<PAGE> 3
class of Shares, may from time to time be changed or supplemented by the
Trustees subject to the requirements of the Act. Upon the issuance of the first
Share of a second class of Shares classified or reclassified by the Trustees
pursuant to this Section 5.1, all Shares theretofore issued and outstanding
shall automatically represent Shares of a separate class having the voting
rights, preferences, participating, or other special rights and qualifications,
restrictions and limitations provided for in this Declaration of Trust with
respect to any class of Shares. The Trustees may from time to time divide or
combine the outstanding Shares of the Trust or of any class into a greater or
lesser number without thereby changing the proportionate beneficial interest of
the Shares in the Trust or in the assets belonging to such class, as the case
may be. Subject to the respective voting rights, preferences, participating, or
other special rights and qualifications, restrictions and limitations expressly
provided for in this Declaration of Trust with respect to each class of Shares,
the Trustees shall have the power to classify or reclassify any class of Shares
into one or more sub-classes by setting or changing in any one or more respects,
from time to time, their preferences, designations, conversion or other rights,
restrictions, limitations as to dividends, conditions of redemption and
qualifications or other terms. All references in this Declaration of Trust to
any class of Shares shall include and refer to the Shares of any sub-class
thereof.
B. The holder of each Share shall be entitled to one vote for each
full Share, and a proportionate fractional vote for each fractional Share,
irrespective of the class, then recorded in his name on the books of the Trust.
On any matter submitted to a vote of Shareholders, all Shares then issued and
outstanding and entitled to vote, irrespective of the class, shall be voted in
the aggregate and not by class except: (1) as otherwise required by the
Investment Company Act of 1940, or (2) when the matter, as conclusively
determined by the Trustees, affects only the interests of the Shareholders of a
particular class or classes of Shares (in which case only Shareholders of the
affected class or classes shall be entitled to vote thereon).
C. Each class of Shares of the Trust shall have the following
preferences, participating or other special rights, qualifications, restrictions
and limitations:
(1) All consideration received by the Trust for the issue or sale
of Shares of any class, together with all income, earnings, profits and
proceeds derived from the investment thereof, including any proceeds
derived from the sale, exchange or liquidation of such investments, any
funds or payments derived from any reinvestment of such proceeds in
whatever form the same may be, and any general assets of the Trust not
-3-
<PAGE> 4
belonging to a particular class which the Trustees may, in their sole
discretion, allocate to a class, shall irrevocably belong to the class
of Shares with respect to which such assets, payments or funds were
received or allocated for all purposes, subject only to the rights of
creditors, and shall be so handled upon the books of account of the
Trust. Such assets and the 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, are herein referred to as "assets
belonging to" such class.
(2) The assets belonging to any class of Shares shall be charged
with the direct liabilities in respect of such class and shall also be
charged with such class's share of the general liabilities of the Trust
in proportion to the relative net assets of the respective classes
determined at such time or times as may be authorized by the Trustees.
The determination of the Trustees shall be conclusive as to the nature
and amount of such liabilities, including the amount of accrued
expenses and reserves; as to any allocation of the same to or among one
or more classes; and as to whether the same are allocable to one or
more classes. The liabilities so charged to a class are herein referred
to as "liabilities belonging to" such class.
(3) In the event of the termination of the Trust and the winding
up of its affairs, the Shareholders of each class shall be entitled to
receive, as a class, out of the assets of the Trust available for
distribution to Shareholders, but other than general assets not
belonging to any particular class of Shares, 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 in their name
on the books of the Trust. In the event that there are any general
assets not belonging to any particular class of Shares and available
for distribution, such distribution shall be made to the Shareholders
of all classes in proportion to the relative net assets of the
respective classes determined as hereinafter provided and the number of
Shares of such class held by them and recorded in their name on the
books of the Trust.
5.2 Purchase of Shares in the Trust. The Trustees may accept
investments in the Trust from such persons and on such terms as they may from
time to time authorize. Each investment shall be credited to the Shareholder's
account in the form of
-4-
<PAGE> 5
full and fractional Shares of the Trust at the net asset value per Share next
determined after receipt of the investment; provided, however, that the Trustees
may, in their sole discretion, determine that a sales charge shall be imposed
upon investments in the Trust.
5.3 Net Asset Value Per Share. The net asset value per Share of the
Trust shall be computed on each day during which the New York Stock Exchange is
open for trading, not less frequently than once daily, as of the time of the
close of trading on such Exchange, or at such other time or times as the
Trustees may specify. Assets shall be valued as follows: (a) all securities for
which market quotations are readily available, at market value; and (b) all
other securities and assets, at fair value determined in good faith by the
Trustees or by the investment adviser or other person, as the Trustees may
determine, acting under supervision of the Trustees. Net asset value per Share
of any class shall be determined by dividing the total value of the assets
belonging to the class, less the value of any liabilities belonging to the
class, by the total outstanding Shares of the class.
5.4 Ownership of Shares. The ownership of Shares shall be recorded on
the books of the Trust. The Trustees may make such rules as they consider
appropriate for the transfer of Shares and similar matters. The record books of
the Trust shall be conclusive as to who are the holders of Shares and to the
number of Shares held by each Shareholder.
5.5 Preemptive Rights. Shareholders shall have no preemptive or other
rights to subscribe to any additional Shares or other securities issued by the
Trust or the Trustees.
5.6 Redemption of Shares. To the extent the Trust has funds or
property legally available therefor, a Shareholder of the Trust shall have the
right, subject to the provisions of Section 5.8 hereof, to require the Trust to
redeem his full and fractional Shares of any class out of assets belonging to
such class at a redemption price equal to the net asset value per Share next
determined after receipt of a request to redeem. If, in the opinion of the
Trustees, ownership of Shares has or may become concentrated to an extent which
would cause the Trust to be deemed a personal holding company within the meaning
of the Internal Revenue Code, as amended, the Trust may compel the redemption
of, reject any order for, or refuse to give effect on the books of the Trust to
the transfer of, any Shares in an effort to maintain the ownership of Shares so
as to prevent that consequence. The Trustees shall establish such rules and
procedures as they deem appropriate for the redemption of Shares, including the
imposition of a redemption fee, provided that all redemptions are made in
accordance with the provisions of the Act.
-5-
<PAGE> 6
5.7 Option to Redeem Small Accounts. The Trust reserves the right to
redeem Shares in any account for their then current net asset value per Share
(which will be paid to the Shareholder), if the value of such account is less
than $1,000; provided, however, that each Shareholder shall first be notified in
writing that his account has a value of less than $1,000 and allowed thirty days
to make an additional investment before the redemption is processed by the
Trust.
5.8 Suspension of Right of Redemption. The Trustees may suspend the
right of redemption or postpone the date of payment (a) during any period that
the New York Stock Exchange (the "Exchange") is closed other than for customary
weekend or holiday closings, or trading on the Exchange is restricted as
determined by the Securities and Exchange Commission (the "Commission"), (b)
during any period when an emergency exists as defined by the rules of the
Commission as a result of which it is not reasonably practicable for the Trust
to dispose of securities owned by it, or fairly to determine the value of its
net assets, and (c) for such other periods as the Commission may permit. Such
suspension shall take effect at such time as the Trustees shall specify but not
later than the close of business on the business day following the declaration
of suspension, and thereafter there shall be no right of redemption or payment
until the Trustees shall declare the suspension at an end, except that the
suspension shall terminate in any event on the first day on which said Exchange
shall have reopened or the period specified in (a) or (b) shall have expired. In
case of suspension of the right of redemption, a Shareholder may either withdraw
his request for redemption or receive payment based on the net asset value
existing after the termination of the suspension.
VI.
THE TRUSTEES
6.1 Management of the Trust. The business and affairs of the Trust
shall be managed by the Trustees, and they shall have all powers necessary and
desirable to carry out such responsibility.
6.2 Number and Term of Office. The number of Trustees shall be
determined from time to time by the Trustees themselves, but shall not be less
than three, nor more than fifteen. Each Trustee shall hold office for such
period as may be provided in the By-Laws. A Trustee shall qualify by accepting
in writing his election or appointment and agreeing to be bound by the
provisions of the Declaration of Trust. Notwithstanding the foregoing, (a) any
Trustee may resign his trust by written instrument signed by him and delivered
to the other Trustees at the principal business office of the Trust (without
need for
-6-
<PAGE> 7
prior or subsequent accounting), which shall take effect upon such delivery or
upon such later date as is specified therein; (b) any Trustee may be removed at
any time with or without cause by written instrument, signed by at least
two-thirds of the number of Trustees prior to such removal, specifying the date
when such removal shall become effective; (c) any Trustee who has become
incapacitated by illness or injury may be retired by written instrument signed
by a majority of the other Trustees; and (d) the terms of the Trustees shall be
as provided in the By-Laws.
6.3 Initial Trustees. At the first meeting of Shareholders of the
Trust held after the commencement of the first public offering of its Shares on
a date fixed by the Trustees, the Shareholders shall elect not less than three
Trustees. The initial Trustees shall be C. Canby Balderston, Dudley F. Cates,
Robert R. Fortune, Samuel C. Myer, Russell W. Richie, James Louis Robertson and
Ralph A. Young.
6.4 Quorum. At all meetings of the Trustees, a majority of the
Trustees shall constitute a quorum for the transaction of business and the
action of a majority of the Trustees present at any meeting at which a quorum is
present shall be the action of the Trustees unless the concurrence of a greater
proportion is required for such action by law, the By-Laws, or this Declaration
of Trust. If a quorum shall not be present at any meeting of Trustees, the
Trustees present may by a majority vote adjourn the meeting without notice other
than announcement at the meeting, until a quorum shall be present. The Trustees
may act with or without a meeting. Unless provided otherwise in this Declaration
of Trust or required by law, any action of the Trustees may be taken at a
meeting by vote of a majority of the Trustees present (a quorum being present)
or without a meeting by written consents of a majority of the Trustees.
The Trustees may appoint committees of Trustees and delegate powers to
them as provided in the By-Laws. Any committee of the Trustees, including an
executive committee, if any, may act with or without a meeting. A quorum for all
meetings of any such committee shall be a majority, of the members thereof.
Unless provided otherwise in this Declaration of Trust, any action of any such
committee may be taken at a meeting by vote of a majority of the members present
(a quorum being present) or without a meeting by written consent of a majority
of the members.
6.5 Appointment of Trustees. The term of a Trustee shall terminate
and a vacancy shall occur upon the expiration of his term or in the event of his
death, resignation, bankruptcy, retirement, removal, adjudicated incompetency or
other incapacity to perform the duties of the office of Trustee. In case a
-7-
<PAGE> 8
vacancy shall, by reason of an increase in number, or for any other reason,
exist, the remaining Trustees may fill such vacancy by appointing such other
person as they in their discretion shall select. Such appointments shall be
evidenced by a written instrument signed by a majority of the Trustees in
office, but the appointment shall not take effect until the individual so named
shall have accepted in writing the appointment and agreed to be bound by the
terms of this Declaration of Trust. An appointment of a Trustee may be made by
the Trustees then in office and notice thereof mailed to Shareholders as
aforesaid in anticipation of a vacancy to occur by reason of retirement,
resignation or increase in number of Trustees effective at a later date,
provided that said appointment shall become effective only at or after the
effective date of said retirement, resignation or increase in number of
Trustees. A vacancy may also be filled by the election of the Shareholders at an
annual or special meeting. As soon as any Trustee so appointed or elected shall
have accepted this Trust, the Trust estate shall vest in the new Trustee or
Trustees, together with the continuing Trustees, without any further act or
conveyance, and he shall be deemed a Trustee hereunder.
6.6 Effect of Death, Resignation, etc. of Trustee. The death,
resignation, bankruptcy, retirement, removal, or incapacity of the Trustees, or
any one of them, shall not operate to annul the Trust or to revoke any existing
agency created pursuant to the terms of this Declaration of Trust. Upon the
resignation or removal of a Trustee, or his otherwise ceasing to be a Trustee,
he shall execute and deliver such documents as the remaining Trustees shall
require for the purpose of conveying to the Trust or the remaining Trustees any
Trust property held in the name of the resigning or removed Trustee. Upon the
incapacity or death of any Trustee, his legal representative shall execute and
deliver on his behalf such documents as the remaining Trustees shall require as
provided in the preceding sentence.
6.7 Powers. The Trustees in all instances shall act as principals,
and are and shall be free from the control of the Shareholders. The Trustees
shall have full power and authority to do any and all acts and to make and
execute any and all contracts and instruments that they may consider necessary
or desirable in connection with the management of the Trust. The Trustees shall
not be bound or limited by present or future laws or customs in regard to Trust
investments, but shall have full authority and power to make any and all
investments which they, in their uncontrolled discretion, shall deem proper to
accomplish the purpose of this Trust. Subject to any applicable limitation in
this Declaration of Trust or the By-Laws of the Trust, the Trustees shall have
power and authority:
-8-
<PAGE> 9
A. To buy and invest funds in their hands, in securities including,
but not limited to, Treasury bills, notes or other obligations issued or
guaranteed by the U.S. Government, its agencies or instrumentalities, rights to
purchase such securities, or in "when-issued" contracts for any such securities;
to purchase such securities coupled with an agreement by the vendor as to their
repurchase, and sell such securities coupled with a similar agreement; or retain
such funds in cash and from time to time change the investments of its funds,
without in any case being limited to investments which may be made by
fiduciaries.
B. To adopt By-Laws not inconsistent with this Declaration of Trust
providing for the conduct of the business of the Trust and to amend and repeal
them to the extent that they do not reserve that right to the Shareholders.
C. To elect and remove such officers and appoint and terminate such
agents as they consider appropriate.
D. To set record dates in the manner hereinafter provided for.
E. To sell or exchange any or all of the assets of the Trust,
subject to the provisions of Article XI, Section 11.3 thereof.
F. To vote or give assent, or exercise any rights of ownership, with
respect to securities or property; to solicit proxies from Shareholders and to
execute and deliver powers of attorney and proxies to such person or persons as
the Trustees shall deem proper, granting to such person or persons such power
and discretion with relation to securities or property as the Trustees shall
deem proper.
G. To exercise powers and rights of subscription or otherwise which
in any manner arise out of ownership of securities.
H. To hold any security or property, a form not indicating any
trust, whether in bearer, unregistered or other negotiable form; or either in
the Trust's own name or in the name of a custodian or a nominee or nominees.
I. To consent to or participate in any plan for the reorganization,
consolidation or merger of any corporation or concern, any security of which is
held in the Trust; to consent to any contract, lease, mortgage, purchase, or
sale of property by such corporation or concern, and to pay calls or
subscriptions with respect to any security held in the Trust.
-9-
<PAGE> 10
J. To compromise, arbitrate, or otherwise adjust claims in favor of
or against the Trust or any matter in controversy including, but not limited to,
claims for taxes.
K. To make distributions of income and of capital gains to
Shareholders in the manner hereinafter provided for.
L. To issue guarantees, to lend its assets and to borrow money from
banks and to pledge, mortgage or hypothecate the assets of the Trust.
M. To issue, acquire, hold, resell, and otherwise deal in
securities, and to apply to any acquisition of securities any property of the
Trust whether capital or surplus or otherwise.
N. To retain and employ persons to serve on behalf of the Trust as
investment adviser, administrator, transfer agent, custodian, underwriter,
distributor or in such other capacities as they consider desirable.
O. To delegate such power and authority as they consider desirable
to any officers of the Trust and to any investment adviser, administrator,
transfer agent, custodian, underwriter, distributor or other person.
No one dealing with the Trustees shall be under any obligation to make
any inquiry concerning the authority of the Trustees, or to see to the
application of any payments made or property transferred to the Trustees or upon
their order.
6.8 Trustees and Officers as Shareholders. Any Trustee, officer or
other agent of the Trust may acquire, own and dispose of Shares of the Trust to
the same extent as if he were not a Trustee, officer or agent; and the Trustee
may issue and sell or cause to be issued and sold Shares of the Trust to and buy
such Shares from any such person with which he is affiliated subject only to the
general limitations herein contained as to the sale and purchase of such Shares;
and all subject to any restrictions which may be contained in the By-laws.
6.9 Trustee Reimbursement. The Trustees have the power to incur and
to pay (or shall be reimbursed) from the Trust estate for all expenses and
disbursements of the Trust, including, without limitation, interest expense,
compensation payable to Trustees and officers of the Trust, taxes, fees and
commissions of every kind incurred in connection with the business of the Trust,
expenses of issue, repurchase and redemption of Shares, expenses of registering
and qualifying the Trust and its Shares under Federal and State laws and
regulations, charges of custodians, transfer agents, investment advisers;
administrators and registrars, expenses of preparing
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<PAGE> 11
and printing and distributing prospectuses, auditing and legal expenses,
expenses of reports to Shareholders, expenses of meetings of Shareholders and
proxy solicitations therefor, insurance expense, association membership dues and
such nonrecurring items as may arise, including litigation to which, the Trust
is a party, and for all losses and liabilities by them incurred in administering
the Trust; and for the payment of such expenses, disbursements, losses and
liabilities, the Trustees shall have a lien on the Trust estate prior to any
rights or interests of the Shareholders thereto.
6.10 Power to Conduct Business; Presumptions. The Trustees shall have
power to conduct the business of the Trust and carry on its operations in any
and all of its branches and maintain offices both within and without the
Commonwealth of Pennsylvania, in any and all states of the United States of
America, in the District of Columbia, and in any and all commonwealths,
territories, dependencies, possessions, agencies or instrumentalities of the
United States of America and of foreign governments, and to do all such other
things and execute all such instruments as they deem necessary, proper or
desirable in order to promote the interests of the Trust although such things
are not herein specifically mentioned. Any determination as to what is in the
interests of the Trust made by the Trustees in good faith shall be conclusive.
In construing the provisions of this Declaration, the presumption shall be in
favor of a grant of power to the Trustees. The Trustees will not be required to
obtain any court order to deal with the Trust property.
6.11 Service in Other Capacities. Any Trustee, officer, employee or
agent of the Trust, including any investment adviser, transfer agent,
administrator, distributor, custodian or underwriter for the Trust, may serve in
any other capacity on his or its own behalf or on behalf of others, and may
engage in other business activities in addition to his or its services on behalf
of the Trust provided, that such other activities do not materially interfere
with the performance of his duties as a Trustee.
VII.
AGREEMENTS WITH: INVESTMENT ADVISER,
PRINCIPAL UNDERWRITER, ADMINISTRATOR, TRANSFER AGENT,
AND CUSTODIAN
7.1 Investment Adviser. The Trustees may enter into a written
investment advisory agreement or agreements with any person whereby such person
shall undertake to furnish the Trustees such portfolio management, investment
advisory, statistical and research facilities and other services upon such terms
and conditions as the Trustees may in their discretion
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determine. Notwithstanding any provisions of this Declaration of Trust, the
Trustees may authorize the investment adviser (subject to such general or
specific instructions as the Trustees may adopt) to effect purchases, sales or
exchanges of portfolio securities of the Trust on behalf of the Trustees or may
authorize any officer or Trustee to effect such purchases, sales or exchanges
pursuant to the recommendations of the investment adviser (and all without
further action by the Trustees). Any such purchases, sales and exchanges shall
have been deemed to have been authorized by all the Trustees.
7.2 Administrator. The Trustees may, on such terms and conditions as
they may in their discretion determine, enter into one or more agreements with
any person(s) providing for administrative services to the Trust, including
assistance in supervising the Trust's operations and performance of
administrative, clerical and other services considered desirable by the
Trustees.
7.3 Principal Underwriter. The Trustees may, on such terms and
conditions as they may in their discretion determine, enter into one or more
distribution agreements with any person(s) providing for the sale of Shares of
the Trust to net the Trust at least the net asset value per Share, pursuant to
which the Trust may either agree to sell the Shares to the other party to the
agreement or appoint such other party its sales agent for such Shares. Such
agreement may also provide for the repurchase of Shares of the Trust by such
other party as principal or agent of the Trust, and may authorize the other
party to enter into agreements with dealers for the purpose of the distribution
or repurchase of Shares.
7.4 Transfer Agent. The Trustees may, on such terms and conditions as
the Trustees may in their discretion determine, enter into one or more
agreements with any person(s) providing for transfer agency and shareholder
services to the Trust.
7.5 Custodian. The Trustees may, on such terms and conditions as they
may in their discretion determine, enter into one or more agreements with any
person(s) providing for the custody and safekeeping of the property of the
Trust. Any custodian agreement shall in all respects be consistent with and
subject to the requirements of the Act as then in effect.
7.6 Parties to the Agreement. The same person may be employed in any
multiple capacity under Sections 7.1 through 7.5 of this Article VII and may
receive compensation from the Trust in as many capacities in which such persons
shall serve the Trust. The Trustees may enter into any agreement of the
character described in this Article VII with any person, including any person in
which any Trustee, officer, employee or Shareholder of the Trust may be
interested, and no such agreement
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shall be invalidated or rendered voidable by reason of the existence of any such
relationship, nor shall any person holding such relationship be liable by reason
of such relationship for any loss or expense to the Trust under or by reason of
said agreement or accountable for any profit realized directly or indirectly
therefrom.
VIII
SHAREHOLDERS' VOTING POWERS AND MEETINGS
8.1 Voting Powers. The Shareholders shall have power to vote (a) for
the election of Trustees, (b) with respect to the amendment of this Declaration
of Trust as provided in Article XI, Section 11.8 and (c) with respect to such
additional matters relating to the Trust as may be required by law, by this
Declaration of Trust, the By-Laws of the Trust, or any conditions applicable to
or agreements of the Trust with the Commission or any State, or as the Trustees
may consider desirable. Each whole Share shall be entitled to one vote as to any
matter on which it is entitled to vote, and each fractional Share shall be
entitled to a proportionate fractional vote. There shall be no cumulative
voting. Shares may be voted in person or by proxy. Until Shares are issued, the
Trustees may exercise all rights of Shareholders and may take any action
required or permitted by law, this Declaration of Trust or any By-Laws of the
Trust to be taken by Shareholders.
8.2 Meetings. Meetings of Shareholders may be called by the Trustees
and shall be called by the Trustees upon the written request of Shareholders
owning at least twenty percent of the outstanding Shares entitled to vote.
8.3 Quorum and Required Vote. At any meeting of the Shareholders a
quorum for the transaction of business shall consist of a majority of the Shares
of the Trust then outstanding and entitled to vote appearing in person or by
proxy, provided that a less number may make reasonable adjournments of such
meeting until a quorum is obtained. Subject to any applicable requirements of
law or of this Declaration of Trust or the By-Laws, a majority of the Shares
voted shall decide any question and a plurality shall elect a Trustee.
8.4 Shareholder Action by Written Consent. Any action which may be
taken by Shareholders may be taken without a meeting of a majority of
Shareholders entitled to vote on the matter if they consent to the action in
writing and the written consents are filed with the records of the meetings of
Shareholders. Such consent shall be treated for all purposes as a vote taken at
a meeting of Shareholders.
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<PAGE> 14
8.5 By-Laws. The By-Laws may include further provisions for
Shareholders' meetings, votes, record dates, notices of meetings and related
matters.
IX.
DISTRIBUTIONS AND DETERMINATION
OF NET INCOME
Distributions. The Board of Trustees may from time to time declare and
pay dividends or distributions, in Shares or in cash, on any or all classes of
Shares, the amount of such dividends or distributions and the payment thereof
being wholly in the discretion of the Board of Trustees. Dividends or
distributions on Shares of any class shall be paid only out of the net income,
surplus, capital or other assets belonging to such class.
Inasmuch as the computation of net income and gains for Federal income
tax purposes may vary from the computation thereof on the books of the Trust,
the Trustees shall have the power in their discretion to distribute for any
fiscal year as ordinary dividends and as capital gains distributions,
respectively, amounts sufficient to enable the Trust to qualify as a regulated
investment company to avoid any liability for Federal income taxes in respect of
that year. In furtherance and not in limitation of the foregoing, in the event
that any class or classes of Shares has a net capital loss or allowable
deductions in excess of taxable income for a fiscal year, and to the extent that
the Trustees determine in their discretion for such tax purposes that such net
capital loss or excess allowable deductions shall offset net capital gains or
taxable income from any other class or classes of Shares, the amount available
for distribution to the Shareholders of the class or classes with the net
capital gain or taxable income may, in the discretion of the Trustees, be
reduced by the amount offset.
The decision of the Trustees as to what, in accordance with generally
accepted accounting principles, is income and what is principal shall be final,
and except as specifically provided herein the decision of the Trustees as to
what expenses and charges of the Trust shall be charged against principal and
what against the income shall be final. Any income not distributed in any year
may be permitted to accumulate and as long as not distributed may be invested
from time to time in the same manner as the principal funds of the Trust.
The Trustees shall have power to declare and cause to be paid
dividends, which, at the election of the Trustees, may be accrued or paid in
cash or property. The Trustees may adopt any resolution deemed necessary or
desirable providing for the
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<PAGE> 15
declaration of dividends on a daily basis or otherwise by one or more designated
officers of the Trust, which may be made payable to shareholders of record at
such time as may be fixed. Dividends declared but not yet paid with respect to
Shares which have been redeemed may be paid prior to the time otherwise payable
if the Trustees so determine in their sole discretion.
X.
LIMITATION OF LIABILITY AND INDEMNIFICATION
10.1 Limitation of Trustee Liability. Every act or thing done or
omitted, and every power exercised or obligation incurred by the Trustees or any
of them in the administration of this Trust or in connection with any business,
property or concerns of the Trust, whether ostensibly in their own names or in
their Trust capacity, shall be done, omitted, exercised or incurred by them as
Trustees and not as individuals; and every person contracting or dealing with
the Trustees or having any debt, claim or judgment against them or any of them
shall look only to the funds and property of the Trust for payment or
satisfaction; and no Trustee or Trustees and no officer or agent of the Trust
shall ever be personally liable for or on account of any contract, debt, tort,
claim, damage, judgment or decree arising out of or connected with the
administration or preservation of the Trust estate or the conduct of any
business of the Trust. A stipulation or notice to this effect shall be inserted
in every note, bond, contract, order or other undertaking issued by or on behalf
of the Trust or the Trustees relating to the Trust and on stationery used by the
Trust (but the omission thereof shall not be construed as a waiver of the
foregoing provision, and shall not render the Trustees, officers or agents
personally liable).
No Trustee shall be subject to any personal liability whatsoever to any
person for any action or failure to act (including without limitation the
failure to compel in any way any former or acting Trustee to redress any breach
of trust except for his own bad faith, willful misfeasance, gross negligence or
reckless disregard of his duties as Trustee; and all such persons shall look
solely to the Trust property for satisfaction of claims of any nature arising in
connection with the affairs of the Trust.
10.2 Indemnification of Trustees, Officers and Employees. The Trust
shall indemnify each of its Trustees against all liabilities and expenses
(including amounts paid in satisfaction of judgments, in compromise, as fines
and penalties, and as counsel fees) reasonably incurred by him in connection
with the defense or disposition of any action, suit or other proceeding, whether
civil or criminal, in which he may be
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<PAGE> 16
involved or with which he may be threatened, while in office or thereafter, by
reason of his being or having been such a Trustee except with respect to any
matter as to which, he shall have been adjudicated to have acted in bad faith,
willful misfeasance, gross negligence or reckless disregard of his duties;
provided, however, that as to any matter disposed of by a compromise payment by
such person, pursuant to a consent decree or otherwise, no indemnification
either for said payment or for any other expenses shall be provided unless the
Trust shall have received a written opinion from independent legal counsel
approved by the Trustees to the effect that if either the matter of willful
misfeasance, gross negligence or reckless disregard of duty, or the matter of
bad faith had been adjudicated, it would in his opinion have been adjudicated in
favor of such person. The rights accruing to any person under these provisions
shall not exclude any other right to which he may be lawfully entitled; provided
that no person may satisfy any right of indemnity or reimbursement except out of
the property of the Trust. The Trustees may make advance payments in connection
with the indemnification under this Section 10.2, provided that the indemnified
person shall have given a written undertaking to reimburse the Trust in the
event it is subsequently determined that he is not entitled to such
indemnification.
The Trustees shall have the power, but not the duty, in their sole
discretion, to indemnify officers and employees of the Trust but not if such
person, had he been a Trustee, would not have been entitled to indemnification
hereunder.
In addition to such rights of indemnification as may be provided
hereunder, the Trustees may purchase insurance against the risk of liability
imposed against Trustees, officers or employees by reason of their services on
behalf of the Trust.
10.3 Reliance on Experts, etc. Each Trustee and officer of the Trust
shall, in the performance of his duties, be fully and completely justified and
protected with regard to any act or any failure to act resulting from reliance
in good faith upon the books of account or other records of the Trust, upon an
opinion of counsel satisfactory to the Trust, or upon reports made to the Trust
by any of its officers or employees or by the investment adviser, the principal
underwriter, selected dealers, accountants, appraisers or other experts or
consultants selected with reasonable care by the Trustees or officer of the
Trust, regardless of whether such counsel or expert may also be a Trustee.
10.4 Limitation of Shareholder Liability. Shareholders shall not be
subject to any personal liability for the acts or obligations of the Trust. The
Trustees shall have no power to bind any Shareholder personally or to call upon
any Shareholder for the payment of any sum of money or assessment
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<PAGE> 17
whatsoever other than such as the Shareholder may at any time personally agree
to pay by way of subscription to any Shares or otherwise. Every note, bond,
contract, order or other undertaking issued by or on behalf of the Trust or the
Trustees relating to the Trust, and the stationery used by the Trust, shall
include a recitation limiting the obligation represented thereby to the Trust
and its assets (but the omission of such a recitation shall not operate to bind
any Shareholder).
10.5 Indemnification of Shareholders. In case any Shareholder or
former Shareholder shall be held to be personally liable solely by reason of his
being or having been a Shareholder and not because of his acts or omissions or
for some other reason, the Shareholder or former Shareholder (or his heirs,
executors, administrators or other legal representatives or in the case of a
corporation or other entity, its corporate or other general successor) shall be
entitled out of the Trust estate to be held harmless from and indemnified
against all loss and expense arising from such liability. The Trust shall, upon
request by the Shareholder, assume the defense of any claim made against any
Shareholder for any act or obligation of the Trust and satisfy any judgment
thereon.
XI.
MISCELLANEOUS
11.1 Trust Not a Partnership. It is hereby expressly declared that a
trust and not a partnership is created hereby. No Trustee hereunder shall have
any power to bind personally either the Trust's officers or any Shareholders.
All persons extending credit to, contracting with or having any claim against
the Trust or the Trustees shall look only to the assets of the Trust for payment
under such credit, contract or claim; and neither the Shareholders nor the
Trustees, nor any of their agents, whether past, present or future, shall be
personally liable therefor.
11.2 No Bond or Surety. The Trustees shall not be required to give any
bonds as such, nor any surety if a bond is required.
11.3 Termination of Trust. This Trust shall continue without
limitation of time, provided, however, that:
A. The Trustees, with the vote of a majority of the outstanding
Shares of a class, may sell and convey the assets belonging to such class of
Shares to another trust or corporation organized under the laws of any state of
the United States, which is a management investment company as defined in the
Act, for an adequate consideration which may include the assumption of all
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outstanding obligations, taxes and other liabilities, accrued or contingent, of
the class and which may include shares of beneficial interest or stock of such
trust or corporation. Upon making provision for the payment of all such
liabilities, by such assumption or otherwise, the Trustees shall distribute the
remaining proceeds ratably among the holders of the Shares of the class then
outstanding.
B. The Trustees, with the vote of a majority of the outstanding
Shares of a class, may sell and convert into money all the assets of such class.
Upon making provision for the payment of all outstanding obligations, taxes and
other liabilities, accrued or contingent, of the class, the Trustees shall
distribute the remaining assets of the class ratably among the holders of the
outstanding Shares of the class.
C. Without the vote of a majority of outstanding Shares of any class
or of the Trust (unless Shareholder approval is otherwise required by applicable
law), the Trustees may combine the assets belonging to any two or more classes
of Shares into a single class if the Trustees reasonably determine that such
combination will not have a material adverse effect on the Shareholder of each
class.
D. Upon completion of the distribution of the remaining proceeds or
the remaining assets as provided in sub-sections A and B, the Trust shall
terminate as to that class of Shares and the Trustees shall be discharged of any
and all further liabilities and duties hereunder and the right, title and
interest of all parties shall be cancelled and discharged.
11.4 Incorporation. With the approval of the holders of a majority of
the outstanding Shares, the Trustees may cause to be organized or assist in
organizing a corporation or corporations under the laws of any jurisdiction or
any other person to take over all of the Trust property or to carry on any
business in which the Trust shall directly or indirectly have any interest, and
to transfer the Trust property to any such person in exchange for any Shares or
securities thereof or otherwise, and to lend money to, subscribe for the Shares
or securities of, and enter into any contracts with any such person or persons
in which the Trust holds or is about to acquire shares of any other interest.
The Trustee may also cause a merger or consolidation between the Trust or any
successor thereto and any such person if and to the extent permitted by law.
Nothing contained herein shall be construed as requiring approval of
Shareholders for the Trustees to organize or assist in organizing one or more
corporations, trusts, partnerships, associations or other organizations and
selling, conveying or transferring a portion of the Trust property to such
person(s).
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<PAGE> 19
11.5 Filing of Copies, References, Headings. The original or a copy of
this instrument and of each Declaration of Trust supplemental hereto shall be
kept at the office of the Trust where it may be inspected by any Shareholder.
Anyone dealing with the Trust may rely on a certificate by an officer of the
Trust as to whether or not any such supplemental Declarations of Trust have been
made and as to any matters in connection with the Trust hereunder, and with the
same effect as if it were the original, may rely on a copy certified by an
officer of the Trust to be a copy of this instrument or of any such supplemental
Declaration of Trust. Headings are placed herein for convenience of reference
only and in the case of any conflict, the text of this instrument, rather than
the headings, shall control. This instrument may be executed in any number of
counterparts each of which shall be deemed an original.
11.6 Applicable Law. The Trust set forth in this instrument is made in
the Commonwealth of Pennsylvania, and is to be governed by and construed and
administered according to the laws of said Commonwealth. The Trust shall be of
the type commonly called a business trust, and without limiting the provisions
hereof, the Trust may exercise all powers which are ordinarily exercised by such
a trust.
11.7 Provisions in Conflict With Law or Regulations.
A. The provisions of this Declaration of Trust are severable, and if
the Trustees shall determine, with the advice of counsel, that any of such
provisions is in conflict with the Act, the regulated investment company
provisions of the Internal Revenue Code or with other applicable laws and
regulations, the conflicting provision shall be deemed never to have constituted
a part of this Declaration of Trust; provided, however, that such determination
shall not affect any of the remaining provisions of this Declaration of Trust or
render invalid or improper any action taken or omitted prior to such
determination.
B. If any provision of this Declaration of Trust shall be held
invalid or unenforceable in any jurisdiction, such invalidity or
unenforceability shall attach only to such provision in such jurisdiction and
shall not in any manner affect such provision in any other jurisdiction or any
other provision of this Declaration of Trust in any jurisdiction.
C. Notwithstanding the foregoing, nothing contained in this
Declaration of Trust shall permit any amendment of this Declaration of Trust
which would impair the exemption from personal liability of the Trustees and
Shareholders of the Trust or to permit assessments upon Shareholders.
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11.8 Amendment Procedure.
A. This Declaration of Trust may be amended by the affirmative vote
of the holders of not less than a majority of the outstanding Shares.
B. The Trustees may also amend this Declaration without the vote of
Shareholders prior to the first public offering of the Trust's shares, or if
they deem it necessary to conform this Declaration of Trust to the requirements
of applicable federal laws or regulations or the requirements of the regulated
investment company provisions of the Internal Revenue Code, but the Trustees
shall not be liable for failing so to do.
IN WITNESS WHEREOF, the undersigned have executed this Amendment to the
Declaration of Trust as of the 9th day of August, 1993.
/s/ Philip E. Coldwell
-------------------------------------------
Philip E. Coldwell
/s/ Rodney D. Johnson
-------------------------------------------
Rodney D. Johnson
/s/ Robert R. Fortune
-------------------------------------------
Robert R. Fortune
/s/ G. Willing Pepper
-------------------------------------------
G. Willing Pepper
/s/ David R. Wilmerding, Jr.
-------------------------------------------
David R. Wilmerding, Jr.
/s/ Anthony M. Santomero
-------------------------------------------
Anthony M. Santomero
/s/ Henry M. Watts, Jr.
-------------------------------------------
Henry M. Watts, Jr.
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EXHIBIT (2)
BY-LAWS
of
TRUST FOR FEDERAL SECURITIES
AMENDED AND RESTATED AS OF AUGUST 9, 1993
ARTICLES I
MEETINGS OF SHAREHOLDERS
1.1 No Annual Meeting Required. No Annual Meeting of Shareholders
shall be held unless required by applicable law or otherwise determined by the
Board of Trustees. Any Annual or Special Meetings of Shareholders shall be held
on such dates and at such times and places as the Trustees may designate.
1.2 Special Meetings. Special Meetings of Shareholders may be called
by the Trustees and shall be called by the Trustees upon the written request of
holders of at least twenty percent of the outstanding shares entitled to vote.
1.3 Notice. Written notice, stating the place, day and hour of each
meeting of Shareholders and in the case of Special Meetings, the general nature
of the business to be transacted, shall be given by, or at the direction of, the
person calling the meeting to each shareholder of record entitled to vote at the
meeting at least ten days prior to the day named for the meeting, unless in a
particular case a longer period of notice is required by law.
1.4 Shareholders' List. The officer or agent having charge of the
transfer books for shares of the Trust shall make, at least five days before
each meeting of Shareholders, a complete list of the Shareholders entitled to
vote at the
<PAGE> 2
meeting, arranged in alphabetical order with the address of and the number of
shares held by each such Shareholder. The list shall be kept on file at the
office of the Trust and shall be subject to inspection by any Shareholders at
any time during usual business hours and shall also be produced and kept open at
the time and place of each meeting of Shareholders and shall be subject to the
inspection of any Shareholder during each meeting of Shareholders.
1.5 Record Date. The Trustees may fix a time (during which they may
close the Share transfer books of the Trust) not more than fifty days prior to
the date of any meeting of Shareholders, or the date fixed for the payment of
any dividend, or the date of the allotment of rights or the date when any change
or conversion or exchange of Shares shall go into effect, as a record date for
the determination of the Shareholder entitled to notice of, or to vote at, any
such meeting, or entitled to receive payment of any such dividend, or to receive
any such allotment of rights, or to exercise such rights, as the case may be. In
such case, only such Shareholders as shall be Shareholders of record at the
close of business on the date so fixed shall be entitled to notice of, or to
vote at, such meeting or to receive payment of such dividend, or to receive such
allotment of rights, or to exercise such rights, as the case may be,
notwithstanding any transfer of any Shares on the books of the Trust after any
record date fixed, as aforesaid.
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ARTICLE II
TRUSTEES
2.1 Number and Term of Office. The number of Trustees shall be seven
or such other number, not less than three nor more than fifteen, as may be fixed
from time to time by the Trustees. Each Trustee shall hold office until the next
annual meeting of shareholders following his election or appointment as Trustee
and until his successor shall have been elected and qualified. Subject to the
provisions of Article I, Section 1.1, the members of the Board of Trustees shall
be elected by the Shareholders at their Annual Meeting and each Trustee shall
hold office until the Annual Meeting next after his election and until his
successor shall have been duly elected and qualified, until he shall have
resigned, or until he shall have been removed or retired as provided in Section
6.2 of Article VI of the Trust's Declaration of Trust.
2.2 Place of Meeting. Meetings of the Trustees, regular or special,
shall be held at the principal office of the Trust or at such other place as the
Trustees may from time to time determine.
2.3 Regular Meetings. Regular meetings of the Trustees may be held
without notice at such time and at the principal office of the Trust or at such
other place as the Trustees may from time to time determine.
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<PAGE> 4
2.4 Special Meetings. Special Meetings of the Trustees shall be held
whenever called by the President, Vice President, or Secretary, by two or more
Trustees or by a majority of the Executive Committee, either in writing or by
vote at a meeting.
2.5 Committees. The Trustees may by resolution passed by a majority
of the Trustees appoint from among its members an executive committee and other
committees composed of two or more Trustees, and may delegate to such
committees, in the intervals between meetings of the Trustees, any or all of the
powers of the Trustees in the management of the business and affairs of the
Trust, except the power to issue shares or to recommend to Shareholders any
action requiring Shareholders' approval.
2.6 Compensation. Any Trustee, whether or not he is a salaried
officer or employee of the Trust, may be compensated for his services as Trustee
or as a member of a Committee, or as Chairman of the Trustees or Chairman of a
Committee by fixed periodic payments or by fees for attendance at meetings or by
both, and in addition may be reimbursed for transportation and other expenses,
all in such manner and amounts as the Trustees may from time to time determine.
2.7 Participation by Conference Telephone. Trustees may participate
in Regular or Special Meetings of the Trustees, or committee meetings thereof,
by means of conference telephone or similar communications equipment if all
persons participating in the meeting can hear each other, and participation in a
<PAGE> 5
meeting by such means shall constitute presence in person at the meeting.
ARTICLE III
NOTICES
3.1 Form. Notices to Shareholders shall be in writing and delivered
personally or mailed to the Shareholders at their addresses appearing on the
books of the Trust. Notices to Trustees shall be oral or by telephone or
telegram or in writing delivered personally or mailed to the Trustees at their
addresses appearing on the books of the Trust. Oral notice shall be deemed to be
given when given directly to the person required to be notified and notice by
mail shall be deemed to be given four days after the mailing thereof. Notice to
Trustees need not state the purpose of a Regular or Special Meeting.
3.2 Waiver. Whenever any notice of the time, place or purpose of any
meeting of Shareholder, Trustees or Committee is required to be given under the
provisions of Pennsylvania law or under the provisions of the Declaration of
Trust or these By-Laws, a waiver thereof in writing, signed by the person or
persons entitled to such notice and filed with the records of the meeting,
whether before or after the holding thereof, or actual attendance at the meeting
of Shareholders in person or by proxy, or at the meeting of Trustees or
Committee in person, shall be deemed equivalent to the giving of such notice to
such persons.
<PAGE> 6
ARTICLE IV
OFFICERS
4.1 Number. The officers of the Trust shall be chosen by the Trustees
and shall include a President, who shall be a Trustee, a Secretary and a
Treasurer. The Board of Trustees may, from time to time, elect or appoint a
Controller, one or more Vice Presidents, Assistant Secretaries and Assistant
Treasurers. The Trustees may at their discretion, also appoint a Chairman who
shall perform and execute such executive and administrative duties and powers as
the Trustees shall from time to time prescribe.
4.2 Other Officers. The Trustees from time to time may appoint such
other officers and agents as they shall deem advisable, who shall hold their
offices for such terms and shall exercise such powers and perform such duties as
shall be determined from time to time by the Trustees. The Trustees may delegate
to one or more officers or agents the power to appoint any such subordinate
officers or agents and to prescribe the respective rights, terms of office,
authorities and duties.
4.3 Election and Tenure. The officers of the Trust shall be chosen
annually by the Trustees. Two or more offices may be held by the same person but
no officer shall execute, acknowledge or verify any instrument in more than one
capacity, if such instrument is required by law, the Declaration of Trust or
these By-Laws to be executed, acknowledged or verified by two or more officers.
Any officer or agent may be removed by the Trustees. An officer of the Trust may
resign by filing a written
<PAGE> 7
resignation with the President or with the Trustees or with the Secretary. Any
vacancy occurring in any office of the Trust by death, resignation, removal or
otherwise shall be filled by the Trustees.
4.4 Compensation. The salaries or other compensation of all officers
and agents of the Trust shall be fixed by the Trustees, except that the Trustees
may delegate: (1) to any Committee the power to fix the salary or other
compensation of any officer of the Trust.
4.5 President. The President, unless the Chairman has been so
designated, shall be the chief executive officer of the Trust; he shall preside
at all meetings of the Shareholders and the Trustees, shall be, ex officio, a
member of all standing committees, and shall see that all orders and resolutions
of the Trustees are carried into effect. The President shall also be the chief
administrative officer of the Trust and shall perform such other duties and have
such other powers as the Trustees may from time to time prescribe.
4.6 Vice Presidents. The Vice Presidents, in the order of their
seniority, 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 Trustees may from time to time prescribe.
4.7 Secretary. The Secretary shall attend all meetings of the
Trustees and all meetings of the Shareholders and record all the proceedings
thereof and shall perform like duties for any Committee when required. He shall
give, or cause to be
<PAGE> 8
given, notice of meetings of the Shareholders and of the Trustees, and shall
perform such other duties as may be prescribed by the Trustees or President,
under whose supervision he shall be. He shall keep in safe custody the seal of
the Trust and, when authorized by the Trustees, affix and attest the same to any
instrument requiring it. The Trustees may give general authority to any other
officer to affix the seal of the Trust and to attest the affixing by his
signature.
4.8 Assistant Secretaries. The Assistant Secretaries, in order of
their seniority, shall in the absence of disability of the Secretary, perform
the duties and exercise the powers of the Secretary and shall perform such other
duties as the Trustee shall prescribe.
4.9 Treasurer. The Treasurer shall be the chief financial officer of
the Trust. He shall be responsible for the maintenance of its accounting records
and shall render to the Trustees when the Trustees so require an account of all
the Trust's financial transactions and a report of the financial condition of
the Trust.
4.10 Controller. The Controller shall be under the direct supervision
of the Treasurer. He shall maintain adequate records of all assets, liabilities
and transactions of the Trust, establish and maintain internal accounting
control and, in cooperation with the independent accounts selected by the
Trustees, shall supervise internal auditing. He shall have such further powers
and duties as may be conferred upon him from time to time by the President or
the Trustees.
<PAGE> 9
4.11 Assistant Treasurers. The Assistant Treasurers, in the order of
their seniority, shall in the absence or disability of the Treasurer, perform
the duties and exercise the power of the Treasurer and shall perform such other
duties as the Trustee may from time to time prescribe.
ARTICLE V
INVESTMENT RESTRICTIONS
The Trustees may from time to time adopt such restrictions upon the
investment of the assets of the Trust, or amendments thereto, as they may
consider necessary or desirable provided, any such restriction or amendment
shall be approved by a majority of the outstanding shares of the Trust if
required by the Investment Company Act of 1940, as amended.
ARTICLE VI
GENERAL PROVISIONS
6.1 Inspection of Books. The Trustees shall from time to time
determine whether and to what extent, and at what time and places, and under
what conditions and regulations the accounts and books of the Trust or any of
them shall be open to the inspection of the Shareholders; and no Shareholder
shall have any right of inspecting any account or book or document of the Trust
except as conferred by law or authorized by the Trustees or by resolution of the
Shareholders.
6.2 Reports. The Trust shall transmit to the Shareholder and/or file
with federal and state regulatory
<PAGE> 10
agencies such reports of its operations as the Trustees shall consider necessary
or desirable or as may be required by law.
6.3 Bonding of Officers and Employees. All officers and employees of
the Trust shall be bonded to such extent, and in such manner, as may be required
by law.
6.4 Fiscal Year. The fiscal year of the Trust shall be the period of
twelve months ending on the last day of August in each calendar year.
ARTICLE VII
AMENDMENTS
These By-Laws may be altered or repealed by the Trustees at any Regular
or Special Meeting of the Trustees.
<PAGE> 1
EXHIBIT (5)(a)
ADVISORY AGREEMENT
AGREEMENT made as of March 11, 1987 between TRUST FOR FEDERAL
SECURITIES, a Pennsylvania business trust (herein called the "Company"), and
PROVIDENT INSTITUTIONAL MANAGEMENT CORPORATION, a Delaware corporation (herein
called the "Investment Adviser"), registered as an investment adviser under the
Investment Advisers Act of 1940 and wholly-owned by Provident National Bank
(herein called "Provident").
WHEREAS, the Company is registered as an open-end, diversified,
management investment company under the Investment Company Act of 1940 and
presently offers five classes of shares representing interests in three separate
investment portfolios; and
WHEREAS, the Company desires to retain the Investment Adviser to render
investment advisory and administrative services to the Company, and the
Investment Adviser is willing to so render such services;
NOW, THEREFORE, this Agreement
WITNESSETH:
In consideration of the premises and mutual covenants herein contained,
it is agreed between the parties hereto as follows:
1. Appointment. (a) The Company hereby appoints the Investment
Adviser to act as investment adviser to the Company for its FedFund portfolio
(herein called "FedFund"), its T-Fund portfolio (herein called "T-Fund") and its
ShortFed Fund portfolio (here in called "ShortFed Fund") (collectively, herein
called the "Portfolios") for the period and on the terms set forth in this
Agreement. The Investment Adviser accepts such appointment and agrees to render
the services herein set forth, for the compensation herein provided.
(b) In the event that the Company establishes one or more
portfolios other than the Portfolios with respect to which it desires to retain
the Investment Adviser to act as investment adviser hereunder, the Company shall
notify the Investment Adviser in writing. If the Investment Adviser is willing
to render such services it shall notify the Company in writing whereupon,
subject to such shareholder approval as may be required pursuant to Paragraph 10
hereof, such portfolio shall
<PAGE> 2
become a Portfolio hereunder and the compensation payable by such new Portfolio
to the Investment Adviser will be as agreed in writing at the time.
2. Delivery of Documents. The Company has furnished the Investment
Adviser with copies properly certified or authenticated of each of the
following:
(a) Declaration of Trust of the Company, as amended (such
Declaration of Trust, as presently in effect and as it shall from time
to time be amended, herein called the "Declaration of Trust");
(b) By-Laws of the Company, as amended (such ByLaws, as presently
in effect and as they shall from time to time be amended, herein called
the "By-Laws");
(c) Resolutions of the Board of Trustees of the Company
authorizing the appointment of the Investment Adviser and the execution
and delivery of this Agreement;
(d) Registration Statement under the Securities Act of 1933, as
amended, on Form S-5 (No. 2-53808) relating to shares representing
interests in FedFund and T-Fund, and all amendments thereto, including
post- effective amendment No. 25 relating to shares representing
interests in FedFund, T-Fund and ShortFed Fund (herein called
"Shares");
(e) Registration Statement of the Company under the Investment
Company Act of 1940 on Form N-8B-1 (No. 811-2573) as filed with the
Securities and Exchange Commission on May 28, 1975 and all amendments
thereto;
(f) Notification of Registration of the Company under the
Investment Company Act of 1940 on form N-8A as filed with the
Securities and Exchange Commission on May 28, 1975 and all amendments
thereto; and
(g) Prospectuses of the Company's Portfolios in effect under the
Securities Act of 1933 (such prospectuses, as presently in effect and
as they shall from time to time be amended and supplemented, herein
called the "Prospectuses").
The Company will furnish the Investment Adviser from time to time with
copies, properly certified or authenticated, of all amendments of or supplements
to the foregoing, if any.
2
<PAGE> 3
3. Management. Subject to the supervision of the Board of Trustees
of the Company, the Investment Adviser will provide a continuous investment
program for each of the Portfolios, including investment research and management
with respect to all securities, investments, cash and cash equivalents in each
Portfolio. The Investment Adviser will determine from time to time what
securities and other investments will be purchased, retained or sold by the
Company for each of its Portfolios. The Investment Adviser will provide the
services rendered by it hereunder in accordance with the investment objective
and policies of each of the Portfolios as stated in their respective
Prospectuses. The Investment Adviser further agrees that it:
(a) will conform with all applicable Rules and Regulations of the
Securities and Exchange Commission (herein called the "Rules"), and
will in addition conduct its activities under this Agreement in
accordance with regulations of the Board of Governors of the Federal
Reserve System pertaining to the investment advisory activities of bank
holding companies to the same extent as if such regulations were by
their terms applicable to the activities of the Investment Adviser;
(b) will not invest its assets or the assets of any accounts
advised by it or by Provident in Shares, make loans for the purpose of
purchasing or carrying Shares, or make interest-bearing loans to the
Company;
(c) will place orders pursuant to its investment determinations
for each Portfolio either directly with the issuer or with any broker
or dealer. In placing orders with brokers and dealers, the Investment
Adviser will attempt to obtain the best net price and the most
favorable execution of its orders. Consistent with this obligation,
when the execution and price offered by two or more brokers or dealers
are comparable, the Investment Adviser may, in its discretion, purchase
and sell portfolio securities to and from brokers and dealers who
provide the Company with research advice and other services. In no
instance will portfolio securities be purchased from or sold to the
Company's principal underwriter, the Investment Adviser or any
affiliated person thereof, except to the extent permitted by the
Securities and Exchange Commission;
(d) will, together with Provident, maintain all books and records
with respect to the securities transactions of the Portfolios, keep
their respective books of account and will render to the Company's
Board
3
<PAGE> 4
of Trustees such periodic and special reports as the Board may request;
and
(e) will compute the respective net asset value and net income
for each of the Portfolios (and each series or sub-class thereof) on
each business day as described in their respective Prospectuses or as
more frequently requested by the Company.
4. Services Not Exclusive. The investment management services
rendered by the Investment Adviser hereunder are not to be deemed exclusive, and
the Investment Adviser shall be free to render similar services to others so
long as its services under this Agreement are not impaired thereby.
5. Sub-Advisory Agreement. Notwithstanding anything herein to the
contrary, this Agreement shall not be effective until the Investment Adviser and
Provident deliver to the Company a duly executed copy of the Sub-Advisory
Agreement in substantially the form attached as Exhibit A-1 hereto (herein
called the "Sub-Advisory Agreement") pursuant to which Provident will provide
the Investment Adviser with certain investment advisory services on behalf of
each Portfolio. The Investment Adviser agrees to give the Company prompt written
notice of any termination of or notice to terminate the Sub-Advisory Agreement
by any person other than the Company.
6. Books and Records. In compliance with the requirements of Rule
31a-3 of the Rules, the Investment Adviser hereby agrees that all records which
it maintains for each Portfolio are the property of the Company and further
agrees to surrender promptly to the Company any of such records upon the
Company's request. The Investment Adviser further agrees to preserve for the
periods prescribed by Rule 31a-2 the records required to be maintained by Rule
31a-1 of the Rules.
7. Expenses. During the term of this Agreement, the Investment
Adviser will pay all expenses incurred by it in connection with its activities
under this Agreement other than the cost of (including brokerage commissions, if
any) securities purchased for the Portfolios.
In addition, if the expenses borne by any Portfolio in any fiscal year
exceed the applicable expense limitations imposed by the securities regulations
of any state in which the Shares are registered or qualified for sale to the
public, the Investment Adviser shall reimburse such Portfolio for one-half of
any excess up to the amount of the fees payable by the particular Portfolio to
it during such fiscal year pursuant to paragraph 8 hereof; provided, however,
that notwithstanding the foregoing, the Investment Adviser shall reimburse such
Portfolio for
4
<PAGE> 5
one-half of such excess expenses regardless of the amount of such fees payable
to it during such fiscal year to the extent that the securities regulations of
any state in which the Company's Shares are registered or qualified for sale so
require.
8. Compensation.
(a) For the services provided and the expenses assumed pursuant
to this Agreement with respect to FedFund and T-Fund, the Company will pay the
Investment Adviser from the assets belonging to FedFund and T-Fund (and in
proportion to each such Portfolio's average net assets) and the Investment
Adviser will accept as full compensation therefor a fee, computed daily and
payable monthly, at the following annual rate: .175% of the first $1 billion of
the combined average net assets of FedFund and T-Fund, plus .15% of the next $1
billion of their combined average net assets, plus .125% of the next $1 billion
of their combined average net assets, plus .1% of the next $1 billion of their
combined average net assets, plus .095% of the next $1 billion of their combined
average net assets, plus .09% of the next $1 billion of their combined average
net assets, plus .085% of the next $1 billion of their combined average net
assets, plus .08% of their combined average net assets over $7 billion. The fee
will be reduced by one-half of the amount necessary to ensure that the ordinary
operating expenses (excluding interest, taxes, brokerage, payments to Service
Organizations pursuant to Servicing Agreements and extraordinary expenses) of
FedFund and of T-Fund do not exceed .45% of each such Portfolio's average net
assets for any fiscal year.
(b) For the services provided and the expenses assumed pursuant
to this Agreement with respect to ShortFed Fund, the Company will pay the
Investment Adviser from the assets belonging to ShortFed Fund and the Investment
Adviser will accept as full compensation therefor a fee, computed daily and
payable monthly, of .20% of the average net assets of ShortFed Fund.
The fee attributable to each Portfolio shall be the several (and not
joint or joint and several) obligations of each such Portfolio.
9. Limitation of Liability of the Investment Adviser. Neither
Provident nor the Investment Adviser shall be liable for any error of judgment
or mistake of law or for any loss suffered by the Company in connection with the
matters to which this Agreement relates, except a loss resulting from a breach
of fiduciary duty with respect to the receipt of compensation for services or a
loss resulting from willful misfeasance, bad faith or gross negligence on the
part of the Investment Adviser in the performance of its duties or from reckless
disregard by it of its obligations and duties under this Agreement.
Notwithstanding the
5
<PAGE> 6
foregoing, the Investment Adviser shall be liable to the Company for the acts
and omissions of Provident to the extent that Provident is liable to the
Investment Adviser for such acts or omissions under the Sub-Advisory Agreement
between the Investment Adviser and Provident.
10. Duration and Termination. This Agreement shall become effective
with respect to a Portfolio upon approval of this Agreement by vote of a
majority of the outstanding voting securities of such Portfolio and, unless
sooner terminated as provided herein, shall continue with respect to such
Portfolio until March 31, 1988. Thereafter, if not terminated, this Agreement
shall continue with respect to a Portfolio for successive annual periods ending
on March 31, provided such continuance is specifically approved at least
annually (a) by the vote of a majority of those members of the Board of Trustees
of the Company who are not parties to this Agreement or interested persons of
any such party, cast in person at a meeting called for the purpose of voting on
such approval, and (b) by the Board of Trustees of the Company or by vote of a
majority of the outstanding voting securities of such Portfolio; provided,
however, that this Agreement may be terminated with respect to a Portfolio by
the Company at any time, without the payment of any penalty, by the Board of
Trustees of the Company or by vote of a majority of the outstanding voting
securities of such Portfolio, on 60 days' written notice to the Investment
Adviser, or by the Investment Adviser at any time, without payment of any
penalty, on 90 days' written notice to the Company. This Agreement will
immediately terminate in the event of its assignment and will immediately
terminate with respect to a Portfolio upon any termination with respect to such
Portfolio of the Sub-Advisory Agreement. (As used in this Agreement, the terms
"majority of the outstanding voting securities," "interested person" and
"assignment" shall have the same meaning as such terms have in the Investment
Company Act of 1940.)
11. Amendment of this Agreement. No provisions in this Agreement may
be changed, discharged or terminated orally, but only by an instrument in
writing signed by the party against which enforcement of the change, discharge
or termination is sought, and no amendment of this Agreement affecting a
Portfolio shall be effective until approved by vote of the holders of a majority
of the outstanding voting securities of such Portfolio.
12. Miscellaneous. The captions in 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. If any
provision of this Agreement shall be held or made invalid by a court decision,
statute, rule or otherwise, the remainder of this Agreement shall not be
affected thereby. This Agreement shall be binding upon and shall inure to
6
<PAGE> 7
the benefit of the parties hereto and their respective successors and shall be
governed by Delaware law.
13. No Personal Liability. The names "Trust for Federal Securities"
and "Trustees of Trust for Federal Securities" refer respectively to the trust
created and the Trustees, as trustees but not individually or personally, acting
from time to time under a Declaration of Trust dated February 27, 1980, which is
hereby referred to and a copy of which is on file at the principal office of the
Company. The obligations of Trust for Federal Securities entered into in the
name or on behalf thereof by any of the Trustees, representatives or agents are
made not individually, but in such capacities, and are not binding upon any of
the Trustees, shareholders or representatives of the Company personally, but
bind only the trust estate, and all persons dealing with the Company must look
solely to the trust property for the enforcement of any claims against the
Company.
IN WITNESS WHEREOF, the parties hereto have caused this instrument to
be executed by their officers designated below as of the day and year first
above written.
TRUST FOR FEDERAL SECURITIES
Attest:
____________________________ By _________________________
Vice President
(Seal)
PROVIDENT INSTITUTIONAL
Attest: MANAGEMENT CORPORATION
____________________________ By _________________________
President
(Corporate Seal)
JOHN D. SILCOX, JR.
VICE PRESIDENT & SECRETARY
7
<PAGE> 1
EXHIBIT (5)(b)
ADDENDUM NO. 1 TO ADVISORY AGREEMENT
This Addendum, dated as of the 30th day of June, 1988, is entered into
between TRUST FOR FEDERAL SECURITIES (the "Company"), a Pennsylvania business
trust, and PROVIDENT INSTITUTIONAL MANAGEMENT CORPORATION ("PIMC"), a Delaware
corporation.
WHEREAS, the Company and PIMC have entered into an Advisory Agreement
dated March 11, 1987 (the "Advisory Agreement"), pursuant to which the Company
appointed PIMC to act as investment adviser to the Company for its FedFund
portfolio ("FedFund"), its T-Fund portfolio ("T-Fund") and its ShortFed Fund
(now, by change of name, "Short Government Fund") portfolio ("ShortFed Fund");
and
WHEREAS, Section 1(b) of the Advisory Agreement provides that in the
event the Company establishes one or more additional investment portfolios with
respect to which it desires to retain PIMC to act as the investment adviser
under the Advisory Agreement, the Company shall so notify PIMC in writing and if
PIMC is willing to render such services it shall notify the Company in writing,
and the compensation to be paid to PIMC shall be that which is agreed to in
writing by the Company and PIMC; and
WHEREAS, pursuant to Section 1(b) of the Advisory Agreement, the
Company has notified PIMC that it has established the Treasury Trust Fund
portfolio ("Treasury Trust Fund") and that it desires to retain PIMC to act as
the investment adviser therefor, and PIMC has notified the Company that it is
willing to serve as investment adviser for Treasury Trust Fund; and
WHEREAS, PIMC is willing to waive the advisory fees payable by the
Company to it for its services as investment adviser for FedFund and T-Fund to
the extent necessary to ensure that the compensation it receives for its
services as investment adviser for FedFund, T-Fund and Treasury Trust Fund is
determined on a combined average net asset basis, based on the average net
assets of each of the three portfolios, at the rate currently set forth in the
Advisory Agreement applicable to FedFund and T-Fund; and
WHEREAS, the Company and PIMC desire to restate the compensation
payable to PIMC for its services as investment adviser to FedFund, T-Fund and
Treasury Trust Fund to evidence the foregoing waiver by PIMC; and
WHEREAS, such waiver of fees is not and shall not be deemed to be an
amendment to the Advisory Agreement.
<PAGE> 2
NOW THEREFORE, the parties hereto, intending to be legally bound,
hereby agree as follows:
1. Appointment. The Company hereby appoints PIMC to act as
investment adviser to the Company for Treasury Trust Fund for the period and on
the terms set forth in the Advisory Agreement. PIMC hereby accepts such
appointment and agrees to render the services set forth in the Advisory
Agreement, for the compensation herein provided.
2. Compensation. For the services provided and the expenses assumed
pursuant to the Advisory Agreement, the Company will pay PIMC from the assets
belonging to FedFund, T-Fund and Treasury Trust Fund (in proportion to each such
Portfolio's average net assets) and PIMC will accept as full compensation
therefor a fee, computed daily and payable monthly, at the following annual
rate:
.175% of the first $1 billion of the combined average net assets of
FedFund, T-Fund and Treasury Trust Fund; plus
.150% of the next $1 billion of their combined average net assets; plus
.125% of the next $1 billion of their combined average net assets; plus
.100% of the next $1 billion of their combined average net assets; plus
.095% of the next $1 billion of their combined average net assets; plus
.090% of the next $1 billion of their combined average net assets; plus
.085% of the next $1 billion of their combined average net assets; plus
.080% of their combined average net assets over $7 billion.
The fee will be reduced by one-half of the amount necessary to ensure that the
ordinary operating expenses (excluding interest, taxes, brokerage, payments to
Service Organizations pursuant to Servicing Agreements and extraordinary
expenses) of FedFund and of T-Fund and of Treasury Trust Fund do not exceed .45%
of each such Portfolio's average net assets for any fiscal year.
3. Capitalized Terms. From and after the date hereof, the term
"Portfolios" as used in the Advisory Agreement shall be deemed to include
Treasury Trust Fund. Capitalized terms used herein and not otherwise defined
shall have the meanings ascribed to them in the Advisory Agreement.
4. Miscellaneous. Except to the extent supplemented hereby, the
Advisory Agreement shall remain unchanged and in full
2
<PAGE> 3
force and effect and is hereby ratified and confirmed in all respects as
supplemented hereby.
IN WITNESS WHEREOF, the undersigned have executed this Addendum as of
the date and year first above written.
TRUST FOR FEDERAL SECURITIES
By:
------------------------------
Title:
PROVIDENT INSTITUTIONAL
MANAGEMENT CORPORATION
By:
------------------------------
Title: President
3
<PAGE> 1
EXHIBIT (5)(c)
ADDENDUM NO. 2 TO ADVISORY AGREEMENT
This Addendum, dated as of the 7th day of September, 1988, is entered
into between TRUST FOR FEDERAL SECURITIES (the "Company"), a Pennsylvania
business trust, and PROVIDENT INSTITUTIONAL MANAGEMENT CORPORATION ("PIMC"), a
Delaware corporation.
WHEREAS, the Company and PIMC have entered into an Advisory Agreement
dated March 11, 1987, as supplemented by Addendum No. 1 to Advisory Agreement
dated as of June 30, 1988 (the "Advisory Agreement"), pursuant to which the
Company appointed PIMC to act as investment adviser to the Company for its
FedFund portfolio ("FedFund"), its T-Fund portfolio, ("T-Fund") and its ShortFed
Fund (now, by change of name, "Short Government Fund") portfolio ("ShortFed
Fund") and its Treasury Trust Fund portfolio ("Treasury Trust Fund"); and
WHEREAS, Section 1(b) of the Advisory Agreement provides that in the
event the Company establishes one or more additional investment portfolios with
respect to which it desires to retain PIMC to act as the investment adviser
under the Advisory Agreement, the Company shall so notify PIMC in writing and if
PIMC is willing to render such services it shall notify the Company in writing,
and the compensation to be paid to PIMC shall be that which is agreed to in
writing by the Company and PIMC; and
WHEREAS, pursuant to Section 1(b) of the Advisory Agreement, the
Company has notified PIMC that it has established the Intermediate Government
Fund portfolio ("InterFed Fund") and the Long Government Fund portfolio
("LongFed Fund") and that it desires to retain PIMC to act as the investment
adviser therefor, and PIMC has notified the Company that it is willing to serve
as investment adviser for InterFed Fund and LongFed Fund.
NOW THEREFORE, the parties hereto, intending to be legally bound,
hereby agree as follows:
1. Appointment. The Company hereby appoints PIMC to act as
investment adviser to the Company for InterFed Fund and LongFed Fund for the
period and on the terms set forth in the Advisory Agreement. PIMC hereby accepts
such appointment and agrees to render the services set forth in the Advisory
Agreement, for the compensation herein provided.
2. Compensation.
(a) For the services provided and the expenses assumed pursuant
to the Advisory Agreement with respect to InterFed Fund,
<PAGE> 2
the Company will pay PIMC from the assets belonging to InterFed Fund and PIMC
will accept as full compensation therefor a fee, computed daily and payable
monthly, of an annual rate of .20% of the average net assets of InterFed Fund.
(b) For the services provided and the expenses assumed pursuant
to the Advisory Agreement with respect to LongFed Fund, the Company will pay
PIMC from the assets belonging to LongFed Fund and PIMC will accept as full
compensation therefor a fee, computed daily and payable monthly, of an annual
rate of .20% of the average net assets LongFed Fund.
3. Capitalized Terms. From and after the date hereof, the term
"Portfolios" as used in the Advisory Agreement shall be deemed to include
InterFed Fund and LongFed Fund. Capitalized terms used herein and not otherwise
defined shall have the meanings ascribed to them in the Advisory Agreement.
4. Miscellaneous. Except to the extent supplemented hereby, the
Advisory Agreement shall remain unchanged and in full force and effect and is
hereby ratified and confirmed in all respects as supplemented hereby.
IN WITNESS WHEREOF, the undersigned have executed this Addendum as of
the date and year first above written.
TRUST FOR FEDERAL SECURITIES
By:
---------------------------------
Title: Vice President & Treasurer
PROVIDENT INSTITUTIONAL
MANAGEMENT CORPORATION
By:
------------------------------
Title: President
2
<PAGE> 1
EXHIBIT (5)(d)
ADDENDUM NO. 3 TO ADVISORY AGREEMENT
This Addendum, dated as of the 1st day of November, 1990, is entered
into between TRUST FOR FEDERAL SECURITIES (the "Company"), a Pennsylvania
business trust, and PROVIDENT INSTITUTIONAL MANAGEMENT CORPORATION ("PIMC"), a
Delaware corporation.
WHEREAS, the Company and PIMC have entered into an Advisory Agreement
dated as of March 11, 1987, as supplemented by Addenda Nos. 1 and 2 dated as of
June 30, 1988 and September 7, 1988, respectively, (the "Advisory Agreement"),
pursuant to which the Company appointed PIMC to act as investment adviser to the
Company for its FedFund portfolio ("FedFund"), its T-Fund portfolio ("T-Fund"),
its Treasury Trust Fund portfolio ("Treasury Trust Fund"), its ShortFed Fund
(now, by change of name, "Short Government Fund") portfolio, its Intermediate
Government Fund portfolio and its Long Government Fund portfolio;
WHEREAS, Section 1(b) of the Advisory Agreement provides that in the
event the Company establishes one or more additional investment portfolios with
respect to which it desires to retain PIMC to act as the investment adviser
under the Advisory Agreement, the Company shall so notify PIMC in writing and if
PIMC is willing to render such services it shall notify the Company in writing,
and the compensation to be paid to PIMC shall be that which is agreed to in
writing by the Company and PIMC;
WHEREAS, pursuant to Section 1(b) of the Advisory Agreement, the
Company has notified PIMC that it has established the Federal Trust Fund
portfolio ("Federal Trust Fund") and that it desires to retain PIMC to act as
the investment adviser therefor, and PIMC has notified the Company that it is
willing to serve as investment adviser for Federal Trust Fund;
WHEREAS, PIMC is willing to waive the advisory fees payable by the
Company to it for its services as investment adviser for FedFund, T-Fund and
Treasury Trust Fund and to the extent necessary to ensure that the compensation
it receives for its services as investment adviser for FedFund, T-Fund, Treasury
Trust Fund and Federal Trust Fund is determined on a combined average net asset
basis, based on the average net assets of each of the four portfolios, at the
rate currently set forth in the Advisory Agreement applicable to FedFund, T-Fund
and Treasury Trust Fund;
WHEREAS, the Company and PIMC desire to restate the compensation
payable to PIMC for its services as investment adviser to FedFund, T-Fund,
Treasury Trust Fund and Federal Trust Fund to evidence the foregoing waiver by
PIMC; and
-1-
<PAGE> 2
WHEREAS, such waiver of fees is not and shall not be deemed to be an
amendment to the Advisory Agreement.
NOW THEREFORE, the parties hereto, intending to be legally bound,
hereby agree as follows:
1. Appointment. The Company hereby appoints PIMC to act as
investment adviser to the Company for Federal Trust Fund for the period and on
the terms set forth in the Advisory Agreement. PIMC hereby accepts such
appointment and agrees to render the services set forth in the Advisory
Agreement, for the compensation herein provided.
2. Compensation. For the services provided and the expenses assumed
pursuant to the Advisory Agreement with respect to FedFund, T-Fund, Treasury
Trust Fund and Federal Trust Fund, the Company will pay PIMC from the assets
belonging to FedFund, T-Fund, Treasury Trust Fund and Federal Trust Fund (in
proportion to each such Portfolio's average net assets) and PIMC will accept as
full compensation therefor a fee, computed daily and payable monthly, at the
following annual rate:
.175% of the first $1 billion of the combined average net assets of
FedFund, T-Fund, Treasury Trust Fund and Federal Trust Fund; plus
.150% of the next $1 billion of their combined average net assets; plus
.125% of the next $1 billion of their combined average net assets; plus
.100% of the next $1 billion of their combined average net assets; plus
.095% of the next $1 billion of their combined average net assets; plus
.090% of the next $1 billion of their combined average net assets; plus
.085% of the next $1 billion of their combined average net assets; plus
.080% of their combined average net assets over $7 billion.
The fee will be reduced by one-half of the amount necessary to ensure that the
ordinary operating expenses (excluding interest, taxes, brokerage, payments to
Service Organizations pursuant to Servicing Agreements and extraordinary
expenses) of FedFund, T-Fund, Treasury Trust Fund and Federal Trust Fund do not
exceed .45% of each such Portfolio's average net assets for any fiscal year.
The Fee attributable to each Portfolio shall be the several (and not
joint or joint and several) obligation of each such Portfolio.
-2-
<PAGE> 3
3. Capitalized Terms. From and after the date hereof, the term
"Portfolios" as used in the Advisory Agreement shall be deemed to include
Federal Trust Fund. Capitalized terms used herein and not otherwise defined
shall have the meanings ascribed to them in the Advisory Agreement.
4. Miscellaneous. Except to the extent supplemented hereby, the
Advisory Agreement shall remain unchanged and in full force and effect and is
hereby ratified and confirmed in all respects as supplemented hereby.
IN WITNESS WHEREOF, the undersigned have executed this Addendum as of
the date and year first above written.
TRUST FOR FEDERAL SECURITIES
By:
-----------------------------------
Title: Vice President
PROVIDENT INSTITUTIONAL
MANAGEMENT CORPORATION
By:
-----------------------------------
Title: President
-3-
<PAGE> 1
EXHIBIT (5)(e)
ADDENDUM NO. 4 TO ADVISORY AGREEMENT
This Addendum, dated as of the 9th day of May, 1991, is entered into
between TRUST FOR FEDERAL SECURITIES (the "Company"), a Pennsylvania business
trust, and PROVIDENT INSTITUTIONAL MANAGEMENT CORPORATION ("PIMC"), a Delaware
corporation.
WHEREAS, the Company and PIMC have entered into an Advisory Agreement
dated as of March 11, 1987, as supplemented by Addenda Nos. 1, 2 and 3 dated as
of June 30, 1988, September 7, 1988 and November 1, 1990, respectively, (the
"Advisory Agreement"), pursuant to which the Company appointed PIMC to act as
investment adviser to the Company for its FedFund portfolio ("FedFund"), its
T-Fund portfolio ("T-Fund"), its Federal Trust Fund portfolio ("Federal Trust
Fund"), its Treasury Trust Fund portfolio ("Treasury Trust Fund"), its ShortFed
Fund (now, by change of name, "Short Government Fund") portfolio, its
Intermediate Government Fund portfolio ("Intermediate Government Fund") and its
Long Government Fund portfolio ("Long Government Fund");
WHEREAS, Section 1(b) of the Advisory Agreement provides that in the
event the Company establishes one or more additional investment portfolios with
respect to which it desires to retain PIMC to act as the investment adviser
under the Advisory Agreement, the Company shall so notify PIMC in writing and if
PIMC is willing to render such services it shall notify the Company in writing,
and the compensation to be paid to PIMC shall be that which is agreed to in
writing by the Company and PIMC;
WHEREAS, pursuant to Section 1(b) of the Advisory Agreement, the
Company has notified PIMC that it has established the FedCash portfolio
("FedCash") and T-Cash portfolio ("T-Cash"), and that it desires to retain PIMC
to act as the investment adviser therefor, and PIMC has notified the Company
that it is willing to serve as investment adviser for FedCash and T-Cash;
WHEREAS, PIMC is willing to waive the advisory fees payable by the
Company to it for its services as investment adviser for FedFund, T-Fund,
Federal Trust Fund and Treasury Trust Fund to the extent necessary to ensure
that the compensation it receives for its services as investment adviser for
FedFund, T-Fund, FedCash, T-Cash, Federal Trust Fund and Treasury Trust Fund is
determined on a combined average net asset basis, based on the average net
assets of each of the six portfolios, at the rate currently set forth in the
Advisory Agreement applicable to FedFund, T-Fund, Federal Trust Fund and
Treasury Trust Fund;
-1-
<PAGE> 2
WHEREAS, the Company and PIMC desire to restate the compensation
payable to PIMC for its services as investment adviser to FedFund, T-Fund,
FedCash, T-Cash, Federal Trust Fund and Treasury Trust Fund to evidence the
foregoing waiver by PIMC; and
WHEREAS, such waiver of fees is not and shall not be deemed to be an
amendment to the Advisory Agreement.
NOW THEREFORE, the parties hereto, intending to be legally bound,
hereby agree as follows:
1. Appointment. The Company hereby appoints PIMC to act as
investment adviser to the Company for FedCash and T-Cash for the period and on
the terms set forth in the Advisory Agreement. PIMC hereby accepts such
appointment and agrees to render the services set forth in the Advisory
Agreement, for the compensation herein provided.
2. Compensation. For the services provided and the expenses assumed
pursuant to the Advisory Agreement with respect to FedFund, T-Fund, FedCash,
T-Cash, Federal Trust Fund and Treasury Trust Fund, the Company will pay PIMC
from the assets belonging to FedFund, T-Fund, FedCash, T-Cash, Federal Trust
Fund and Treasury Trust Fund (in proportion to each such Portfolio's average net
assets) and PIMC will accept as full compensation therefor a fee, computed daily
and payable monthly, at the following annual rate:
.175% of the first $1 billion of the combined average net assets of
FedFund, T-Fund, FedCash, T-Cash, Federal Trust Fund and Treasury Trust Fund;
plus
.150% of the next $1 billion of their combined average net assets; plus
.125% of the next $1 billion of their combined average net assets; plus
.100% of the next $1 billion of their combined average net assets; plus
.095% of the next $1 billion of their combined average net assets; plus
.090% of the next $1 billion of their combined average net assets; plus
.085% of the next $1 billion of their combined average net assets; plus
.080% of their combined average net assets over $7 billion.
The fee will be reduced by one-half of the amount necessary to ensure that the
ordinary operating expenses (excluding interest, taxes, brokerage, payments to
Service Organizations pursuant to Servicing Agreements and extraordinary
expenses) of FedFund, T-Fund, FedCash, T-Cash, Federal Trust Fund and Treasury
Trust Fund do not exceed .45% of each such Portfolio's average net assets for
any fiscal year.
-2-
<PAGE> 3
The fee attributed to each Portfolio shall be the several (and not
joint or joint and several) obligation of each such Portfolio.
3. Capitalized Terms. From and after the date hereof, the term
"Portfolios" as used in the Advisory Agreement shall be deemed to include
FedCash and T-Cash. Capitalized terms used herein and not otherwise defined
shall have the meanings ascribed to them in the Advisory Agreement.
4. Miscellaneous. Except to the extent supplemented hereby, the
Advisory Agreement shall remain unchanged and in full force and effect and is
hereby ratified and confirmed in all respects as supplemented hereby.
IN WITNESS WHEREOF, the undersigned have executed this Addendum as of
the date and year first above written.
TRUST FOR FEDERAL SECURITIES
By:
---------------------------------
Title: Vice President & Treasurer
PROVIDENT INSTITUTIONAL
MANAGEMENT CORPORATION
By:
---------------------------------
Title: President
-3-
<PAGE> 1
EXHIBIT (5)(f)
SUB-ADVISORY AGREEMENT
AGREEMENT dated us of March 11, 1987 between PROVIDENT NATIONAL BANK, a
national banking association (herein called "Provident") and PROVIDENT
INSTITUTIONAL MANAGEMENT CORPORATION, a Delaware corporation registered as an
investment adviser under the Investment Advisers Act of 1940 and wholly-owned by
Provident (herein called "PIMC").
WHEREAS, PIMC is the investment adviser to Trust for Federal Securities
(herein called the "Company"), an open-end, diversified, management investment
company registered under the Investment Company Act of 1940; and
WHEREAS, PIMC wishes to retain Provident to provide it with investment
research, administrative, and statistical services in connection with PIMC's
advisory activities on behalf of the Company's FedFund portfolio (herein called
"FedFund"), its T-Fund portfolio (herein called "T-Fund") and its ShortFed Fund
portfolio (herein called "ShortFed Fund") (collectively, herein called the
"Portfolios"); and
WHEREAS, Provident is willing to provide such services to PIMC upon the
conditions and for the compensation set forth below,
NOW THEREFORE, in consideration of the premises and mutual covenants
herein contained, it is agreed between the parties hereto as follows:
1. Appointment. (a) PIMC hereby appoints Provident its sub-adviser
with respect to the Portfolios as required by the Advisory Agreement between
PIMC and the Company dated as of March 11, 1987 (such Agreement or the most
recent successor advisory agreement between such parties is herein called the
("Advisory Agreement"). Provident accepts such appointment and agrees to render
the services herein set forth for the compensation herein provided.
(b) In the event that the Company establishes one or more
portfolios other than the Portfolios and PIMC has agreed to act as investment
adviser to such new portfolio under the Advisory Agreement, and PIMC desires to
retain Provident to act as its sub-adviser with respect thereto, PIMC shall
notify Provident in writing. If Provident is willing to render such services it
shall notify PIMC in writing whereupon, subject to such shareholder approval as
may be required pursuant to Paragraph 8 hereof, such portfolio shall become a
Portfolio hereunder and the compensation payable by PIMC to Provident with
respect to the services provided for such Portfolio shall be as agreed in
writing at the time.
<PAGE> 2
2. Sub-Advisory Services. Subject to the supervision of the Board of
Trustees of the Company, Provident, through its Trust Division and on behalf of
the Company, will provide the Company investment research and credit analysis
concerning prospective and existing investments for each of the Portfolios, make
recommendations with respect to the continuous investment program for each such
Portfolio, supply PIMC computer facilities and operating personnel, and provide
certain statistical services as PIMC may from time to time reasonably request.
Provident will provide the services rendered by it hereunder in accordance with
the investment objective, policies and restrictions as stated in the respective
prospectuses of each of the Portfolios, as presently in effect and as they may
be amended or supplemented from time to time. Provident further agrees that it:
(a) will use the same skill and care in providing such services
as it uses in providing services to fiduciary accounts for which it has
investment responsibilities:
(b) will conform with all applicable Rules and Regulations of the
Securities and Exchange Commission (herein called the "Rules"), and
will in addition conduct its activities under this Agreement in
accordance with the regulations of the Board of Governors of the
Federal Reserve System pertaining to the investment advisory activities
of bank holding companies to the same extent as if such regulations
were by their terms applicable to its activities hereunder;
(c) will not invest its assets or assets of any fiduciary account
managed by it in shares of the Company, make loans for purposes of
purchasing or carrying such shares, or make interest-bearing loans to
the Company;
(d) will maintain or cause PIMC to maintain all books and records
with respect to the securities transactions of the Portfolios and shall
keep or cause PIMC to keep their respective books of account;
(e) will render to the Company's Board of Trustees such periodic
and special reports as the Board may request; and
(f) will maintain its policy and practice of conducting its Trust
Division independently of its Commercial Division. In making investment
recommendations for the Portfolios, Trust Division personnel will not
inquire or take into consideration
2
<PAGE> 3
whether the issuers of securities proposed for purchase or sale for the
account of a Portfolio are customers of the Commercial Division. In
dealing with commercial customers, the Commercial Division will not
inquire or take into consideration whether securities of those
customers are held by the Portfolios.
3. Services Not Exclusive. Provident's services hereunder are not
deemed to be exclusive, and Provident shall be free to render similar services
to others no long as its services under this Agreement are not impaired thereby.
4. Books and Records. In compliance with the requirements of Rule
31a-3 of the Rules, Provident hereby agrees that all records which it maintains
for the Company are the property of the Company and further agrees to surrender
promptly to the Company any of such records upon the Company's request.
Provident further agrees to preserve, or cause PIMC to preserve, for the periods
prescribed by Rule 31a-2, the records required to be maintained by Rule 31a-1 of
the Rules.
5. Expenses. During the term of this Agreement, Provident will pay
all expenses incurred by it in connection with its activities under this
Agreement.
6. Compensation. For the services which Provident will render to
PIMC under this Agreement, PIMC will pay to Provident a monthly fee equal to 75%
of each month's advisory fee received by PIMC from the Company on behalf of each
Portfolio pursuant to the Advisory Agreement between PIMC and the Company.
Notwithstanding the foregoing, the fee payable to Provident shall be adjusted
each quarter as necessary to assure that PIMC has income from all sources before
application of Federal, state, or other income taxes of at least $22,500 during
each quarter. The sub-advisory fee shall be paid by PIMC to Provident at least
quarterly.
7. Limitation on Liability. Provident will not be liable for any
error of judgment or mistake of law or for any loss suffered by PIMC or by the
Company in connection with the matters to which this Agreement relates, except a
loss resulting from a breach of fiduciary duty with respect to the receipt of
compensation for services or a loss resulting from willful misfeasance, bad
faith or gross negligence on its part in the performance of its duties or from
reckless disregard by it of its obligations or duties under this Agreement.
8. Duration and Termination. This Agreement shall become effective
with respect to a Portfolio upon approval of this Agreement by vote of a
majority of the outstanding voting
3
<PAGE> 4
securities of such Portfolio and, unless sooner terminated as provided herein,
shall continue with respect to such Portfolio until March 31, 1988. Thereafter,
if not terminated, this Agreement shall continue with respect to a Portfolio for
successive annual periods ending on March 31, provided such continuance is
specifically approved at least annually (a) by the vote of a majority of those
members of the Board of Trustees of the Company who are not parties to this
Agreement or interested persons of the Company or any such party, cast in person
at a meeting called for the purpose of voting on such approval, and (b) by the
Board of Trustees of the Company or by vote of a majority of the outstanding
voting securities of such Portfolio, provided, however, that this Agreement may
be terminated with respect to a Portfolio by the Company at any time, without
the payment of any penalty, by the Board of Trustees of the Company or by vote
of a majority of the outstanding voting securities of such Portfolio, on 60
days' written notice to PIMC, and will be terminated upon any termination of the
Advisory Agreement between the Company and PIMC. This Agreement will also
immediately terminate in the event of its assignment. (As used in this
Agreement, the terms "majority of the outstanding voting securities," interested
person" and "assignment" shall have the same meaning as such terms have in the
Investment Company Act of 1940.)
9. Amendment of this Agreement. No provision of this Agreement may
be changed, discharged or terminated orally, but only by an instrument in
writing signed by the party against which enforcement of the change, discharge
or termination is sought, and no amendment of this Agreement affecting a
Portfolio shall be effective until approved by vote of the holders of a majority
of the outstanding voting securities of such Portfolio.
10. Miscellaneous. The captions in 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 effect. If any
provision of this Agreement shall be held or made invalid by a court decision,
statute, rule or otherwise, the remainder of this Agreement shall not be
affected thereby. This Agreement shall be binding upon and shall inure to the
benefit of the parties hereto and their respective successors and shall be
governed by Delaware law.
4
<PAGE> 5
IN WITNESS WHEREOF, the parties hereto have caused this instrument to
be executed by their officers designated below as of the day and year first
above written.
PROVIDENT NATIONAL BANK
Attest:
By:
- ------------------------- --------------------------------
(Corporate Seal)
PROVIDENT INSTITUTIONAL
Attest: MANAGEMENT CORPORATION
By:
- ------------------------- --------------------------------
(Corporate Seal)
5
<PAGE> 1
EXHIBIT (5)(g)
ADDENDUM NO. 1 TO SUB-ADVISORY AGREEMENT
This Addendum is entered into as of the 30th day of June, 1988 by and
between PROVIDENT NATIONAL BANK, a national banking association ("Provident"),
and PROVIDENT INSTITUTIONAL MANAGEMENT CORPORATION, a Delaware corporation
("PIMC").
WHEREAS, Trust for Federal Securities (the "Company") and PIMC have
entered into an Advisory Agreement dated March 11, 1987 (the "Advisory
Agreement"), pursuant to which the Company appointed PIMC to act as investment
adviser to the Company for its FedFund portfolio ("FedFund"), its T-Fund
portfolio ("T- Fund") and its ShortFed Fund (now, by change of name, "Short
Government Fund") portfolio ("ShortFed Fund"); and
WHEREAS, Provident has agreed to act as sub-adviser to FedFund, T-Fund
and ShortFed Fund pursuant to a Sub-Advisory Agreement dated as of March 11,
1987 between PIMC and Provident (the "Sub-Advisory Agreement"); and
WHEREAS, Section 1(b) of the Advisory Agreement permits the Company to
appoint PIMC as investment adviser under the Advisory Agreement for any new
investment portfolios established by the Company from time to time; and
WHEREAS, Section 1(b) of the Sub-Advisory Agreement provides that in
the event PIMC is appointed to act as investment adviser to a new investment
portfolio of the Company, and desires to retain Provident to act as its
sub-adviser with respect thereto, PIMC shall notify Provident in writing, and if
Provident is willing to render such services it shall notify PIMC in writing,
whereupon, after obtaining any required shareholder approval, such portfolio
shall become a Portfolio under the Sub- Advisory Agreement and the compensation
payable by PIMC to Provident with respect to the services provided by Provident
in respect of such portfolio shall be as agreed in writing at the time; and
WHEREAS, pursuant to an Addendum No. 1 to Advisory Agreement of even
date herewith, PIMC has been appointed investment adviser for the Treasury Trust
Fund portfolio ("Treasury Trust Fund") of the Company; and
WHEREAS, pursuant to Section 1(b) of the Sub-Advisory Agreement, PIMC
has notified Provident that it desires to retain Provident as its sub-adviser
with respect to Treasury Trust Fund and Provident has notified PIMC that it is
willing to render sub- advisory services for Treasury Trust Fund.
<PAGE> 2
NOW THEREFORE, the parties hereto, intending to be legally bound,
hereby agree as follows:
1. Appointment. PIMC hereby appoints Provident its sub-adviser with
respect to Treasury Trust Fund. Provident accepts such appointment and agrees to
render the services set forth in the Sub-Advisory Agreement for the compensation
herein provided.
2. Compensation. For the services which Provident will render to
PIMC under the Sub-Advisory Agreement in respect of Treasury Trust Fund, PIMC
will pay to Provident a monthly fee equal to that which is set forth in Section
6 of the Sub-Advisory Agreement.
3. Defined Terms. From and after the date hereof, the term
"Portfolios" as used in the Sub-Advisory Agreement shall be deemed to include
Treasury Trust Fund, and the term "Portfolio" shall mean any of the Portfolios.
Capitalized terms used herein and not otherwise defined shall have the meanings
ascribed to them in the Sub-Advisory Agreement.
4. Miscellaneous. Except to the extent supplemented hereby, the
Sub-Advisory Agreement shall remain unchanged and in full force and effect and
is hereby ratified and confirmed in all respects as supplemented hereby.
IN WITNESS WHEREOF, the undersigned have executed this Addendum as of
the date and year first above written.
PROVIDENT INSTITUTIONAL MANAGEMENT
CORPORATION
By:
------------------------------------------
Title: President
PROVIDENT NATIONAL BANK
By:
------------------------------------------
Title: Senior Vice President
Chief Investment Officer
2
<PAGE> 1
EXHIBIT (5)(h)
ADDENDUM NO. 2 TO SUB-ADVISORY AGREEMENT
This Addendum is entered into as of the 7th day of September, 1988 by
and between PROVIDENT NATIONAL BANK, a national banking association
("Provident"), and PROVIDENT INSTITUTIONAL MANAGEMENT CORPORATION, a Delaware
corporation ("PIMC").
WHEREAS, Trust for Federal Securities (the "Company") and PIMC have
entered into an Advisory Agreement dated March 11, 1987, as supplemented by an
Addendum No. 1 to Advisory Agreement dated as of June 30, 1988 (the "Advisory
Agreement"), pursuant to which the Company appointed PIMC to act as investment
adviser to the Company for its FedFund portfolio ("FedFund"), its T-Fund
portfolio ("T-Fund"), its ShortFed Fund (now, by change of name, "Short
Government Fund") portfolio ("ShortFed Fund"), and its Treasury Trust Fund
portfolio ("Treasury Trust Fund"); and
WHEREAS, Provident has agreed to act as sub-adviser to FedFund, T-Fund,
ShortFed Fund and Treasury Trust Fund pursuant to a Sub-Advisory Agreement dated
as of March 11, 1987 between PIMC and Provident, as supplemented by Addendum No.
1 to Sub-Advisory Agreement dated as of June 30, 1988 (the "Sub-Advisory
Agreement"); and
WHEREAS, Section 1(b) of the Advisory Agreement permits the Company to
appoint PIMC as investment adviser under the Advisory Agreement for any new
investment portfolios established by the Company from time to time; and
WHEREAS, Section 1(b) of the Sub-Advisory Agreement provides that in
the event PIMC is appointed to act as investment adviser to a new investment
portfolio of the Company, and desires to retain Provident to act as its
sub-adviser with respect thereto, PIMC shall notify Provident in writing, and if
Provident is willing to render such services it shall notify PIMC in writing,
whereupon, after obtaining any required shareholder approval, such portfolio
shall become a Portfolio under the Sub-Advisory Agreement and the compensation
payable by PIMC to Provident with respect to the services provided by Provident
in respect of such portfolio shall be as agreed in writing at the time; and
WHEREAS, pursuant to an Addendum No. 2 the Advisory Agreement of even
date herewith, PIMC has been appointed investment adviser for the Intermediate
Government Fund portfolio ("InterFed Fund") and the Long Government Fund
portfolio ("LongFed Fund") of the Company; and
<PAGE> 2
WHEREAS, pursuant to Section 1(b) of the Sub-Advisory Agreement, PIMC
has notified Provident that it desires to retain Provident as its sub-adviser
with respect to InterFed Fund and LongFed Fund and Provident has notified PIMC
that it is willing to render sub-advisory services for InterFed Fund and LongFed
Fund.
NOW THEREFORE, the parties hereto, intending to be legally bound,
hereby agree as follows:
1. Appointment. PIMC hereby appoints Provident its sub-adviser with
respect to InterFed Fund and LongFed Fund. Provident accepts such appointment
and agrees to render the services set forth in the Sub-Advisory Agreement for
the compensation herein provided.
2. Compensation. For the services which Provident will render to
PIMC under the Sub-Advisory Agreement in respect of InterFed Fund and LongFed
Fund, PIMC will pay to Provident a monthly fee equal to that which is set forth
in Section 6 of the Sub-Advisory Agreement.
3. Defined Terms. From and after the date hereof, the term
"Portfolios" as used in the Sub-Advisory Agreement shall be deemed to include
InterFed Fund and LongFed Fund, and the term "Portfolio" shall mean any of the
Portfolios. Capitalized terms used herein and not otherwise defined shall have
the meanings ascribed to them in the Sub-Advisory Agreement.
4. Miscellaneous. Except to the extent supplemented hereby, the
Sub-Advisory Agreement shall remain unchanged and in full force and effect and
is hereby ratified and confirmed in all respects as supplemented hereby.
IN WITNESS WHEREOF, the undersigned have executed this Addendum as of
the date and year first above written.
PROVIDENT INSTITUTIONAL
MANAGEMENT CORPORATION
By: /s/ Thomas H. Nevin
---------------------------------
Title: President
PROVIDENT NATIONAL BANK
By: /s/ Malcolm C. Wilson
---------------------------------
Title: Senior Vice President
-2-
<PAGE> 1
EXHIBIT (5)(i)
ADDENDUM NO. 3 to SUB-ADVISORY AGREEMENT
This Addendum, dated as of the 1st day of November, 1990, is entered by
and between PROVIDENT NATIONAL BANK ("Provident"), a national banking
association, and PROVIDENT INSTITUTIONAL MANAGEMENT CORPORATION ("PIMC"), a
Delaware corporation.
WHEREAS, Trust for Federal Securities (the "Company") and PIMC have
entered into an Advisory Agreement dated as of March 11, 1987, as supplemented
by Addenda Nos. 1 and 2 dated as of June 30, 1988 and September 7, 1988,
respectively, (the "Advisory Agreement"), pursuant to which the Company
appointed PIMC to act as investment adviser to the Company for its FedFund
portfolio ("FedFund"), its T-Fund portfolio ("T-Fund"), its Treasury Trust Fund
portfolio ("Treasury Trust Fund"), its ShortFed Fund (now, by change of name,
"Short Government Fund") portfolio ("Short Government Fund"), its Intermediate
Government Fund portfolio ("Intermediate Government Fund") and its Long
Government Fund portfolio ("Long Government Fund");
WHEREAS, Provident has agreed to act as sub-adviser to FedFund, T-Fund,
Treasury Trust Fund, Short Government Fund, Intermediate Government Fund and
Long Government Fund, pursuant to a Sub-Advisory Agreement dated as of March 11,
1987 between PIMC and Provident, as supplemented by Addenda Nos. 1 and 2 dated
as of June 30, 1988 and September 7, 1988, respectively, (the "Sub-Advisory
Agreement");
WHEREAS, Section 1(b) of the Advisory Agreement permits the Company to
appoint PIMC as investment adviser under the Advisory Agreement for any new
investment portfolios established by the Company from time to time;
WHEREAS, Section 1(b) of the Sub-Advisory Agreement provides that in
the event PIMC is appointed to act as investment adviser to a new investment
portfolio of the Company, and desires to retain Provident to act as its
sub-adviser with respect thereto, PIMC shall notify Provident in writing, and if
Provident is willing to render such services it shall notify PIMC in writing,
whereupon, after obtaining any required shareholder approval, such portfolio
shall become a Portfolio under the Sub- Advisory Agreement and the compensation
payable by PIMC to Provident with respect to the services provided by Provident
in respect of such portfolio shall be as agreed in writing at the time;
WHEREAS, pursuant to an Addendum No. 3 to the Advisory Agreement of
even date herewith, PIMC has been appointed investment adviser for the Federal
Trust Fund portfolio ("Federal Trust Fund") of the Company; and
-1-
<PAGE> 2
WHEREAS, pursuant to Section 1(b) of the Sub-Advisory Agreement, PIMC
has notified Provident that it desires to retain Provident as its sub-adviser
with respect to Federal Trust Fund and Provident has notified PIMC that it is
willing to render sub- advisory services for Federal Trust Fund.
NOW THEREFORE, the parties hereto, intending to be legally bound,
hereby agree as follows:
1. Appointment. PIMC hereby appoints Provident its sub-adviser with
respect to Federal Trust Fund. Provident accepts such appointment and agrees to
render the services set forth in the Sub-Advisory Agreement for the compensation
herein provided.
2. Compensation. For the services which Provident will render to
PIMC under the Sub-Advisory Agreement in respect of Federal Trust Fund, PIMC
will pay to Provident a monthly fee equal to that which is set forth in Section
6 of the Sub-Advisory Agreement.
3. Capitalized Terms. From and after the date hereof, the term
"Portfolios" as used in the Sub-Advisory Agreement shall be deemed to include
Federal Trust Fund, and the term "Portfolio" shall mean any of the Portfolios.
Capitalized terms used herein and not otherwise defined shall have the meanings
ascribed to them in the Sub-Advisory Agreement.
4. Miscellaneous. Except to the extent supplemented hereby, the
Sub-Advisory Agreement shall remain unchanged and in full force and effect and
is hereby ratified and confirmed in all respects as supplemented hereby.
IN WITNESS WHEREOF, the undersigned have executed this Addendum as of
the date and year first above written.
PROVIDENT INSTITUTIONAL
MANAGEMENT CORPORATION
By: /s/ Thomas H. Nevin
-----------------------------------
Title: President
PROVIDENT NATIONAL BANK
By: /s/ Malcolm C. Wilson
-----------------------------------
Title: Senior Vice President
-2-
<PAGE> 1
EXHIBIT (5)(j)
ADDENDUM NO. 4 TO SUB-ADVISORY AGREEMENT
This Addendum, dated as of the 9th day of May, 1991, is entered by and
between PROVIDENT NATIONAL BANK ("Provident"), a national banking association,
and PROVIDENT INSTITUTIONAL MANAGEMENT CORPORATION ("PIMC"), a Delaware
corporation.
WHEREAS, Trust for Federal Securities (the "Company") and PIMC have
entered into an Advisory Agreement dated as of March 11, 1987, as supplemented
by Addenda Nos. 1, 2 and 3 dated as of June 30, 1988, September 7, 1988 and
November 1, 1990, respectively, (the "Advisory Agreement"), pursuant to which
the Company appointed PIMC to act as investment adviser to the Company for its
FedFund portfolio ("FedFund"), its T-Fund portfolio ("T-Fund"), its Federal
Trust Fund portfolio ("Federal Trust Fund"), its Treasury Trust Fund portfolio
("Treasury Trust Fund"), its ShortFed Fund (now, by change of name, "Short
Government Fund"), its Intermediate Government Fund portfolio ("Intermediate
Government Fund") and its Long Government Fund portfolio ("Long Government
Fund");
WHEREAS, Provident has agreed to act as sub-adviser to FedFund, T-Fund,
Federal Trust Fund, Treasury Trust Fund, Short Government Fund, Intermediate
Government Fund and Long Government Fund, pursuant to a Sub-Advisory Agreement
dated as of March 11, 1987 between PIMC and Provident, as supplemented by
Addenda Nos. 1, 2 and 3 dated as of June 30, 1988, September 7, 1988 and
November 1, 1990, respectively, (the "Sub-Advisory Agreement");
WHEREAS, Section 1(b) of the Advisory Agreement permits the Company to
appoint PIMC as investment adviser under the Advisory Agreement for any new
investment portfolios established by the Company from time to time;
WHEREAS Section 1(b) of the Sub-Advisory Agreement provides that in the
event PIMC is appointed to act as investment adviser to a new investment
portfolio of the Company, and desires to retain Provident to act as its
sub-adviser with respect thereto, PIMC shall notify Provident in writing, and if
Provident is willing to render such services it shall notify PIMC in writing,
whereupon, after obtaining any required shareholder approval, such portfolio
shall become a Portfolio under the Sub- Advisory Agreement and the compensation
payable by PIMC to Provident with respect to the services provided by Provident
in respect of such portfolio shall be as agreed in writing at the time;
WHEREAS, pursuant to an Addendum No. 4 to the Advisory Agreement of
even date herewith, PIMC has been appointed investment adviser for the FedCash
portfolio
-1-
<PAGE> 2
("FedCash") and T-Cash portfolio ("T-Cash") of the Company; and
WHEREAS, pursuant to Section 1(b) of the Sub-Advisory Agreement, PIMC
has notified Provident that it desires to retain Provident as its sub-adviser
with respect to FedCash and T-Cash, and Provident has notified PIMC that it is
willing to render sub- advisory services for FedCash and T-Cash.
NOW THEREFORE, the parties hereto, intending to be legally bound,
hereby agree as follows:
1. Appointment. PIMC hereby appoints Provident its sub-adviser with
respect to FedCash and T-Cash. Provident accepts such appointment and agrees to
render the services set forth in the Sub-Advisory Agreement for the compensation
herein provided.
2. Compensation. For the services which Provident will render to
PIMC under the Sub-Advisory Agreement in respect of FedCash and T-Cash, PIMC
will pay to Provident a monthly fee equal to that which is set forth in Section
6 of the Sub-Advisory Agreement.
3. Capitalized Terms. From and after the date hereof, the term
"Portfolios" as used in the Sub-Advisory Agreement shall be deemed to include
FedCash and T-Cash, and the term "Portfolio" shall mean any of the Portfolios.
Capitalized terms used herein and not otherwise defined shall have the meanings
ascribed to them in the Sub-Advisory Agreement.
-2-
<PAGE> 3
4. Miscellaneous. Except to the extent supplemented hereby, the
Sub-Advisory Agreement shall remain unchanged and in full force and effect and
is hereby ratified and confirmed in all respects as supplemented hereby.
IN WITNESS WHEREOF, the undersigned have executed this Addendum as of
the date and year first above written.
PROVIDENT INSTITUTIONAL MANAGEMENT
CORPORATION
By: /s/ Thomas H. Nevin
----------------------------------
Title: President
PROVIDENT NATIONAL BANK
By: /s/ Charles L. Wills
----------------------------------
Title: Vice President
-3-
<PAGE> 1
EXHIBIT (6)
TRUST FOR FEDERAL SECURITIES
DISTRIBUTION AGREEMENT
Agreement dated January 31, l994 between Trust for Federal Securities,
a Pennsylvania business trust (the "Company"), and Provident Distributors, Inc.,
a Delaware corporation (the "Distributor").
WHEREAS, the Company is an open-end, diversified management investment
company and is so registered under the Investment Company Act of 1940, as
amended (the "1940 Act"); and
WHEREAS, the Company desires to retain the Distributor as its
distributor to provide for the sale and distribution of each class and subclass
of shares of beneficial interest ("shares") in each of the Company's investment
portfolios (individually, a "Fund," collectively, the "Funds") as listed on
Appendix A (as such Appendix may, from time to time, be supplemented (or
amended)), and the Distributor is willing to render such services;
NOW, THEREFORE, in consideration of the premises and mutual covenants
set forth and intending to be legally bound, the parties hereto agree as
follows:
1. APPOINTMENT OF DISTRIBUTOR. The Company hereby appoints the
Distributor as distributor of each class and subclass of shares in each of the
Company's Funds on the terms and for the period set forth in this Agreement. The
Distributor hereby accepts such appointment and agrees to render the services
and duties set forth in Section 3 below. In the event that the Company
establishes additional classes or investment portfolios other than the Funds
listed on Appendix A with respect to which it desires to retain the Distributor
to act as distributor hereunder, the Company shall notify the Distributor,
whereupon such Appendix A shall be supplemented (or amended) and such portfolio
shall become a Fund hereunder and shall be subject to the provisions of this
Agreement to the same extent as the Funds (except to the extent that said
provisions may be modified in writing by the Company and Distributor at the
time).
2. DELIVERY OF DOCUMENTS. The Company has furnished the Distributor
with copies, properly certified or authenticated, of each of the following
documents and will deliver to it all future amendments and supplements, if any:
a. The Company's Declaration of Trust, filed with the
Secretary of State of the Commonwealth of Pennsylvania on May 14, 1975, as
amended (the "Charter"),
<PAGE> 2
b. The Company's By-Laws, as amended and supplemented
("By-Laws");
c. Resolutions of the Company's Board of Trustees authorizing
the execution and delivery of this Agreement;
d. The Company's most recent amendment to its Registration
Statement under the Securities Act of 1933, as amended (the "1933 Act"), and the
1940 Act on Form N-1A as filed with the Securities and Exchange Commission (the
"Commission") relating to its Funds (the Registration Statement, as presently in
effect and as amended or supplemented from time to time, is herein called the
"Registration Statement");
e. The Company's most recent Prospectuses and Statements of
Additional Information and all amendments and supplements thereto (such
Prospectuses and Statements of Additional Information and supplements thereto,
as presently in effect and as from time to time amended and supplemented, are
herein called the "Prospectuses").
3. SERVICES AND DUTIES. The Distributor enters into the following
covenants with respect to its services and duties:
a. The Distributor agrees to sell, as agent, from time to time
during the term of this Agreement, shares upon the terms and at the current
offering price as described in the Prospectuses. The Distributor will act only
in its own behalf as principal in making agreements with selected dealers. No
broker-dealer or other person which enters into a selling or servicing agreement
with the Distributor shall be authorized to act as agent for the Company or its
Funds in connection with the offering or sale of shares to the public or
otherwise. The Distributor shall use its best efforts to sell shares of each
class or subclass of each of the Funds but shall not be obligated to sell any
certain number of shares.
b. The Distributor shall prepare or review, provide advice
with respect to, and file with the federal and state agencies or other
organization as required by federal, state, or other applicable laws and
regulations, all sales literature (advertisements, brochures and shareholder
communications) for each of the Funds and any class or subclass thereof.
c. In performing all of its services and duties as
Distributor, the Distributor will act in conformity with the Charter, By-Laws,
Prospectuses and resolutions and other instructions of the Company's Board of
Trustees and will comply with the requirements of the 1933 Act, the Securities
Exchange
-2-
<PAGE> 3
Act of 1934, the 1940 Act and all other applicable federal or state law.
d. The Distributor will bear the cost of (i) printing and
distributing any Prospectus (including any supplement thereto) to persons who
are not shareholders, and (ii) preparing, printing and distributing any
literature, advertisement or material which is primarily intended to result in
the sale of shares; provided, however, that the Distributor shall not be
obligated to bear the expenses incurred by the Company in connection with the
preparation and printing of any amendment to any Registration Statement or
Prospectus necessary for the continued effective registration of the shares
under the 1933 Act and state securities laws and the distribution of any such
document to existing shareholders of the Company's Funds.
e. The Company shall have the right to suspend the sale of
shares at any time in response to conditions in the securities markets or
otherwise, and to suspend the redemption of shares of any Fund at any time
permitted by the 1940 Act or the rules and regulations of the Commission
("Rules").
f. The Company reserves the right to reject any order for
shares but will not do so arbitrarily or without reasonable cause.
4. LIMITATIONS OF LIABILITY. The Distributor shall not be liable for
any error of judgment or mistake of law or for any loss suffered by the Company
in connection with the matters to which this Agreement relates, except a loss
resulting from willful misfeasance, bad faith or gross negligence on its part in
the performance of its duties or from reckless disregard by it of its
obligations and duties under this Agreement.
5. PROPRIETARY AND CONFIDENTIAL INFORMATION. The Distributor agrees
on behalf of itself and its employees to treat confidentially and as proprietary
information of the Company all records and other information relative to the
Company and its Funds and prior, present or potential shareholders, and not to
use such records and information for any purpose other than performance of its
responsibilities and duties hereunder, except after prior notification to and
approval in writing by the Company, which approval shall not be unreasonably
withheld and may not be withheld where the Distributor may be exposed to civil
or criminal contempt proceedings for failure to comply, when requested to
divulge such information by duly constituted authorities, or when so requested
by the Company.
-3-
<PAGE> 4
6. INDEMNIFICATION.
a. The Company represents and warrants to the Distributor that
the Registration Statement contains, and that the Prospectuses at all times will
contain, all statements required by the 1933 Act and the Rules of the
Commission, will in all material respects conform to the applicable requirements
of the 1933 Act and the Rules and will not include any untrue statement of a
material fact or omit to state any material fact required to be stated therein
or necessary to make the statements therein, in light of the circumstances under
which they were made, not misleading, except that no representation or warranty
in this Section 6 shall apply to statements or omissions made in reliance upon
and in conformity with written information furnished to the Company by or on
behalf of the Distributor or either of the Company's co-administrators expressly
for use in the Registration Statement or Prospectuses.
b. The Company on behalf of each Fund agrees that each Fund
will indemnify, defend and hold harmless the Distributor, its several officers,
and directors, and any person who controls the Distributor within the meaning of
Section 15 of the 1933 Act, from and against any losses, claims, damages or
liabilities, joint or several, to which the Distributor, its several officers,
and directors, and any person who controls the Distributor within the meaning of
Section 15 of the 1933 Act, may become subject under the 1933 Act or otherwise,
insofar as such losses, claims, damages or liabilities (or actions or
proceedings in respect thereof) arise out of, or are based upon any untrue
statement or alleged untrue statement of a material fact contained in the
Registration Statement, the Prospectuses or in any application or other document
executed by or on behalf of the Company with respect to such Fund or are based
upon information furnished by or on behalf of the Company with respect to such
Fund filed in any state in order to qualify the shares under the securities or
blue sky laws thereof ("Blue Sky application") or arise out of, or are based
upon, the omission or alleged omission to state therein a material fact required
to be stated therein or necessary to make the statements therein not misleading,
and will reimburse the Distributor, its several officers, and directors, and any
person who controls the Distributor within the meaning of Section 15 of the 1933
Act, for any legal or other expenses reasonably incurred by the Distributor, its
several officers, and directors, and any person who controls the Distributor
within the meaning of Section 15 of the 1933 Act, in investigating, defending or
preparing to defend any such action, proceeding or claim; provided, however,
that the Company shall not be liable in any case to the extent that such loss,
claim, damage or liability arises out of, or is based upon, any untrue
statement, alleged untrue statement, or omission or alleged omission made in the
Registration Statement, the Prospectus or any Blue Sky
-4-
<PAGE> 5
application with respect to such Fund in reliance upon and in conformity with
written information furnished to the Company by or on behalf of the Distributor
or either of the Company's co-administrators specifically for inclusion therein
or arising out of the failure of the Distributor to deliver a current
Prospectus.
c. The Company on behalf of each Fund shall not indemnify any
person pursuant to this Section 6 unless the court or other body before which
the proceeding was brought has rendered a final decision on the merits that such
person was not liable by reason of his or her willful misfeasance, bad faith or
gross negligence in the performance of his or her duties, or his or her reckless
disregard of any obligations and duties, under this Agreement ("disabling
conduct") or, in the absence of such a decision, a reasonable determination
(based upon a review of the facts) that such person was not liable by reason of
disabling conduct has been made by the vote of a majority of a quorum of the
directors of the Company who are neither "interested parties" (as defined in the
1940 Act) nor parties to the proceeding, or by independent legal counsel in a
written opinion.
d. The Distributor will indemnify and hold harmless the
Company and each of its Funds and its several officers and directors, and any
person who controls the Company within the meaning of Section 15 of the 1933
Act, from and against any losses, claims, damages or liabilities, joint or
several, to which any of them may become subject under the 1933 Act or
otherwise, insofar as such losses, claims, damages or liabilities (or actions or
proceedings in respect thereof) arise out of, or are based upon, any untrue
statement or alleged untrue statement of a material fact contained in the
Registration Statement, the Prospectus or any Blue Sky application, or arise out
of, or are based upon, the omission or alleged omission to state therein a
material fact required to be stated therein or necessary to make the statements
therein not misleading, which statement or omission was made in reliance upon
and in conformity with information furnished in writing to the Company or any of
its several officers and directors by or on behalf of the Distributor or either
of the Company's co-administrators specifically for inclusion therein, and will
reimburse the Company and its several officers, directors and such controlling
persons for any legal or other expenses reasonably incurred by any of them in
investigating, defending or preparing to defend any such action, proceeding or
claim.
e. The obligations of each Fund under this Section 6 shall be
the several (and not the joint or joint and several) obligation of each Fund.
-5-
<PAGE> 6
7. DURATION AND TERMINATION. This Agreement shall become effective
upon its execution as of the date first written above and, unless sooner
terminated as provided herein, shall continue until March 31, 1995. Thereafter,
if not terminated, this Agreement shall continue automatically for successive
terms of one year, provided that such continuance is specifically approved at
least annually (a) by a vote of a majority of those members of the Company's
Board of Trustees who are not parties to this Agreement or "interested persons"
of any such party, cast in person at a meeting called for the purpose of voting
on such approval, and (b) by the Company's Board of Trustees or by vote of a
"majority of the outstanding voting securities" of the Company; provided,
however, that this Agreement may be terminated by the Company at any time,
without the payment of any penalty, by vote of a majority of the entire Board of
Trustees or by a vote of a "majority of the outstanding voting securities" of
the Company on 60-days' written notice to the Distributor, or by the Distributor
at any time, without the payment of any penalty, on 90-days' written notice to
the Company. This Agreement will automatically and immediately terminate in the
event of its "assignment." (As used in this Agreement, the terms "majority of
the outstanding voting securities," "interested person" and "assignment" shall
have the same meanings as such terms have in the 1940 Act.)
8. AMENDMENT OF THIS AGREEMENT. No provision of this Agreement may
be changed, waived, discharged or terminated orally, but only by an instrument
in writing signed by the party against which an enforcement of the change,
waiver, discharge or termination is sought.
9. NOTICES. Notices of any kind to be given to the Company hereunder
by the Distributor shall be in writing and shall be duly given if mailed or
delivered to the Company at Bellevue Park Corporate Center, Suite 152, 103
Bellevue Parkway, Wilmington, Delaware 19809, Attention: Mr. Edward J. Roach,
Treasurer, with a copy to Philadelphia National Bank Building, 1345 Chestnut
Street, Philadelphia Pennsylvania 19107-3496, Attention: W. Bruce McConnel, III,
Secretary, or at such other address or to such individual as shall be so
specified by the Company to the Distributor. Notices of any kind to be given to
the Distributor hereunder by the Company shall be in writing and shall be duly
given if mailed or delivered to Provident Distributors, Inc., 259 Radnor-Chester
Road, Suite 120, Radnor, Pennsylvania 19087, Attention: Monroe J. Haegele or at
such other address or to such other individual as shall be so specified by the
Distributor to the Company.
10. MISCELLANEOUS. a. The captions in this Agreement are included
for convenience of reference only and in no way define or delimit any of the
provisions hereof or otherwise
-6-
<PAGE> 7
affect their construction or effect. If any provision of this Agreement shall be
held or made invalid by a court decision, statute, rule or otherwise, the
remainder of this Agreement shall not be affected thereby. This Agreement shall
be binding upon and shall inure to the benefit of the parties hereto and their
respective successors.
b. The names "Trust for Federal Securities" and "Trustees of
Trust for Federal Securities" refer specifically to the trust created and the
Trustees, as trustees but not individually or personally, acting from time to
time under a Declaration of Trust dated May 14, 1975, which is hereby referred
to and a copy of which is on file at the principal office of the Company. The
obligations of "Trust for Federal Securities" entered into in the name or on
behalf thereof by any of the Trustees, officers, representatives or agents are
not made individually, but in such capacities, and are not binding upon any of
the Trustees, shareholders, representatives or agents of the Company personally,
but bind only the Trust property (as defined in the Declaration of Trust), and
all persons dealing with any Fund or class of shares of the Company must look
solely to the Trust property belonging to such Fund or class for the enforcement
of any claims against the Company.
11. COUNTERPARTS. This Agreement may be executed in counterparts, all
of which together shall constitute one and the same instrument.
IN WITNESS WHEREOF, the parties hereto have caused this instrument to
be executed by their officers designated below as of the day and year first
above written.
TRUST FOR FEDERAL SECURITIES
By
-----------------------------
President
PROVIDENT DISTRIBUTORS, INC.
By
-----------------------------
Title
-7-
<PAGE> 8
APPENDIX A
to the
DISTRIBUTION AGREEMENT
between
Trust for Federal Securities
and
Provident Distributors, Inc.
- --------------------------------------------------------------------------------
FedFund (FedFund Shares and FedFund Dollar shares)
T-Fund (T-Fund shares and T-Fund Dollar shares)
FedCash (FedCash shares and FedCash Dollar shares)
T-Cash (T-Cash shares and T-Cash Dollar shares)
Federal Trust Fund (Federal Trust shares and Federal Trust Dollar shares)
Treasury Trust Fund (Treasury Trust shares and Treasury Trust Dollar shares)
Short Government Fund (Short Government shares and Short Government Dollar
shares)
Intermediate Government Fund (Intermediate Government shares and Intermediate
Government Dollar shares)
A-1
<PAGE> 1
EXHIBIT 7
DRINKER BIDDLE & REATH
REGIONAL PROTOTYPE
DEFINED CONTRIBUTION PLAN AND TRUST AGREEMENT
SPONSORED
BY
DRINKER BIDDLE & REATH
PHILADELPHIA, PENNSYLVANIA
[ FUND OFFICE RETIREMENT PROFIT-SHARING PLAN ]
NAME OF PLAN OF ADOPTING EMPLOYER
[ MUNICIPAL FUND FOR TEMPORARY INVESTMENT ]
NAME OF ADOPTING EMPLOYER
(REV. 06/94)
(C)DRINKER BIDDLE & REATH 1995
<PAGE> 2
TABLE OF CONTENTS
PART I - PLAN
<TABLE>
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Article I DEFINITIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.1 Accrual Computation Period. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.2 Accrued Benefit. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.3 Adjustment Factor. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.4 Administrative Committee. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.5 Adoption Agreement. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.6 Affiliated Employer . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.7 Appropriate Form . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.8 Beneficiary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
1.9 Code . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
1.10 Compensation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
1.11 Computation Period . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
1.12 Controlled Group . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
1.13 Defined Benefit Plan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
1.14 Defined Contribution Plan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
1.15 Determination Date . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
1.16 Determination Period . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
1.17 Disability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
1.18 Early Retirement Date . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
1.19 Earned Income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
1.20 Effective Date . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
1.21 Elective Deferrals . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
1.22 Elective Deferral Account(s) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
1.23 Elective Deferral Contributions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
1.24 Eligibility Computation Period(s) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
1.25 Employee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
1.26 Employee Contributions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
1.27 Employee Pension Benefit Plan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
1.28 Employer . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
1.29 Employer Account . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
1.30 Employer Contributions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
1.31 Employer Security . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
1.32 Employment Commencement Date . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
1.33 Entry Date . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
1.34 ERISA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
1.35 Excess Compensation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
1.36 Family Member . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
1.37 Fiduciary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
1.38 Highly Compensated Employee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
</TABLE>
-i-
<PAGE> 3
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1.39 Hour of Service . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
1.40 Hourly Employee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
1.41 Inactive Participant . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
1.42 Insurance Contracts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
1.43 Insurer . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
1.44 Investment Manager . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
1.45 Key Employee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
1.46 Leased Employee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
1.47 Limitation Compensation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
1.48 Limitation Year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
1.49 Matching Account(s) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
1.50 Matching Contribution . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
1.51 Non-Highly Compensated Employee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
1.52 Non-Resident Alien . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
1.53 Normal Retirement Age . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
1.54 Normal Retirement Date . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
1.55 One-Year Break In Service . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
1.56 Owner-Employee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
1.57 Participant . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
1.58 Participant Account . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
1.59 Participant Contributions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
1.60 Permissive Aggregation Group . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
1.61 Plan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
1.62 Plan Administrator . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
1.63 Plan Sponsor . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
1.64 Plan Year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
1.65 Prior Plan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
1.66 Profits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
1.67 QVEC Account(s) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
1.68 Qualified Domestic Relations Order . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
1.69 Qualified Matching Contribution . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
1.70 Qualified Nonelective Contribution . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
1.71 Qualified Voluntary Employee Contributions . . . . . . . . . . . . . . . . . . . . . . . . . 16
1.72 Qualifying Employer Security . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
1.73 Reemployment Commencement Date . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
1.74 Required Aggregation Group . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
1.75 Rollover Account . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
1.76 Rollover Contributions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
1.77 Salaried Employee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
1.78 Self-Employed Person . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
1.79 Service . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
1.80 Sponsoring Organization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
1.81 Spouse or Surviving Spouse . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
1.82 Taxable Wage Base . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
1.83 Taxable Year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
1.84 Top-Heavy Plan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
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1.85 Top-Heavy Ratio . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
1.86 Top-Heavy Valuation Date . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
1.87 Transfer Account . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
1.88 Trust . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
1.89 Trust Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
1.90 Trust Fund . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
1.91 Trustee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
1.92 Union Employee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
1.93 Valuation Date . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
1.94 Vested Accrued Benefit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
1.95 Vesting Computation Period . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
1.96 Welfare Benefit Fund . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
1.97 Year of Service for Benefit Accrual . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
1.98 Year of Service for Eligibility . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
1.99 Year of Service for Vesting . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
Article II PARTICIPATION UNDER PLAN . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
2.1 Adoption of Plan. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
2.2 Eligibility Requirements. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
2.3 Additional Rules Relating to Plan Participation. . . . . . . . . . . . . . . . . . . . . . . 23
2.4 Plans Covering Owner-Employees. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
Article III CONTRIBUTIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
3.1 Employer Contributions. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
3.2 Participant Contributions. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
3.3 Qualified Voluntary Employee Contributions. . . . . . . . . . . . . . . . . . . . . . . . . . 31
3.4 Elective Deferral Contributions. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
3.5 Matching Contributions. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
3.6 Contributions Held in Trust. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
3.7 Return of Employer Contributions. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
3.8 Limitations on Allocations. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
3.9 Rollover Contributions. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
3.10 Transfers of Accounts from and to Other
Qualified Plans. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
3.11 Top-Heavy Provisions. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48
Article IV ACCOUNTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49
4.1 Separate Accounts. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49
Article V ALLOCATION OF CONTRIBUTIONS, EARNINGS AND FORFEITURES . . . . . . . . . . . . . . . . . . . . 50
5.1 Allocations of Contributions. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50
5.2 Advice to Trustee re Allocations of Contributions and Direct Transfers. . . . . . . . . . . . 51
5.3 Valuations. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51
5.4 Allocation of Increases and Decreases. . . . . . . . . . . . . . . . . . . . . . . . . . . . 51
5.5 Forfeitures. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52
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Article VI INVESTMENT OF ACCOUNTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52
6.1 Investment of Accounts. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52
6.2 Insurance Contracts. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 55
6.3 Voting and Other Actions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 56
Article VII BENEFITS AND DISTRIBUTIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 57
7.1 Benefit Determination. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 57
7.2 Designation of Beneficiary and Election with Respect to
Death Benefit. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 58
7.3 Normal Retirement. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 59
7.4 Early Retirement. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 59
7.5 Participation after Normal Retirement Date. . . . . . . . . . . . . . . . . . . . . . . . . . 59
7.6 Separation from Service. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 60
7.7 Disability. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 64
7.8 Death. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 65
7.9 Commencement of Payments; Deferral of Payments; Minimum
Distribution Requirements. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 65
7.10 Withdrawals during Employment. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 71
7.11 Loans. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 76
7.12 QVEC Withdrawals. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 79
7.13 Incidental Benefit Rule. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 79
7.14 Joint and Survivor Annuity Requirements. . . . . . . . . . . . . . . . . . . . . . . . . . . 79
7.15 Waiver of 30-day Notice Requirements for Certain Distributions . . . . . . . . . . . . . . . 84
Article VIII NONALIENATION OF BENEFITS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 84
8.1 Benefits Not Alienable. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 84
8.2 Special Provision with Respect to Qualified Domestic Relations
Orders. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 84
Article IX THE ADMINISTRATIVE COMMITTEE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 85
9.1 Structure. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 85
9.2 Administrative Committee Action. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 85
9.3 Responsibilities. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 85
9.4 Contracting for Service. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 86
9.5 Expenses of Administrative Committee. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 86
Article X CLAIMS PROCEDURE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 86
10.1 Claims for Benefits. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 86
10.2 Appeals Procedure. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 87
Article XI THE TRUSTEE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 88
11.1 Acceptance of Trust. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 88
11.2 Resignation of Trustee. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 88
11.3 Removal of Trustee. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 88
11.4 Appointment of Successor Trustee upon Occurrence of Certain Events . . . . . . . . . . . . . . 88
11.5 Successor Trustee. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 88
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11.6 Meetings and Actions of Trustee. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 88
11.7 Compensation. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 89
11.8 Trustee's Liability. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 89
11.9 General Powers. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 89
11.10 Payments to Trustee. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 89
11.11 Investment of Trust Fund. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 89
11.12 Accounts, Reports and Governmental Filings. . . . . . . . . . . . . . . . . . . . . . . . . . 90
11.13 Information to Trustee. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 90
11.14 Benefit Payments. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 90
11.15 Trust Assets. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 90
11.16 Participants Exclusively to Benefit. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 90
11.17 Employment of Counsel, Agents, etc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 90
11.18 Compromise of Claims. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 91
11.19 Suits. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 91
11.20 Execution of Documents. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 91
11.21 No Discrimination. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 91
11.22 Decision of Trustee. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 91
11.23 Funding Policy. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 91
Article XII THE INSURER . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 91
12.1 Insurer's Liability. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 91
12.2 Information to Insurer. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 91
12.3 Benefit Payments. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 91
12.4 Annuities Must be Nontransferable. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 92
12.5 Conflicts. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 92
12.6 Distribution of Insurance Contracts. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 92
12.7 Conflict with Insurance Contracts. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 92
12.8 Dividends or Credits. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 92
Article XIII THE INVESTMENT MANAGER . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 92
13.1 Appointment. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 92
13.2 Responsibility. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 92
13.3 Act in Interest of Participants. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 92
13.4 Directions from Investment Manager. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 92
Article XIV FIDUCIARY RESPONSIBILITY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 93
14.1 Fiduciary Duties. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 93
14.2 Allocation of Responsibility. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 93
14.3 Exclusive Responsibility. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 94
14.4 Transfer or Maintenance of Indicia of Ownership of Plan
Assets Outside United States Prohibited. . . . . . . . . . . . . . . . . . . . . . . . . . . 94
14.5 Liability of Fiduciary for Breach of Co-Fiduciary. . . . . . . . . . . . . . . . . . . . . . 94
14.6 Prohibited Transactions. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 94
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Article XV PLAN AMENDMENT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 97
15.1 Amendment. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 97
15.2 Limitations upon Amendment. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 97
15.3 Rights of Trustee upon Amendment. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 98
15.4 Significant Reduction in Rate of Future Benefit Accruals. . . . . . . . . . . . . . . . . . . 98
Article XVI PLAN TERMINATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 99
16.1 Right to Discontinue Contributions and/or to Terminate Plan and Trust. . . . . . . . . . . . 99
16.2 Termination of Plan on Happening of Certain Events. . . . . . . . . . . . . . . . . . . . . . 99
16.3 Continuance of Trust after Complete Discontinuance of
Contributions to Plan. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 99
16.4 Distribution of Trust Assets. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 99
16.5 Distributees whose Whereabouts are Unknown. . . . . . . . . . . . . . . . . . . . . . . . . . 100
Article XVII SUCCESSOR EMPLOYER AND MERGER OR CONSOLIDATION OF PLAN . . . . . . . . . . . . . . . . . . . 100
17.1 Successor to Employer under Plan and Trust. . . . . . . . . . . . . . . . . . . . . . . . . . 100
17.2 Merger or Consolidation. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100
Article XVIII MISCELLANEOUS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 101
18.1 No Right to Employment. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 101
18.2 Gender and Number. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 101
18.3 Bonding. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 101
18.4 Agent for Service of Legal Process. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 101
18.5 Headings. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 101
18.6 Unclaimed Benefits. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 101
18.7 Reports Furnished to Participants. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 102
18.8 Reports Available to Participant and Beneficiaries. . . . . . . . . . . . . . . . . . . . . . 102
18.9 Reports upon Request. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 102
18.10 Controlled Group Employees. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 102
18.11 Construction. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 103
18.12 Insurance and Indemnification for Liability. . . . . . . . . . . . . . . . . . . . . . . . . 103
18.13 No Retention of Interest in Trust Fund. . . . . . . . . . . . . . . . . . . . . . . . . . . . 103
18.14 Termination of Plan and Trust under Rule Against Perpetuities. . . . . . . . . . . . . . . . 103
18.15 Notice to Interested Parties. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 103
18.16 Effective Date of Adoption of Plan and Trust Agreement. . . . . . . . . . . . . . . . . . . . 104
18.17 Restatement of Existing Plan. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 104
18.18 Individual Provisions. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 104
18.19 Failure of Qualification. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 104
Article XIX ADOPTION OF PLAN BY AFFILIATED EMPLOYERS . . . . . . . . . . . . . . . . . . . . . . . . . . 104
19.1 Adoption of Plan and Trust. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 104
19.2 Withdrawal from Plan. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 105
19.3 Exclusive Purpose of Trust. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 105
19.4 Application of Withdrawal Provisions. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 105
19.5 Single Plan. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 106
</TABLE>
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<TABLE>
<CAPTION>
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<S> <C>
19.6 Adopting Employer Appointed Agent of Adopting Affiliated Employers . . . . . . . . . . . . . . 106
PART II - ADOPTION AGREEMENTS
PROFIT-SHARING (401(K)) PLAN (REGIONAL PROTOTYPE PLAN NUMBER 001)
ADOPTION AGREEMENT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . A-1
MONEY PURCHASE PLAN (REGIONAL PROTOTYPE PLAN NUMBER 002) ADOPTION
AGREEMENT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . B-1
</TABLE>
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PART I
DRINKER BIDDLE & REATH
REGIONAL PROTOTYPE
DEFINED CONTRIBUTION PLAN AND TRUST AGREEMENT
ARTICLE I
DEFINITIONS
The following words and phrases, as used in the Plan and
Adoption Agreement, shall have the following meanings unless the context
clearly indicates otherwise:
1.1 ACCRUAL COMPUTATION PERIOD. "ACCRUAL COMPUTATION PERIOD"
shall mean the Plan Year except as otherwise elected in the applicable Adoption
Agreement.
1.2 ACCRUED BENEFIT. "ACCRUED BENEFIT" shall mean the amounts
credited to a Participant's Employer, Elective Deferral, Matching, Participant,
Rollover, Transfer and QVEC Accounts and other accounts (e.g., Qualified
Matching Contribution and Qualified Nonelective Contribution accounts)
including the proceeds of Insurance Contracts, if any, on the life of the
Participant.
1.3 ADJUSTMENT FACTOR. "ADJUSTMENT FACTOR" shall mean the
cost-of-living adjustment factor prescribed by the Secretary of the Treasury
under section 415(d) of the Code for years beginning after December 31, 1987,
as applied to such items and in such manner as the Secretary shall provide.
1.4 ADMINISTRATIVE COMMITTEE. "ADMINISTRATIVE COMMITTEE" shall
mean the committee appointed by the Employer to administer the Plan. The
name(s) of the member(s) of the Administrative Committee and his (their)
address(es) shall be indicated in the Adoption Agreement.
1.5 ADOPTION AGREEMENT. "ADOPTION AGREEMENT" shall mean the
document executed by the Employer and the Trustee under which the Employer has
elected to establish or continue a qualified retirement plan and trust under
the terms of this Plan and Trust Agreement. If the Employer desires to
establish a profit-sharing or a profit-sharing 401(k) plan, the Employer shall
adopt the Profit-Sharing (401(k)) Plan Adoption Agreement. If the Employer
desires to establish a money purchase plan, the Employer shall adopt the Money
Purchase Plan Adoption Agreement.
1.6 AFFILIATED EMPLOYER. "AFFILIATED EMPLOYER" shall mean the
Employer and any corporation which is a member of a controlled group of
corporations (as defined in section 414(b) of the Code) which includes the
Employer; any trade or business (whether or not incorporated) which is under
common control (as defined in section 414(c) of the Code) with the Employer;
any organization (whether or not incorporated) which is a member of an
affiliated service group (as defined in section 414(m) of the Code) which
includes the Employer; and any other entity required to be aggregated with the
Employer pursuant to regulations under section 414(o) of the Code.
1.7 APPROPRIATE FORM. "APPROPRIATE FORM" shall mean the form
prescribed or provided by the Administrative Committee for the particular
purpose.
(C) DRINKER BIDDLE & REATH 1995
<PAGE> 10
1.8 BENEFICIARY. "BENEFICIARY" shall mean the Surviving Spouse of
a Participant, but if there is no Surviving Spouse, or, if the Surviving Spouse
previously consented in a manner conforming to a qualified election as provided
in Article VII, then such other person or persons or legal entity as may be
designated by the Participant to receive benefits payable under the Plan after
the Participant's death, or the personal or legal representative of a deceased
Participant. Prior to August 23, 1984, "Beneficiary" shall mean such person or
persons or legal entity as may be designated by the Participant to receive
benefits payable under the Plan after the Participant's death, or the personal
or legal representative of a deceased Participant.
1.9 CODE. "CODE" shall mean the Internal Revenue Code of 1986, as
amended.
1.10 COMPENSATION. "COMPENSATION" shall mean Limitation
Compensation as that term is defined in Section 1.47. For any Self-Employed
Person covered under the Plan, Compensation shall mean Earned Income.
Compensation shall include only that compensation which is actually paid to the
Participant during the determination period. Except as provided elsewhere in
the Plan, the determination period is the Accrual Computation Period elected by
the Employer in the Adoption Agreement. If no election is made, the
determination period is the Plan Year.
Notwithstanding the above, if elected by the Employer in the Adoption
Agreement, Compensation shall include any amount which is contributed by the
Employer pursuant to a salary reduction agreement and which is not includible
in the gross income of the Employee under sections 125, 402(e)(3), 402(h)(1)(B)
or 403(b) of the Code.
(A) LIMITATION FOR PLAN YEARS BEGINNING BEFORE JANUARY 1,
1994. Effective for Plan Years beginning on or after January 1, 1989, and
before 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 $200,000, as adjusted by the Adjustment Factor
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. 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 compensation limit multiplied by the fraction, the
numerator of which is the number of months in the short plan year, and the
denominator of which is 12.
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 period is subject
to the applicable annual compensation limit in effect for that prior period.
For this purpose, for periods beginning before January 1, 1990, the applicable
annual compensation limit is $200,000.
(B) LIMITATION FOR PLAN YEARS BEGINNING ON OR AFTER
JANUARY 1, 1994. In addition to other applicable limitations set forth in
the Plan, and notwithstanding any other provisions of the Plan to the
contrary, 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 Code. The cost-of-living adjustment in effect
for a calendar year applies to any determination period beginning in such
calendar year.
If a determination period consists of fewer than 12 months,
the annual compensation limit is an amount equal to the otherwise applicable
annual compensation limit multiplied by a fraction, the numerator of which is
the number of months in the short determination period, and the denominator of
which is 12.
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<PAGE> 11
For Plan Years beginning on or after January 1, 1994, any
reference in this Plan to the limitation under section 401(a)(17) of the
Code shall mean the OBRA '93 annual compensation limit set forth in this
provision.
If compensation for any prior determination period is taken
into account in determining a Participant's allocations for the current Plan
Year, the compensation for such prior determination period is subject to
applicable annual compensation limit in effect for that prior determination
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.
In determining the Compensation of a Participant for purposes of the
limitations of Section 1.10(A) and (B), 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 annual compensation
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 1.10 prior to the application of this limitation.
1.11 COMPUTATION PERIOD. "COMPUTATION PERIOD" shall mean any 12
consecutive month period.
1.12 CONTROLLED GROUP. "CONTROLLED GROUP" shall mean a group of
employers, of which the Employer is a member and which group constitutes:
(A) A controlled group of corporations (as defined in
section 414(b) of the Code);
(B) Trades or businesses (whether or not incorporated)
which are under common control (as defined in section 414(c) of the Code);
(C) Trades or businesses (whether or not incorporated)
which constitute an affiliated service group (as defined in section 414(m)
of the Code); or
(D) Any other entity required to be aggregated with the
Employer pursuant to section 414(o) of the Code and the Treasury regulations
thereunder.
Solely for the purpose of applying Section 3.8, the phrase "more than
50 percent" shall be substituted for the phrase "at least 80 percent" each
place it appears in section 1563(a)(1) of the Code.
If the Employer adopting the Plan is a member of a Controlled Group,
the Employer shall so indicate in the Adoption Agreement.
1.13 DEFINED BENEFIT PLAN. "DEFINED BENEFIT PLAN" shall mean any
Employee Pension Benefit Plan which is not a Defined Contribution Plan.
1.14 DEFINED CONTRIBUTION PLAN. "DEFINED CONTRIBUTION PLAN" shall
mean any Employee Pension Benefit Plan which provides for an individual account
for each Participant and for benefits based solely upon
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<PAGE> 12
the amount contributed to the Participant's account and any income, expenses,
gains and losses, and any forfeitures of accounts of other Participants which
may be allocated to such Participant's account.
1.15 DETERMINATION DATE. "DETERMINATION DATE" shall mean, with
respect to any Employee Pension Benefit Plan, except as otherwise provided in
Treasury regulations, the last day of the preceding plan year or, in the case
of the first plan year of any plan, the last day of such plan year.
1.16 DETERMINATION PERIOD. "DETERMINATION PERIOD" shall mean the
Plan Year containing the Determination Date and the four preceding Plan Years.
1.17 DISABILITY. "DISABILITY" shall mean the inability to engage
in any substantial gainful activity by reason of any medically determinable
physical or mental impairment which can be expected to result in death or to be
of long continued or indefinite duration. The permanence and degree of such
impairment shall be supported by medical evidence satisfactory to the
Administrative Committee. If elected by the Employer in the Adoption
Agreement, nonforfeitable contributions shall be made to the Plan on behalf of
each disabled Participant who is a Non-Highly Compensated Employee.
1.18 EARLY RETIREMENT DATE. "EARLY RETIREMENT DATE" shall mean the
date, if any, specified in the Adoption Agreement.
1.19 EARNED INCOME. "EARNED INCOME" shall mean the net earnings of
a Self-Employed Person from self-employment in the trade or business with
respect to which the Plan is established, for which personal services of the
Self-Employed Person 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 shall be 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 taxpayer by section 164(f) of the Code for Taxable Years beginning after
December 31, 1989.
1.20 EFFECTIVE DATE. "EFFECTIVE DATE" shall mean the date on which
the Employer's Plan becomes effective, as indicated in the Adoption Agreement.
1.21 ELECTIVE DEFERRALS. "ELECTIVE DEFERRALS" shall mean
contributions made to the Plan during the Plan Year by the Employer, at the
election of the Participant, in lieu of cash compensation and shall include
contributions made pursuant to a salary reduction agreement or other deferral
mechanism. Moreover, with respect to any taxable year of a Participant, such
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 cash or deferred arrangement as described in section 401(k) of the
Code, any simplified employee pension cash or deferred arrangement as described
in section 402(h)(l)(B) of the Code, any eligible deferred compensation plan
under section 457 of the Code, any plan as described under section 501(c)(18)
of the Code, and any employer contributions made on the behalf of a Participant
for the purchase of an annuity contract under section 403(b) of the Code
pursuant to a salary reduction agreement. Elective Deferrals shall not include
any deferrals properly distributed as excess annual additions.
1.22 ELECTIVE DEFERRAL ACCOUNT(S). "ELECTIVE DEFERRAL ACCOUNT(S)"
shall mean the account established by the Administrative Committee with the
Trustee for each Participant, which account shall be invested as provided in
Article VI on behalf of the Participant for whom such Elective Deferral Account
has
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<PAGE> 13
been established, and to which Elective Deferral Contributions on behalf of
such Participant, and the earnings and losses thereon, shall be allocated.
1.23 ELECTIVE DEFERRAL CONTRIBUTIONS. "ELECTIVE DEFERRAL
CONTRIBUTIONS" shall mean Employer contributions through salary reduction under
Section 3.4.
1.24 ELIGIBILITY COMPUTATION PERIOD(S). "ELIGIBILITY COMPUTATION
PERIOD(S)" shall mean the Computation Period(s) determined under (A) or (B)
below.
(A) NORMAL RULE. Unless the Adoption Agreement provides
otherwise, the Eligibility Computation Period(s) shall be the Computation
Period(s) commencing on an Employee's Employment Commencement Date and the
anniversaries of the Employee's Employment Commencement Date.
(B) ALTERNATE RULE. If the Adoption Agreement so
provides, the initial Eligibility Computation Period shall be the
Computation Period commencing on an Employee's Employment Commencement Date
and the succeeding Eligibility Computation Period(s) shall commence with the
first Plan Year which begins prior to the first anniversary of the
Employee's Employment Commencement Date regardless of whether the Employee
is entitled to be credited with the number of Hours of Service required by
the Adoption Agreement (not to exceed 1,000 Hours of Service) during the
initial Eligibility Computation Period. An Employee who is credited with
the number of Hours of Service required by the Adoption Agreement (not to
exceed 1,000 Hours of Service) in both the initial Eligibility Computation
Period and the first Plan Year which commences prior to the first
anniversary of the Employee's initial Eligibility Computation Period shall
be credited with two Years of Service for Eligibility for purposes of
participation in the Plan.
Years of Service for Eligibility and One-Year Breaks In Service for
eligibility shall be measured by the same Eligibility Computation Periods.
This provision is not applicable if the elapsed time method is selected in
Section A.2.2(B)(2) of the Adoption Agreement.
1.25 EMPLOYEE. "EMPLOYEE" shall mean any employee of the Employer
or of any other employer required to be aggregated with such Employer under
sections 414(b), (c), (m) or (o) of the Code and shall also include any Leased
Employee deemed to be an employee of any employer described in the preceding
clause as provided in sections 414(n) or (o) of the Code.
1.26 EMPLOYEE CONTRIBUTIONS. "EMPLOYEE CONTRIBUTIONS" shall mean
contributions to the Plan made by a Participant during the Plan Year.
1.27 EMPLOYEE PENSION BENEFIT PLAN. "EMPLOYEE PENSION BENEFIT
PLAN" shall mean any plan described in section 415(k)(1) of the Code.
1.28 EMPLOYER. "EMPLOYER" shall mean the adopting individual(s) or
business entity(ies). For purposes of applying the provisions of sections 401,
410, 411, 415 and 416 of the Code, all employees of a Controlled Group shall be
treated as employed by a single employer.
1.29 EMPLOYER ACCOUNT. "EMPLOYER ACCOUNT" shall mean the account
established by the Administrative Committee with the Trustee for each
Participant, which shall be invested as provided in Article VI on behalf of the
Participant for whom such Employer Account has been established, and to which
the Employer Contributions on behalf of such Participant and the earnings and
losses thereon shall be allocated.
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<PAGE> 14
1.30 EMPLOYER CONTRIBUTIONS. "EMPLOYER CONTRIBUTIONS" shall mean
Employer contributions under Section 3.1 of the Plan.
1.31 EMPLOYER SECURITY. "EMPLOYER SECURITY" shall mean an employer
security (as such term is defined in section 407(d)(1) of ERISA) issued by an
Employer or other Controlled Group member.
1.32 EMPLOYMENT COMMENCEMENT DATE. "EMPLOYMENT COMMENCEMENT DATE"
shall mean the date on which an Employee first performs an hour of service.
For purposes of this Section 1.32, hour of service shall mean each hour for
which an Employee is paid or is entitled to payment for the performance of
services for the Employer.
1.33 ENTRY DATE. "ENTRY DATE" shall mean the date designated in
the Adoption Agreement as the date on which an Employee shall become an active
Participant in the Plan.
1.34 ERISA. "ERISA" shall mean the Employee Retirement Income
Security Act of 1974, as amended from time to time.
1.35 EXCESS COMPENSATION. "EXCESS COMPENSATION" shall mean
Compensation in excess of the lesser of:
(A) The Taxable Wage Base; or
(B) The dollar amount set forth in the Adoption Agreement.
1.36 FAMILY MEMBER. "FAMILY MEMBER" shall mean an individual
described in section 414(q)(6)(B) of the Code.
1.37 FIDUCIARY. "FIDUCIARY" shall mean any person who:
(A) Exercises any discretionary authority or
discretionary control respecting management of the Plan or exercises any
authority or control respecting management or disposition of its assets;
(B) Renders investment advice for a fee or other
compensation, direct or indirect, with respect to any moneys or other
property of the Plan or has authority or responsibility to do so; or
(C) Has any discretionary authority or discretionary
responsibility in administering the Plan.
1.38 HIGHLY COMPENSATED EMPLOYEE. "HIGHLY COMPENSATED EMPLOYEE"
shall mean highly compensated active Employees and highly compensated former
Employees.
(A) ACTIVE EMPLOYEES.
(1) A highly compensated active Employee includes
any Employee who performs services 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 by the Adjustment
Factor);
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<PAGE> 15
(b) Received Compensation from the
Employer in excess of $50,000 (as adjusted by the Adjustment
Factor) 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
percent of the dollar limitation in effect under section
415(b)(l)(A) of the Code. If elected by the Employer in the
Adoption Agreement, Section 1.38(A)(1)(a) shall be modified by
substituting $50,000 for $75,000 and Section 1.38(A)(1)(b)
shall be disregarded. This simplified definition of Highly
Compensated Employee shall apply only to Employers that
maintain significant business activities (and employ
Employees) in at least two significantly separate geographic
areas.
(2) A highly compensated active Employee also
includes any Employee who would be described in Section 1.38(A)(1)(a),
(b) or (c), if the term "determination year" were substituted for the
term "look-back year" and the Employee was one of the 100 Employees
who received the most Compensation from the Employer during the
determination year.
(3) A highly compensated active Employee also
includes any Employee who is a five-percent owner at any time during
the look-back year or determination year.
If elected by the Employer in the Adoption Agreement, Section
1.38(A)(1)(a) and (b) shall be modified by substituting $50,000 for $75,000
in Section 1.38(A)(1)(a) and by disregarding Section 1.38(A)(1)(b). This
simplified definition of Highly Compensated Employee shall apply only to
employers that maintain significant business activities (and employ
employees) in at least two significantly separate geographic areas.
If no officer has satisfied the Compensation requirement of
Section 1.38(A)(1)(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 purposes of this Section 1.38, the determination year
shall be the Plan Year and the look-back year shall be the 12-month period
immediately preceding the determination year. However, the Employer may
elect, in the applicable Adoption Agreement, to make the look-back year
calculation for a determination year on the basis of the calendar year
ending with or within the applicable determination year (or, in the case of
a determination year that is shorter than 12 months, the calendar year
ending with or within the 12-month period ending with the end of the
applicable determination year). In such case, the Employer must make the
determination year calculation for the determination year on the basis of
the period (if any) by which the applicable determination year extends
beyond such calendar year (i.e., the lag period). If the Employer elects to
make the calendar year calculation election with respect to one plan, entity
or arrangement, such election must apply to all plans, entities and
arrangements of the Employer and such election must be provided for in the
plan. This election and the calculation are subject to the requirements and
provisions of Treas. Reg. Section 1.414(q)-1T Q- and A-14, as modified by
Proposed Treas. Reg. Section 1.414(q)-1T.
(B) FORMER EMPLOYEES. 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.
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<PAGE> 16
If an Employee is, during a determination year or look-back
year, a Family Member of either a five-percent owner who is an active or
former Employee or a highly compensated Employee who is one of the ten most
highly compensated Employees ranked on the basis of Compensation paid by the
Employer during such year, then the Family Member and the five-percent owner
or top-ten highly compensated Employee shall be aggregated. In such case,
the Family Member and five-percent owner or top-ten highly compensated
Employee shall be treated as a single Employee receiving Compensation and
Plan contributions or benefits equal to the sum of such Compensation and
contributions or benefits of the Family Member and five-percent owner or
top-ten highly compensated Employee.
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, shall be made in
accordance with section 414(q) of the Code and the Treasury regulations
thereunder.
1.39 HOUR OF SERVICE. "HOUR OF SERVICE" shall mean an hour of
service determined as follows:
(A) An "Hour of Service" shall mean:
(1) Each hour for which an Employee is paid, or
entitled to payment, for the performance of duties for the Employer;
(2) 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; and
(3) Each hour for which back pay, irrespective of
mitigation of damages, is either awarded or agreed to by the Employer,
provided that the same Hours of Service shall not be credited under
Section 1.39(A)(1) or Section 1.39(A)(2) and under Section 1.39(A)(3).
(B) Effective for Plan Years beginning after December 31,
1984, solely for purposes of determining whether a One-Year Break In
Service, as defined in Section 1.55, for participation and vesting purposes
has occurred in a Computation Period, an Employee 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 Employee but for
such absence, or in any case in which such Hours of Service cannot be
determined, eight Hours of Service per day of such absence. For purposes of
this Section 1.39(B), an absence from work for maternity or paternity
reasons means an absence:
(1) By reason of the pregnancy of the Employee;
(2) By reason of the birth of a child of the
Employee;
(3) By reason of the placement of a child with
the Employee in connection with the adoption of such child by such
Employee; or
(4) For purposes of caring for such child for a
period beginning immediately following such birth or placement.
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<PAGE> 17
The Hours of Service credited under this Section 1.39(B) shall be credited
(i) in the Computation Period in which the absence begins if the crediting
is necessary to prevent a One-Year Break In Service in that Computation
Period, or (ii) in all other cases, in the following Computation Period.
(C) Notwithstanding Section 1.39(A)(2),
(1) No more than 501 Hours of Service shall be
credited under Section 1.39(A)(2) to an Employee on account of any
single continuous period during which the Employee performs no duties
(whether or not such period occurs in a single Computation Period);
(2) Hours of Service shall not be credited under
Section 1.39(A)(2) to an Employee for payments made or due under a
plan maintained solely for the purpose of complying with any
applicable workers' compensation, unemployment compensation or
disability insurance laws;
(3) Hours of Service shall not be credited under
Section 1.39(A)(2) to an Employee for any payment which solely
reimburses him for medical or medically related expenses he has
incurred; and
(4) Hours of Service shall not be credited under
Section 1.39(A)(2) to an Employee for any payments made or due to him
under this Plan or any other pension or profit-sharing plan maintained
by the Employer.
(D) In the case of a payment which is made, or due, on
account of a period during which an Employee performs no duties, and which
results in the crediting of Hours of Service under Section 1.39(A)(2), or in
the case of an award or agreement for back pay, to the extent that such
award or agreement is made with respect to a period described in Section
1.39(A)(2), the number of Hours of Service to be credited shall be
determined in accordance with 29 CFR Section 2530.200b-2(b).
(E) Hours of Service described in Section 1.39(A)(1)
shall be credited to the Employee for the Computation Period in which the
duties are performed. Hours of Service under Section 1.39(A)(2) shall be
calculated and credited to service Computation Periods in accordance with 29
CFR Section 2530.200b-2 which is incorporated herein by this reference.
Hours of Service under Section 1.39(A)(3) shall be credited to the Employee
for the Computation Period(s) to which the award or agreement pertains
rather than to the Computation Period in which the award, agreement or
payment is made.
(F) This Section 1.39 shall not be construed so as to
alter, amend, modify, invalidate, impair or supersede any law of the United
States or any rule or regulation issued under any such law. The nature and
extent of credit for Hours of Service recognized under this Section 1.39
shall be determined under such law.
(G) In the case of an Employee who is on leave of absence
for service on active duty in the Armed Forces of the United States, such
Employee shall receive upon return to the service of the Employer, in
addition to credit for Hours of Service to which such Employee is entitled
under this Section 1.39, such other credit as may be prescribed by Federal
laws relating to military service and veterans' reemployment rights.
(H) Hours of Service shall be credited for employment
with other members of an affiliated service group (under section 414(m) of
the Code) and of other members of a Controlled Group of which the
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<PAGE> 18
adopting Employer is a member. Hours of Service shall also be credited for
any individual required under section 414(n) of the Code to be considered an
Employee of any employer aggregated under sections 414(b), 414(c), or 414(m)
of the Code or section 414(o) of the Code and the Treasury regulations
thereunder.
(I) Except as otherwise provided in Section 1.39(B), the
number of Hours of Service to be credited to an Employee in a Computation
Period shall be determined in the following manner:
(1) In the case of an Employee for whom the
Employer maintains records of his hours worked and hours for which
payment is made or due, the number of Hours of Service to be credited
to such Employee in a Computation Period shall be determined from such
records.
(2) In the case of an Employee for whom the
Employer does not maintain records of his hours worked and hours for
which payment is made or due, the number of Hours of Service to be
credited to such Employee in a Computation Period shall be determined
on the basis of periods of employment which shall be the payroll
periods of the Employer applicable to such Employee. An Employee
shall be credited with a number of Hours of Service, determined in
accordance with the following table, for each of his payroll periods
in which he actually has at least one Hour of Service:
<TABLE>
<CAPTION>
PAYROLL PERIOD HOURS OF SERVICE CREDITED
-------------- -------------------------
<S> <C>
Daily 10
Weekly 45
Semi-monthly 95
Monthly 190
</TABLE>
1.40 HOURLY EMPLOYEE. "HOURLY EMPLOYEE" shall mean any Employee
who is compensated by the Employer on an hourly-rated basis.
1.41 INACTIVE PARTICIPANT. "INACTIVE PARTICIPANT" shall mean any
Employee or former Employee who has ceased to be a Participant and on whose
behalf an account is maintained under the Plan.
1.42 INSURANCE CONTRACTS. "INSURANCE CONTRACTS" shall mean fixed
or variable annuities, endowments and any other form or type of life insurance
contract or combination thereof issued by an Insurer. Each Insurance Contract
shall be held and owned by the Trustee in accordance with the terms of the
Plan.
1.43 INSURER. "INSURER" shall mean any life insurance company
which is licensed to do business in the State where the Employer's principal
office is located.
1.44 INVESTMENT MANAGER. "INVESTMENT MANAGER" shall mean the
investment manager, if any, appointed by the Employer to manage and invest all
or any portion of the assets of the Plan. Such Investment Manager shall:
(A) Have the power to manage, acquire or dispose of any
Plan assets committed to it;
(B) Be registered as an investment adviser under the
Investment Advisers Act of 1940; and
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(C) Have acknowledged in writing that it is a Fiduciary
with respect to the Plan and that it is bonded as required by ERISA.
The name(s) and address(es) of any Investment Manager(s) shall
be indicated in the Adoption Agreement.
1.45 KEY EMPLOYEE. "KEY EMPLOYEE" shall mean any Employee or
former Employee of the Employer who, at any time during the Determination
Period, is:
(A) An officer of the Employer having an annual
compensation which exceeds 50 percent of the dollar limitation under section
415(b)(1)(A) of the Code;
(B) An owner (or considered an owner under section 318 of
the Code) of one of the ten largest interests in the Employer if such
individual's compensation from the Employer exceeds 100 percent of the
dollar limitation under section 415(c)(1)(A) of the Code;
(C) A five-percent owner of the Employer; or
(D) A one-percent owner of the Employer having annual
compensation from the Employer of more than $150,000.
For the purposes of this Section 1.45, Key Employees shall
also include their beneficiaries.
Compensation means compensation as defined in Section A.1.47
of the Adoption Agreement, but including amounts contributed by the Employer
pursuant to a salary reduction arrangement which are excludable from the
Employee's gross income under sections 125, 402(e)(3), 402(h)(1)(B) or
403(b) of the Code.
For purposes of Section 1.45(A), no more than 50 Employees
(or, if less, the greater of three or ten percent of the Employees) shall be
treated as officers.
For purposes of Section 1.45(B), if two Employees have the
same interest in the Employer, the Employee having the greater amount of
compensation from the Employer shall be treated as having the larger
interest.
The determination of who is a Key Employee shall be made in
accordance with section 416(i)(l) of the Code and the Treasury regulations
thereunder.
1.46 LEASED EMPLOYEE. "LEASED EMPLOYEE" shall mean any person
(other than an employee of the recipient) who pursuant to an agreement between
the recipient and any other person ("leasing organization") has performed
services for the recipient (or for the recipient and related persons determined
in accordance with section 414(n)(6) of the Code) on a substantially full-time
basis for a period of at least one year, provided 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:
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<PAGE> 20
(A) Such employee is covered by a money purchase pension plan
providing: (1) a nonintegrated employer contribution rate of at least ten
percent of compensation, as defined in section 415(c)(3) of the Code, but
including amounts contributed pursuant to a salary reduction agreement which
are excludable from the employee's gross income under section 125, section
402(e)(3), section 402(h)(1)(B) or section 403(b) of the Code, (2) immediate
participation, and (3) full and immediate vesting; and
(B) Leased Employees do not constitute more than 20 percent
of the recipient's nonhighly compensated workforce.
1.47 LIMITATION COMPENSATION. "LIMITATION COMPENSATION" shall mean
one of the following, as elected by the Employer in the Adoption Agreement:
(A) INFORMATION REQUIRED TO BE REPORTED UNDER SECTIONS 6041,
6051, AND 6052 OF THE CODE (WAGES, TIPS AND OTHER COMPENSATION AS REPORTED
ON FORM W-2). Limitation Compensation shall mean 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), 6051(a)(3), and 6052 of the Code.
Limitation Compensation must be determined without regard to any rules under
section 3401(a) of the Code that limit the remuneration included in wages
based on the nature or location of the employment or the services performed
(such as the exception for agricultural labor in section 3401(a)(2) of the
Code).
(B) SECTION 3401(A) WAGES. Limitation Compensation shall
mean wages as defined in section 3401(a) of the Code for the purposes of
income tax withholding at the source but determined without regard to any
rules that limit the remuneration included in wages based on the nature or
location of the employment or the services performed (such as the exception
for agricultural labor in section 3401(a)(2) of the Code).
(C) 415 SAFE-HARBOR COMPENSATION. Limitation Compensation
shall mean wages, salaries, 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 (including, but not limited to,
commissions paid salesmen, compensation 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 Treas. Reg. Section 1.62-2(c)) and excluding the
following:
(1) Employer contributions to a deferred
compensation plan which are not includible in the Employee's gross
income for the taxable year in which contributed or Employer
contributions made on behalf of the Employee to a simplified employee
pension plan to the extent such contributions are deductible by the
Employee or any distributions from a deferred compensation plan;
(2) Amounts realized from the exercise of a
nonqualified stock option, or when restricted stock (or property) held
by the Employee either becomes freely transferable or is no longer
subject to a substantial risk of forfeiture;
(3) Amounts realized from the sale, exchange or
other disposition of stock acquired under a qualified stock option;
and
(4) Other amounts which receive special tax
benefits, or Employer contributions (whether or not under a salary
reduction agreement) toward the purchase of an annuity contract
described
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<PAGE> 21
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 Person, individual compensation shall mean
Earned Income.
Notwithstanding the above, Limitation 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 Limitation Compensation such
Participant would have received for the Limitation Year if the Participant had
been paid at the rate of Limitation Compensation paid immediately before
becoming permanently and totally disabled; such imputed Limitation Compensation
for the disabled Participant may be taken into account only if the Participant
is not a Highly Compensated Employee and contributions made on behalf of such
Participant are nonforfeitable when made.
For purposes of this Section 1.47, Limitation Compensation shall only
include compensation actually paid or made available during the applicable
Limitation Year. Notwithstanding the preceding sentence, an Employer may
include in Limitation Compensation amounts earned but not paid in a Limitation
Year because of the timing of pay periods and pay days if these amounts are
paid during the first few weeks of the next Limitation Year, the amounts are
included on a uniform and consistent basis with respect to all similarly
situated Participants, and no compensation is included in more than one
limitation period.
1.48 LIMITATION YEAR. "LIMITATION YEAR" shall mean the calendar
year unless another Computation Period is designated pursuant to a written
resolution adopted by the Employer.
1.49 MATCHING ACCOUNT(S). "MATCHING ACCOUNT(S)" shall mean the
account established by the Administrative Committee with the Trustee for each
Participant, which account shall be invested as provided in Article VI on
behalf of the Participant for whom such Matching Account has been established
and to which Matching Contributions on behalf of such Participant and the
earnings and losses thereon shall be allocated.
1.50 MATCHING CONTRIBUTION. "MATCHING CONTRIBUTION" shall mean any
contribution to the Plan made by the Employer for the Plan Year and allocated
to a Participant's Matching Account by reason of the Participant's Participant
Contributions or other Employee Contributions and/or by reason of the
Participant's Elective Deferral Contributions.
1.51 NON-HIGHLY COMPENSATED EMPLOYEE. "NON-HIGHLY COMPENSATED
EMPLOYEE" shall mean an Employee of the Employer who is neither a Highly
Compensated Employee nor a Family Member.
1.52 NON-RESIDENT ALIEN. "NON-RESIDENT ALIEN" shall mean any
non-resident alien (within the meaning of section 7701(b)(1)(B) of the Code)
who receives no earned income (within the meaning of section 911(d)(2) of the
Code), which constitutes United States source income (within the meaning of
section 861(a)(3) of the Code).
1.53 NORMAL RETIREMENT AGE. "NORMAL RETIREMENT AGE" shall mean the
age (not less than age 62 nor more than age 65) and/or time specified in the
Adoption Agreement.
1.54 NORMAL RETIREMENT DATE. "NORMAL RETIREMENT DATE" shall mean
the Valuation Date coincident with, or immediately following, the date on which
a Participant attains his Normal Retirement Age.
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<PAGE> 22
1.55 ONE-YEAR BREAK IN SERVICE. "ONE-YEAR BREAK IN SERVICE" shall
mean a one-year break in service computed under the regular method or the
elapsed time method, as defined below, based on the election made in the
Adoption Agreement.
(A) REGULAR METHOD. A One-Year Break In Service shall
mean a Computation Period during which the Employee has not completed more
than the number of Hours of Service (not to exceed 500 Hours of Service)
indicated in the Adoption Agreement.
(B) ELAPSED TIME METHOD. A One-Year Break In Service
shall mean a one-year period of severance in which an Employee does not have
one Hour of Service.
(1) GENERAL RULES. For purposes of determining
an Employee's initial or continued eligibility to participate in the
Plan or the nonforfeitable interest in the Participant's account
balance derived from Employer contributions (except for "Periods of
Service" (as defined in Section 1.97(B)(4)) which may be disregarded
on account of the "rule of parity" described in Section 2.3 and
Section A.7.6(B) of the Adoption Agreement), an Employee shall receive
credit for the aggregate of all time period(s) commencing with the
Employee's Employment or Reemployment Commencement Date and ending on
the date a break in service begins. An Employee shall also receive
credit for any "Period of Severance" (as defined in Section
1.97(B)(6)) of less than 12 consecutive months. Fractional periods of
a year shall be expressed in terms of days.
Each Employee shall 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 shall be credited for any employment for
any period of time for any other member of such group. Service shall
also be credited for any individual required under section 414(n) of
the Code or section 414(o) of the Code to be considered an Employee of
any Employer aggregated under section 414(b), (c), or (m) of the Code.
For purposes of this Section 1.55(B), a One-Year
Break In Service occurs if:
(a) An Employee severs service and does
not return within 12 months from the date of severance (e.g.,
the date on which he quits, is discharged or retires); or
(b) An Employee is absent from service
(e.g., by reason of Disability (except as otherwise provided
in the Plan), vacation, or leave of absence) and severs
employment during such absence (e.g., he quits, is discharged
or retires) and does not return to service on or before the
first anniversary of the date on which the Employee was first
absent.
(2) EXCEPTION FOR MATERNITY OR PATERNITY LEAVE.
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 One-Year Break In Service.
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<PAGE> 23
For purposes of this Section 1.55(B)(2), an absence from work for
maternity or paternity reasons means an absence:
(a) By reason of the pregnancy of an
individual;
(b) By reason of the birth of a child of
the individual;
(c) By reason of the placement of a
child with the individual in connection with the adoption of
such child by such individual; or
(d) For purposes of caring for such
child for a period beginning immediately following such birth
or placement.
In the case of a leave of absence due to service in the Armed Forces
or the United States, the Employee must return to active employment with the
Employer within the period prescribed under the reemployment provisions of the
Title 38, Chapter 43 of the United States Code. Any leave of absence
authorized by the Employer shall be granted under uniform rules so that all
Participants under similar circumstances shall be treated alike.
1.56 OWNER-EMPLOYEE. "OWNER-EMPLOYEE" shall mean a Self-Employed
Person who is a sole proprietor, or who is a partner owning more than ten
percent of either the capital or profits interest of the partnership.
1.57 PARTICIPANT. "PARTICIPANT" shall mean any Employee who, on
the first applicable Entry Date, has met the requirements for participation in
the Plan as provided in Article II.
1.58 PARTICIPANT ACCOUNT. "PARTICIPANT ACCOUNT" shall mean the
account established by the Administrative Committee with the Trustee for each
Participant, which shall be invested as provided in Article VI on behalf of the
Participant for whom such Participant Account has been established, and to
which the Participant Contributions and the earnings or losses thereon shall be
allocated.
1.59 PARTICIPANT CONTRIBUTIONS. "PARTICIPANT CONTRIBUTIONS" shall
mean Participant contributions under Section 3.2.
1.60 PERMISSIVE AGGREGATION GROUP. "PERMISSIVE AGGREGATION GROUP"
shall mean the Required Aggregation Group of plans plus any other plan or plans
of the Employer which, when considered as a group with the Required Aggregation
Group, would continue to satisfy the requirements of sections 401(a)(4) and 410
of the Code.
1.61 PLAN. "PLAN" shall mean the Employer's Defined Contribution
Plan and Trust Agreement as set forth in this document and in the applicable
Adoption Agreement, and as it may be amended from time to time. As adopted by
the Employer, the Plan shall be a profit-sharing plan, a profit-sharing 401(k)
plan or a money purchase plan, as indicated in the applicable Adoption
Agreement.
1.62 PLAN ADMINISTRATOR. "PLAN ADMINISTRATOR" shall mean the
Administrative Committee.
1.63 PLAN SPONSOR. "PLAN SPONSOR" shall mean the sponsor of the
Plan as designated in the Adoption Agreement.
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<PAGE> 24
1.64 PLAN YEAR. "PLAN YEAR" shall mean the Computation Period
indicated in the Adoption Agreement. Plan Year shall also include any such
period completed before the Effective Date of the Plan.
1.65 PRIOR PLAN. "PRIOR PLAN" shall mean a prior qualified plan of
the Employer which is amended and restated into the Plan under the Adoption
Agreement applicable to such Employer.
1.66 PROFITS. "PROFITS" shall mean, in the case of a for-profit
Employer, the earnings and profits of the Employer for the Taxable Year but
before provision for income taxes (Federal, State and local) and before
deduction of Employer contributions hereunder or under any other pension or
profit-sharing plan of the Employer and/or accumulated earnings and profits as
computed by the Employer in accordance with generally accepted accounting
principles. Profits shall mean, in the case of a not-for-profit Employer, the
excess of such Employer's receipts over expenditures, whether such excess
results from the performance of such Employer's functions for which it is
recognized as exempt from Federal income tax, or from investments or other
business activity.
1.67 QVEC ACCOUNT(S). "QVEC ACCOUNT(S)" shall mean the account(s)
established by the Administrative Committee with the Trustee for each
Participant who has made Qualified Voluntary Employee Contributions to the
Plan, which QVEC Account(s) shall be invested as provided in Article VI on
behalf of the Participant for whom such QVEC Account(s) has (have) been
established, and to which the Participant's Qualified Voluntary Employee
Contributions have been and the earnings or losses thereon shall be, allocated.
1.68 QUALIFIED DOMESTIC RELATIONS ORDER. "QUALIFIED DOMESTIC
RELATIONS ORDER" shall mean a qualified domestic relations order as described
in section 414(p) of the Code.
1.69 QUALIFIED MATCHING CONTRIBUTION. "QUALIFIED MATCHING
CONTRIBUTION" shall mean a Matching Contribution which is subject to the
distribution and nonforfeitability requirements of section 401(k) of the Code
when made. Any Qualified Matching Contribution to the Plan shall be credited
to a separate Qualified Matching Contribution account maintained for the
Participant on whose behalf such Qualified Matching Contribution is made.
1.70 QUALIFIED NONELECTIVE CONTRIBUTION. "QUALIFIED NONELECTIVE
CONTRIBUTION" shall mean a contribution (other than Matching Contributions or
Qualified Matching Contributions) made by the Employer and allocated to
Participants' accounts that the Participant may not elect to receive in cash
until distributed from the Plan; that are 100 percent vested and 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 Contributions to the Plan shall be
credited to a separate Qualified Nonelective Contribution account maintained
for the Participant on whose behalf such Qualified Nonelective Contribution is
made.
1.71 QUALIFIED VOLUNTARY EMPLOYEE CONTRIBUTIONS. "QUALIFIED
VOLUNTARY EMPLOYEE CONTRIBUTIONS" shall mean qualified voluntary employee
contributions within the meaning of section 219(e)(2) of the Code.
1.72 QUALIFYING EMPLOYER SECURITY. "QUALIFYING EMPLOYER SECURITY"
shall mean an Employer Security which is stock or a marketable obligation as
provided in sections 407(d)(5) and 407(e) of ERISA. The classes of Employer
Securities which are to be considered Qualifying Employer Securities may be
limited in the Adoption Agreement.
1.73 REEMPLOYMENT COMMENCEMENT DATE. "REEMPLOYMENT COMMENCEMENT
DATE" shall mean
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the first day, following a separation from service, on which an Employee
performs an hour of service. For purposes of this Section 1.73, an hour of
service shall mean each hour for which an Employee is paid or is entitled to
payment for the performance of services for the Employer.
1.74 REQUIRED AGGREGATION GROUP. "REQUIRED AGGREGATION GROUP"
shall mean:
(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 Section 1.74(A) to meet the requirements of
sections 401(a)(4) or 410 of the Code.
1.75 ROLLOVER ACCOUNT. "ROLLOVER ACCOUNT" shall mean the account
established by the Administrative Committee with the Trustee for each
Participant or other Employee who has made a Rollover Contribution to the Plan,
which Rollover Account shall be invested as provided in Article VI on behalf of
the Participant or other Employee for whom such Rollover Account has been
established and to which the Participant's or other Employee's Rollover
Contributions and the earnings and losses thereon shall be allocated.
1.76 ROLLOVER CONTRIBUTIONS. "ROLLOVER CONTRIBUTIONS" shall mean,
on or before December 31, 1992, "rollover amounts" which are contributed to the
Trustee on or before the 60th day immediately following the day the
contributing Participant or other Employee receives such "rollover amount".
The term "rollover amount" means:
(A) The entire amount (including money and any other
property) in an Individual Retirement Account or Individual Retirement
Annuity (as defined in section 408 of the Code) maintained for the benefit
of the Participant or other Employee making the Rollover Contribution, which
amount has been distributed from such individual retirement account or
individual retirement annuity; or
(B) Part or all of the amount received by such
Participant or other Employee from an employee's trust described in section
401(a) of the Code which is exempt from tax under section 501(a) of the
Code.
Such amount shall, however, only constitute a "rollover
amount" if the amount described in Section 1.76(A) or 1.76(B) is solely
attributable to a plan termination distribution, as that term is described in
section 402(a)(5) of the Code, or to a lump-sum distribution, as defined in
section 402(e)(4)(A) of the Code, or to an accumulated deductible employee
contribution distribution, as described in section 402(a)(5) of the Code, from
either a trust described in section 401(a) of the Code or from an annuity plan
described in section 403(a) of the Code, plus the earnings thereon. For
purposes of rolling-over property other than money under this Section 1.76, the
transfer of an amount equal to any portion of the proceeds from the sale of
property received in the distribution, including any excess in fair market
value of property on sale over the fair market value on distribution, shall
constitute a "rollover amount".
Effective January 1, 1993, "Rollover Contributions" shall mean
eligible rollover distributions within the meaning of section 402(c)(4) or
section 402(f)(2) of the Code, as in effect on and after January 1, 1993,
provided such eligible rollover distributions are transferred to the Plan
within 60 days of the date received by the Participant or other Employee.
Effective January 1, 1993, "Rollover Contributions" shall also mean such
eligible rollover distributions within the meaning of section 402(f)(2)(A) and
which are made in the form of a
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<PAGE> 26
direct trustee-to-trustee transfer described in section 401(a)(31) of the Code
as in effect on and after January 1, 1993.
1.77 SALARIED EMPLOYEE. "SALARIED EMPLOYEE" shall mean any
Employee who is not an Hourly Employee.
1.78 SELF-EMPLOYED PERSON. "SELF-EMPLOYED PERSON" shall mean an
individual who has earned income for the Taxable Year from the trade or
business for which the Plan is established or an individual who would have had
earned income but for the fact the trade or business had no Profits for the
Taxable Year.
1.79 SERVICE. "SERVICE" shall mean service with the Employer or
any related employer who adopts this Plan. If the Employer adopting the Plan
is maintaining the Plan of a predecessor employer, then service for such
predecessor shall be treated as Service for the Employer. Service for a
predecessor employer shall otherwise be treated as Service for the Employer
only to the extent provided in Section 2.2 and in the Adoption Agreement.
In the event the Plan is an amendment and restatement of a Prior Plan
in accordance with Section 18.17, if the Prior Plan credited service for
eligibility, and/or vesting on the basis of the elapsed time method (as
described in Treas. Reg. Section 1.410(a)-7), unless and to the extent the
Employer continues to use the elapsed time method under this Plan, a
Participant shall receive Service credit as of the effective date of the
amendment, for a number of Years of Service for Eligibility and/or Years of
Service for Vesting (as applicable) equal to the number of 1-year periods of
service credited to the Participant under the Prior Plan as of the effective
date of the amendment. In addition, if the effective date of the amendment is
a date other than the first day of a Computation Period, a Participant shall
receive credit, in the Computation Period, which includes the effective date of
the amendment, for a number of Hours of Service determined under one of the
equivalencies set forth in Section 1.39(I) (unless the Employer maintains
records for the Participant on an hourly basis, in which case actual hours
shall be credited) for the fractional part of a period of service credited to
the Participant under the elapsed time method as of the effective date of the
amendment. The equivalency to be used for this purpose shall be selected by
the Employer in the Adoption Agreement.
1.80 SPONSORING ORGANIZATION. "SPONSORING ORGANIZATION" shall mean
DRINKER BIDDLE & REATH, a law firm which has its principal office at
Philadelphia National Bank Building, 1345 Chestnut Street, Philadelphia, PA
19107-3496.
1.81 SPOUSE or SURVIVING SPOUSE. "SPOUSE" or "SURVIVING SPOUSE"
shall mean the spouse or surviving spouse of a Participant, provided that a
former spouse shall be treated as the spouse or surviving spouse and a current
spouse shall not be treated as the spouse or surviving spouse to the extent
provided under a Qualified Domestic Relations Order.
1.82 TAXABLE WAGE BASE. "TAXABLE WAGE BASE" shall mean, with
respect to any Plan Year, the maximum amount of earnings which on the first day
of such Plan Year may be considered wages for such Plan Year under section
3121(a)(1) of the Code.
1.83 TAXABLE YEAR. "TAXABLE YEAR" shall mean the fiscal period
adopted by the Employer for filing its Federal income tax returns.
1.84 TOP-HEAVY PLAN. "TOP-HEAVY PLAN" shall mean this Plan if, for
any Plan Year beginning after December 31, 1983, any of the following
conditions exists:
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<PAGE> 27
(A) If the Top-Heavy Ratio for this Plan exceeds 60
percent and this Plan is not part of any Required Aggregation Group or
Permissive Aggregation Group;
(B) If this Plan is a part of a Required Aggregation
Group but not part of a Permissive Aggregation Group and the Top-Heavy Ratio
for the Required Aggregation Group exceeds 60 percent.
(C) If this Plan is a part of a Required Aggregation
Group and part of a Permissive Aggregation Group and the Top-Heavy Ratio for
the Permissive Aggregation Group exceeds 60 percent.
1.85 TOP-HEAVY RATIO. "TOP-HEAVY RATIO" shall mean a fraction
determined as follows:
(A) 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
Determination Period, 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 Determination Period), and
the denominator of which is the sum of all account balances (including any
part of any account balance distributed in the Determination Period), both
computed in accordance with section 416 of the Code and the Treasury
regulations thereunder. Both the numerator and denominator of the Top-
Heavy Ratio are increased to reflect any contribution not actually made as
of the Determination Date, but which is required to be taken into account on
that date under section 416 of the Code and the Treasury regulations
thereunder.
(B) 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 Determination Period 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 Section 1.85(A) above, and the
present value of accrued benefits under the aggregated Defined Benefit Plan
or Plans for all Key Employees as of the Determination Date(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 Section 1.85(A) 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 Treasury 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 Determination Period.
For purposes of Section 1.85(A) and Section 1.85(B) above, the
value of account balances and the present value of accrued benefits shall be
determined as of the most recent Top-Heavy 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 Treasury regulations thereunder for
the first and second plan years of a Defined Benefit Plan. The account
balances and accrued benefits of a Participant (1) who is not a Key Employee
but who was a Key Employee in a prior year, or (2) who has not been credited
with at least one hour of service with any Employer maintaining the plan at any
time during the Determination Period shall be disregarded. The calculation of
the Top-Heavy Ratio, and the extent to which distributions, rollovers, and
transfers are taken into account shall be made in accordance with section 416
of the Code and the Treasury regulations thereunder. Deductible employee
contributions shall not be taken into account for purposes of computing the
Top-Heavy
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Ratio. When aggregating plans, the value of account balances and accrued
benefits shall 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 the method, if any, that uniformly applies for
accrual purposes under all Defined Benefit Plans maintained by the Employer, or
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.
Present value shall be determined in accordance with the
mortality and interest assumptions set forth in the Adoption Agreement.
1.86 TOP-HEAVY VALUATION DATE. "TOP-HEAVY VALUATION DATE" shall
mean the date selected by the Employer in the Adoption Agreement as of which
account balances or accrued benefits are valued for purposes of calculating the
Top-Heavy Ratio.
1.87 TRANSFER ACCOUNT. "TRANSFER ACCOUNT" shall mean the account
established by the Administrative Committee with the Trustee for each
Participant who has had transferred to the Plan assets from another qualified
plan pursuant to Section 3.10, which Transfer Account shall be invested as
provided in Article VI on behalf of the Participant for whom such Transfer
Account was established and the assets and the earnings and losses thereon have
been allocated.
1.88 TRUST. "TRUST" shall mean the legal entity established by
this Plan and Trust Agreement and by the Adoption Agreement by which the Plan
contributions shall be received, held, invested and disbursed to, or for the
benefit of, Participants or Beneficiaries of Participants, or both.
1.89 TRUST AGREEMENT. "TRUST AGREEMENT" shall mean the Trust
Agreement as set forth in this document and as it may be amended from time to
time.
1.90 TRUST FUND. "TRUST FUND" shall mean all funds received by the
Trustee and the property in which said funds shall be invested, together with
all income, profits and increments thereon less any withdrawals and losses
incurred thereon.
1.91 TRUSTEE. "TRUSTEE" shall mean the individual trustee(s)
(subject to the requirements of any applicable Federal Securities laws) or
corporate trustee(s) designated by the Employer in the Adoption Agreement.
1.92 UNION EMPLOYEE. "UNION EMPLOYEE" shall mean any Employee who
is included in a unit of employees covered by an agreement which the Secretary
of Labor finds to be a collective bargaining agreement between the Employer and
a bargaining representative of such person, if there is evidence that
retirement benefits were the subject of good faith bargaining between such
bargaining representative and the Employer.
1.93 VALUATION DATE. "VALUATION DATE" shall mean the last day of
each Plan Year and such other date or dates as may be provided for in the
applicable Adoption Agreement.
1.94 VESTED ACCRUED BENEFIT. "VESTED ACCRUED BENEFIT" shall mean
that portion of a Participant's Accrued Benefit which has become nonforfeitable
under the Plan.
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1.95 VESTING COMPUTATION PERIOD. "VESTING COMPUTATION PERIOD"
shall mean the Computation Period measured by the Plan Year. Years of Service
for Vesting and One-Year Breaks In Service for vesting shall be measured by the
Vesting Computation Period.
1.96 WELFARE BENEFIT FUND. "WELFARE BENEFIT FUND"shall mean a
welfare benefit fund as defined in section 419(e) of the Code.
1.97 YEAR OF SERVICE FOR BENEFIT ACCRUAL. "YEAR OF SERVICE FOR
BENEFIT ACCRUAL" shall mean any Year of Service for Benefit Accrual computed
under the regular method or the elapsed time method, as defined below, based on
the election made in the Adoption Agreement.
(A) REGULAR METHOD. A Year of Service for Benefit
Accrual shall mean any Accrual Computation Period during which a Participant
has completed not less than the number of Hours of Service (not to exceed
1,000 Hours of Service) with the Employer indicated in the Adoption
Agreement. If the Participant has completed a Year of Service for Benefit
Accrual but is not in the service of the Employer at the end of the Accrual
Computation Period, a Year of Service for Benefit Accrual shall be credited
except to the extent otherwise provided in Section 2.3(G), Section 3.11 and
in the Adoption Agreement.
(B) ELAPSED TIME METHOD. A Year of Service for Benefit
Accrual shall mean a "Period of Service," as defined below, (which shall be
the equivalent of a Year of Service for Benefit Accrual under the regular
method) with the Employer based on a Participant's actual period of
employment with the Employer, irrespective of the number of hours actually
worked during such period and during which the Participant completes 12
"Months of Service" as defined below. All periods of employment with the
Employer, including "Periods of Severance," as defined below, of less than
12 consecutive months shall be aggregated unless there is a "One-Year Period
of Severance". A "Period of Service" shall be credited for each completed
12 months of service (365 days) with the Employer, which need not be
consecutive. A partial Year of Service for Benefit Accrual shall be
credited for any "Period of Service" with the Employer of less than 12
months calculated to the nearest 1/12th based on a fraction, where the
numerator shall be the actual "Months of Service" and the denominator shall
be 12 "Months of Service". For purposes of determining "Periods of Service"
under the elapsed time method, the following terms shall apply:
(1) "DATE OF SEVERANCE (TERMINATION)" shall mean
the earlier of:
(a) The actual date a Participant quits,
is discharged, dies or retires; or
(b) The first anniversary of the date a
Participant is absent from work with the Employer (with or
without pay) for any other reason.
(2) "ELAPSED TIME" shall mean the total "Period
of Service" which has elapsed between a Participant's Employment
Commencement Date or Reemployment Commencement Date with the Employer
and "Date of Severance (Termination)" by the Employer, including
"Periods of Severance" where a "One-Year Period of Severance" does not
occur.
(3) "HOUR OF SERVICE" shall mean each hour for
which an Employee is paid or entitled to payment for the performance
of duties for the Employer.
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(4) "PERIOD OF SERVICE" shall mean each completed
12 "Months of Service" (whether or not consecutive) during the total
"Elapsed Time" while a Participant is employed by the Employer,
regardless of the number of hours worked.
(5) "MONTH OF SERVICE" shall mean 30 days of
"Elapsed Time".
(6) "PERIOD OF SEVERANCE" shall mean the time
between the actual "Date of Severance (Termination)" by the Employer,
as defined above, and the subsequent date, if any, on which the
Participant performs an "Hour of Service", as defined above, with the
Employer.
(7) "ONE-YEAR PERIOD OF SEVERANCE" shall mean a
12-month period following a Participant's "Date of Severance
(Termination)", as defined above, in which a Participant does not have
one "Hour of Service" with the Employer.
1.98 YEAR OF SERVICE FOR ELIGIBILITY. "YEAR OF SERVICE FOR
ELIGIBILITY" shall mean any Eligibility Computation Period in which a
Participant has completed not less than the number of Hours of Service (not to
exceed 1,000 Hours of Service) indicated in the Adoption Agreement. For
purposes of this Section 1.98, Service with a Predecessor Employer shall be
included to the extent provided in Sections 1.79 and 2.2 and in the applicable
Adoption Agreement. If less than one Year of Service for Eligibility is
required for participation in the Plan, the eligibility period shall be
computed without regard to the number of Hours of Service completed. This
provision is not applicable if the elapsed time method is selected in Section
A.2.2(B)(2) of the Adoption Agreement.
1.99 YEAR OF SERVICE FOR VESTING. "YEAR OF SERVICE FOR VESTING"
shall mean any Year of Service for Vesting computed under the regular method or
the elapsed time method, as defined below, based on the election made in the
Adoption Agreement.
(A) REGULAR METHOD. A Year of Service for Vesting shall
mean any Vesting Computation Period indicated in the Adoption Agreement
during which an Employee has completed not less than the number of Hours of
Service (not to exceed 1,000 Hours of Service) with the Employer indicated
in the Adoption Agreement.
(B) ELAPSED TIME METHOD. A Year of Service for Vesting
shall mean a "Period of Service", as defined in Section 1.97(B)(4), (which
shall be the equivalent of a Year of Service for Vesting under the regular
method) with the Employer based on an Employee's actual period of employment
with the Employer, irrespective of the number of hours actually worked
during such period and during which the Employee has completed 12 "Months of
Service" as defined in Section 1.97(B)(5) with the Employer. All periods of
employment with the Employer, including "Periods of Severance", as defined
in Section 1.97(B)(6), of less than 12 consecutive months shall be
aggregated unless there is a "One-Year Period of Severance", as defined in
Section 1.97(B)(7). A "Period of Service" shall be credited for each
completed 12 "Months of Service" (365 days) with the Employer, which need
not be consecutive. A partial Year of Service for Vesting shall be credited
for any "Period of Service" with the Employer of less than 12 months
calculated to the nearest 1/12th based on a fraction, where the numerator
shall be the actual "Months of Service" and the denominator shall be 12
"Months of Service". For purposes of this Section 1.99, Service with a
predecessor employer shall be included to the extent provided in Sections
1.79 and 2.2 and in the Adoption Agreement.
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ARTICLE II
PARTICIPATION UNDER PLAN
2.1 ADOPTION OF PLAN. An Employer shall adopt the Plan by
executing the Adoption Agreement.
2.2 ELIGIBILITY REQUIREMENTS. To be eligible for participation in
the Plan, an Employee must satisfy both of the following eligibility
requirements:
(A) The Employee must be a member of an eligible class of
Employees as specified by the Employer in the Adoption Agreement; and
(B) The Employee must have completed the period of
Service and attained the age specified by the Employer in the Adoption
Agreement.
Upon satisfaction of the requirements of Sections 2.2(A) and 2.2(B) as
specified in the Adoption Agreement, an Employee shall become a Participant in
the Plan on the Entry Date specified in the Adoption Agreement, unless the
Employee separated from service with the Employer before the Entry Date. An
Employee who has met all the requirements for eligibility, as set forth in this
Article II and in the Adoption Agreement, but who separates from service with
the Employer before the Entry Date and has not been rehired before the Entry
Date, shall become a Participant in the Plan on his Reemployment Commencement
Date. In the case of any such eligible Employee who is rehired before the
Entry Date, such eligible Employee shall become a Participant on such Entry
Date. Employees who have completed such requirements prior to the Effective
Date shall become Participants as of the Effective Date. Except as otherwise
provided in Section 1.79, service with a predecessor employer shall be included
as Service with the Employer for purposes of eligibility to participate under
the Plan only to the extent provided in the Adoption Agreement and to the
extent required by the Secretary of the Treasury or his delegate.
2.3 ADDITIONAL RULES RELATING TO PLAN PARTICIPATION. The
following additional rules relating to the Plan Participation apply:
(A) EMPLOYEES REQUIRED TO COMPLETE MORE THAN ONE YEAR OF
SERVICE FOR ELIGIBILITY. If an Employee who is required to complete more
than one Year of Service for Eligibility as an eligibility requirement has a
One-Year Break In Service before satisfying such requirement, Service prior
to such Break shall be disregarded.
(B) REHIRED FORMER PARTICIPANTS WITH NONFORFEITABLE
RIGHTS. A former Participant shall become a Participant immediately upon
his return to the employ of the Employer, if such former Participant had a
nonforfeitable right to all or a portion of his Employer Account at the time
of his termination.
(C) REHIRED FORMER PARTICIPANTS WITHOUT NONFORFEITABLE
RIGHTS. A former Participant who did not have a nonforfeitable right to any
portion of his Employer Account at the time of his termination shall be
considered, upon his reemployment, a new Employee for eligibility purposes,
if the number of consecutive One-Year Breaks In Service equals or exceeds
the greater of (1) five or (2) the aggregate number of Years of Service for
Eligibility before such Breaks. If such former Participant's Years of
Service for Eligibility before his termination may not be disregarded
pursuant to the preceding sentence, such former Participant shall
participate immediately upon his reemployment.
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(D) PARTICIPANTS WHO BECOME INELIGIBLE EMPLOYEES. In the
event a Participant becomes ineligible to participate because he is no
longer a member of an eligible class of Employees, but has not incurred a
One-Year Break In Service, such Employee shall participate immediately upon
his return to an eligible class of Employees. If such Participant incurs a
One-Year Break In Service, his eligibility to participate shall be
determined pursuant to Section 2.3(B) or 2.3(C).
(E) INELIGIBLE EMPLOYEES WHO BECOME ELIGIBLE. In the
event an Employee who is not a member of the eligible class of Employees
becomes a member of the eligible class, such Employee shall participate
immediately, if such Employee has satisfied the minimum age and service
requirements and would have previously become a Participant had he been in
the eligible class.
(F) DURATION OF PARTICIPATION. After an Employee becomes
a Participant in the Plan, the Employee's active participation shall
continue until the earlier of the Participant's death, retirement,
Disability, or termination of employment with the Employer. However, except
as otherwise provided in Section 3.11 and in the Adoption Agreement, no
Participant shall share in Employer Contributions in any Plan Year in which
such Participant does not complete a Year of Service for Benefit Accrual and
meet the other eligibility requirements of Sections 2.2 and 2.3.
(G) PARTICIPANTS WHO SEPARATE BEFORE END OF PLAN YEAR.
Subject to Section 3.11, a Participant whose employment is terminated before
the end of a Plan Year but after he has completed the number of Hours of
Service required for a Year of Service for Benefit Accrual shall share in
Employer contributions for such Plan Year only if the Adoption Agreement so
provides.
(H) LEASED EMPLOYEES.
(1) GENERAL. If the Employer has Leased
Employees, such Leased Employees shall participate in the Plan only
if, and to the extent, provided in the Adoption Agreement of such
Employer.
(2) SAFE-HARBOR. Notwithstanding any other
provisions of the Plan, for purposes of determining the number or
identity of Highly Compensated Employees or for purposes of the
pension requirements of section 414(n)(3) of the Code, the Employees
of the Employer shall include individuals defined as Employees in
Section 1.25. This provision was effective December 31, 1986.
2.4 PLANS COVERING OWNER-EMPLOYEES. If this Plan, as adopted by
the applicable Adoption Agreement, provides contributions or benefits for one
or more Owner-Employees who control both the business for which this Plan, as
adopted by the applicable Adoption Agreement, is established and one or more
other trades or businesses, this Plan and the plan established for other trades
or businesses must, when looked at as a single plan, satisfy sections 401(a)
and (d) of the Code for the employees of this and all other trades or
businesses.
If the Plan, as adopted by the applicable Adoption Agreement, 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.
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If an individual is covered as an Owner-Employee under the plans of two or more
trades or businesses which are not controlled and the individual controls a
trade or business, then the contributions or benefits of the employees under
the plan of the trades or businesses which are controlled must be as favorable
as those provided for him under the most favorable plan of the trade or
business which is not controlled.
For purposes of this Section 2.4, an Owner-Employee, or two or more
Owner-Employees, will be considered to control a trade or business if the
Owner-Employee, or two or more Owner-Employees together:
(A) Own the entire interest in an unincorporated trade or
business; or
(B) In the case of a partnership, own more than 50
percent of either the capital interest or the profits interest in the
partnership.
For purposes of the preceding sentence, an Owner-Employee, or two or more
Owner-Employees shall be treated as owning 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.
ARTICLE III
CONTRIBUTIONS
3.1 EMPLOYER CONTRIBUTIONS. Employer Contributions shall be
determined as follows:
(A) MONEY PURCHASE PLAN. If the Plan is a money purchase
plan, this Section 3.1(A) applies and the Employer Contribution shall be
determined in accordance with the applicable Money Purchase Plan Adoption
Agreement.
(B) PROFIT-SHARING OR PROFIT-SHARING 401(K) PLAN. If the
Plan is a profit-sharing plan or a profit-sharing 401(k) plan, the
Profit-Sharing (401(k)) Adoption Agreement applies and contributions shall
be made in accordance with such Adoption Agreement and this Section 3.1(B).
(1) AMOUNT. Except as otherwise provided in
Section 3.11(G), for each Plan Year during the continuance of the
Plan, the Employer shall contribute to the Trustee such amount as
shall be authorized by the Employer, in its sole discretion, provided
that the amount of the Employer Contribution for any Plan Year shall
not exceed the lesser of:
(a) The amount allowable as a deduction,
if the Employer is a for-profit organization, for computing
Federal income tax under the applicable provisions of the Code
for the Taxable Year which ends with or within such Plan Year
or, if the Employer is a not-for-profit organization, an
amount not in excess of reasonable compensation for services
rendered by the Participants for the Employer for the Taxable
Year which ends with or within such Plan Year; or
(b) The limitations set forth in Section
3.8 below.
(2) PROFITS NOT REQUIRED. Unless the Adoption
Agreement provides otherwise, effective for Plan Years beginning after
December 31, 1985, the Employer shall, notwithstanding any
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other provision of the Plan, make all contributions to the Plan
without regard to current or accumulated Profits for the Taxable Year
or Years ending with or within such Plan Year. Notwithstanding the
foregoing, the Plan shall continue to be designed to qualify as a
profit-sharing plan for purposes of sections 401(a), 402, 412 and 417
of the Code.
(3) QUALIFIED NONELECTIVE CONTRIBUTIONS AND
QUALIFIED MATCHING CONTRIBUTIONS.
(a) ELECTION. If the Plan provides for
Elective Deferral Contributions, the Employer may elect to
make Qualified Nonelective Contributions and/or Qualified
Matching Contributions under the Plan on behalf of Employees
as provided in the Adoption Agreement.
In addition, in lieu of distributing "Excess
Contributions" as provided in Section 3.4(B)(4), or "Excess
Aggregate Contributions" as provided in Section 3.2(G), and to
the extent elected by the Employer in the Adoption Agreement,
the Employer may make Qualified Nonelective Contributions
and/or Qualified Matching Contributions on behalf of
Non-Highly Compensated Employees that are sufficient to
satisfy either the "Actual Deferral Percentage" (ADP) (as
defined in Section 3.4(B)) test or the "Average Contribution
Percentage" (ACP) (as defined in Section 3.2(F)) test, or
both, pursuant to Treasury regulations under the Code.
(b) VESTING AND ACCOUNTS. The
Participant's Accrued Benefit derived from Qualified
Nonelective Contributions and Qualified Matching Contributions
and the earnings thereon shall be nonforfeitable at all times.
Separate accounts for Qualified Nonelective Contributions and
Qualified Matching Contributions shall be maintained for each
Participant on whose behalf such contributions are made. Each
account shall be credited with the applicable contributions
and earnings or losses thereon.
(C) TIME AND TYPE OF CONTRIBUTIONS. Employer
Contributions, for any Plan Year, shall be paid to the Trustee if the
Employer's Plan is a profit-sharing or profit-sharing 401(k) plan, no later
than the due date (including extensions of time) for filing the Employer's
Federal income tax return for the Taxable Year which ends with or within
such Plan Year or if the Employer's Plan is a money purchase plan no later
than the time required by the rules of section 412(m) of the Code but in no
event later than the due date (including extensions of time) for filing the
Employer's Federal income tax return for the Taxable Year which ends with or
within such Plan Year.
3.2 PARTICIPANT CONTRIBUTIONS. Participant Contributions shall be
determined as follows:
(A) AMOUNT. Unless this Plan is a profit-sharing 401(k)
plan, this Plan shall not accept Employee Contributions and Matching
Contributions for Plan Years beginning after the Plan Year in which this
Plan is adopted by the Employer. Employee Contributions for Plan Years
beginning after December 31, 1986, together with any Matching Contributions
as defined in section 401(m) of the Code, shall be limited so as to meet the
nondiscrimination test of section 401(m) of the Code. Participant
Contributions on or after such date are only permitted or required if the
Plan is a profit-sharing 401(k) plan. In such case, Participants are not
required to make Participant Contributions under the Plan, unless the
Adoption Agreement provides otherwise. If, however, the Plan is a
profit-sharing 401(k) plan and the Employer has elected in the Adoption
Agreement to permit Participant Contributions, a Participant may, subject to
the limitations of Section 3.2 and Section 3.8, make cash contributions
under the Plan in any Plan Year in any amount up to ten percent of the
aggregate Compensation (as defined in Section 1.10 before any modifications
thereto in the Adoption
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<PAGE> 35
Agreement) received by such Participant for all periods of participation in
the Plan reduced by any Participant Contributions made by such Participant
under this Plan during such period. This limitation applies in the
aggregate to voluntary contributions by any Participant to two or more
qualified plans maintained by the same Employer. Mandatory Participant
Contributions are subject to the requirements of the Adoption Agreement.
(B) PARTICIPANT CONTRIBUTIONS AND EARNINGS THEREON
NONFORFEITABLE. The interest of each Participant in his Participant
Contributions and the earnings thereon shall be nonforfeitable at all times.
(C) MANNER OF MAKING CONTRIBUTIONS. Participant
Contributions shall be made in cash and paid to the Employer. Participant
Contributions may be made by regular payroll deductions from his
Compensation, if the Adoption Agreement so provides, or in any other way
approved by the Employer. For a Participant Contribution to be deemed to be
credited to a Participant's Participant Account for any particular
Limitation Year, such Participant Contribution must be made to the Plan not
later than 30 days following the end of such Limitation Year. Participant
Contributions shall be paid to the Trustee by the Employer as soon as is
administratively possible after receipt by the Employer.
(D) CHANGE OF PARTICIPANT CONTRIBUTION RATE. If the
Adoption Agreement provides for Participant Contributions by regular payroll
deductions from the Participant's Compensation, a Participant, by 30 days'
written notice to the Administrative Committee, may elect to change his
Participant Contribution rate (but not retroactively) within the limits
specified herein, to discontinue making Participant Contributions, or to
resume Participant Contributions.
(E) RESPONSIBILITY OF TRUSTEE. The Trustee shall be
accountable for Participant Contributions received by it, but shall have no
duty to require any Participant Contributions to be delivered to it nor to
determine that the Participant Contributions received are of the correct
amount or are correctly attributed by the Administrative Committee to the
Participants who made them.
(F) LIMITATIONS ON EMPLOYEE CONTRIBUTIONS AND MATCHING
CONTRIBUTIONS - AVERAGE CONTRIBUTION PERCENTAGE TEST REQUIREMENT.
(1) TEST. The "Average Contribution Percentage"
(ACP) for Participants who are Highly Compensated Employees for each
Plan Year and the ACP for Participants who are Non-Highly Compensated
Employees for the same Plan Year must satisfy one of the following two
tests:
(a) The ACP for Participants who are
Highly Compensated Employees for the Plan Year shall not
exceed the ACP for Participants who are Non-Highly Compensated
Employees for the same Plan Year multiplied by 1.25; or
(b) The ACP for Participants who are
Highly Compensated Employees for the Plan Year shall not
exceed the ACP for Participants who are Non-Highly Compensated
Employees for the same Plan Year multiplied by two, provided
that the ACP for Participants who are Highly Compensated
Employees does not exceed the ACP for Participants who are
Non-Highly Compensated Employees by more than two percentage
points.
(2) SPECIAL RULES. The following special rules
apply:
(a) MULTIPLE USE. If one or more Highly
Compensated Employees participate in both a cash or deferred
arrangement (CODA) and a plan subject to the ACP test
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<PAGE> 36
maintained by the Employer and the sum of the "Actual Deferral
Percentage" (ADP), as defined below in Section 3.4(B), and the
ACP of those Highly Compensated Employees subject to either or
both tests exceeds the "Aggregate Limit," then the
"Contribution Percentages" of those Highly Compensated
Employees who also participate in a CODA shall be reduced
(beginning with such Highly Compensated Employee whose
"Contribution Percentage" is the highest) so that the limit is
not exceeded. The amount by which each Highly Compensated
Employee's "Contribution Percentage Amount" is reduced shall
be treated as an "Excess Aggregate Contribution." The ADP and
ACP of the Highly Compensated Employees shall be determined
after any corrections required to meet the ADP and ACP tests.
Multiple use does not occur if both the ADP and ACP of the
Highly Compensated Employees do not exceed 1.25 multiplied by
the ADP and ACP of the Non-Highly Compensated Employees.
(b) MULTIPLE PLANS. For purposes of
this Section 3.2(F), the "Contribution Percentage" for any
Participant who is a Highly Compensated Employee and who is
eligible to have "Contribution Percentage Amounts" allocated
to his account under two or more plans described in section
401(a) of the Code, or CODAs that are maintained by the
Employer, shall be determined as if the total of such
"Contribution Percentage Amounts" were made under each plan.
If a Highly Compensated Employee participates in two or more
CODAs that have different plan years, all CODAs 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
pursuant to Treasury regulations under section 401(m) of the
Code.
(c) AGGREGATION. 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 3.2(F) shall be applied by
determining the ACP 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.
(d) FAMILY AGGREGATION. For purposes of
determining the "Contribution Percentage" of a Participant who
is a five-percent owner or one of the ten most highly-paid
Highly Compensated Employees, the "Contribution Percentage
Amounts" and "Applicable Compensation" of such Participant
shall include the "Contribution Percentage Amounts" and
"Applicable Compensation" for the Plan Year of Family Members.
Family Members, with respect to Highly Compensated Employees,
shall be disregarded as separate Employees in determining the
ACP both for Participants who are Non-Highly Compensated
Employees and for Participants who are Highly Compensated
Employees.
(e) TIMING. For purposes of the ACP
test, "Employee Contributions" are considered to have been
made in the Plan Year in which contributed to the Trust.
Matching Contributions, Qualified Matching Contributions and
Qualified Nonelective Contributions shall 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.
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(f) RECORDS. 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.
(g) OTHER REQUIREMENTS. 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.
(3) DEFINITIONS. The following definitions apply:
(a) "AGGREGATE LIMIT" shall mean the sum
of (i) 125 percent of the greater of (AA) the ADP of the
Non-Highly Compensated Employees eligible under the CODA for
the Plan Year or (BB) the ACP of Non-Highly Compensated
Employees eligible under the Plan subject to section 401(m) of
the Code for the Plan Year beginning with or within the Plan
Year of the CODA, and (ii) two plus the lesser of (AA) or (BB)
above, but in no event shall this amount exceed 200 percent of
the lesser of (AA) or (BB) above. However, the "Aggregate
Limit," for Plan Years beginning before the later of January
1, 1992, or the date that is 60 days after publication of
final Treasury regulations under section 401(m) of the Code,
shall be the greater of (aa) the "Aggregate Limit," as
calculated under the preceding sentence, or (bb) the sum of
(AAA) 125 percent of the lesser of (AAAA) the ADP of the Non-
Highly Compensated Employees eligible under the CODA for the
Plan Year, or (BBBB) the ACP of the Non-Highly Compensated
Employees eligible under the Plan subject to section 401(m) of
the Code for the Plan Year beginning with or within the Plan
Year of the CODA, and (BBB) two plus the greater of (AAAA) or
(BBBB) above, but in no event shall this amount exceed 200
percent of the greater of (AAAA) or (BBBB) above.
(b) "AVERAGE CONTRIBUTION PERCENTAGE
(ACP)" shall mean the average of the "Contribution
Percentages" of the "Eligible Participants" in a group.
(c) "CONTRIBUTION PERCENTAGE" shall mean
the ratio (expressed as a percentage) of the Participant's
"Contribution Percentage Amounts" to the Participant's
"Applicable Compensation" for the Plan Year (whether or not
the Employee was a Participant for the entire Plan Year).
(d) "CONTRIBUTION PERCENTAGE AMOUNTS"
shall mean the sum of the "Employee Contributions", Matching
Contributions and Qualified Matching Contributions (to the
extent not taken into account for purposes of the ADP test)
made under the Plan on behalf of the Participant for the Plan
Year. Such Contribution Percentage Amounts shall not include
Matching Contributions that are forfeited either to correct
"Excess Aggregate Contributions" as defined below, or because
the contributions to which they relate are "Excess Elective
Deferrals" under Section 3.4, "Excess Contributions" under
Section 3.4, or "Excess Aggregate Contributions" under this
Section 3.2. If so elected in the Adoption Agreement, the
Employer may include Qualified Nonelective Contributions in
the "Contribution Percentage Amounts." The Employer also may
elect to use Elective Deferrals in the "Contribution
Percentage Amounts" so long as the ADP test is met before the
Elective Deferrals are used in the ACP test and continues to
be met following the exclusion of those Elective Deferrals
that are used to meet the ACP test.
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(e) "ELIGIBLE PARTICIPANT" shall mean
any Employee who is eligible to make an "Employee
Contribution" or an Elective Deferral (if the Employer takes
such contributions into account in the calculation of the
"Contribution Percentage"), or to receive a Matching
Contribution (including forfeitures) or a Qualified Matching
Contribution. If an "Employee Contribution" is required as a
condition of participation in the Plan, any Employee who would
be a Participant in the Plan if such Employee made such an
"Employee Contribution" shall be treated as an "Eligible
Participant" on behalf of whom no "Employee Contributions" are
made.
(f) "EMPLOYEE CONTRIBUTION" shall mean
any contribution made to the Plan by or on behalf of a
Participant that is included in the Participant's gross income
in the Plan Year in which made and that is maintained under a
separate account to which earnings and losses are allocated.
(g) "APPLICABLE COMPENSATION" shall mean
compensation (i) within the meaning of section 414(s)(1) of
the Code for the Plan Year for which a determination under
this Section 3.2(F) is being made, plus (ii) any amount
contributed by the Employer for such Plan Year pursuant to a
salary reduction agreement and which is not includible in
gross income under section 125, 402(e)(3), 402(h)(1)(B) or
403(b) of the Code.
(G) DISTRIBUTION OF "EXCESS AGGREGATE CONTRIBUTIONS".
(1) IN GENERAL. 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. If such "Excess Aggregate Contributions" are distributed more
than two and one-half months after the last day of the Plan Year in
which such "Excess Aggregate Contributions" arose, a ten percent
excise tax will be imposed on the Employer maintaining the plan with
respect to such "Excess Aggregate Contributions". Such distributions
shall be made to Highly Compensated Employees on the basis of the
respective portions of the "Excess Aggregate Contributions"
attributable to each of such Employees. "Excess Aggregate
Contributions" of Participants who are subject to the Family Member
aggregation rules of section 414(q)(6) of the Code shall be allocated
among the Family Members in proportion to the "Employee Contributions"
and Matching Contributions (or amounts treated as Matching
Contributions) of each Family Member that is combined to determine the
combined ACP. "Excess Aggregate Contributions" shall be treated as
"Annual Additions" (within the meaning of Section 3.8(D)(1)) under the
Plan.
(2) DETERMINATION OF INCOME OR LOSS. "Excess
Aggregate Contributions" shall be adjusted for any income or loss.
The income or loss allocable to "Excess Aggregate Contributions" is
the income or loss allocable to the Participant's "Employee
Contribution" account, Matching Contribution account, Qualified
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 Plan Year and the denominator
of which is the Participant's account balance(s) attributable to
"Contribution Percentage Amounts" without regard to any income or loss
occurring during such Plan Year. Income or loss allocable to the
period between the end of the Plan Year and the date of distribution
shall be disregarded in determining income or loss.
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<PAGE> 39
(3) FORFEITURES OF "EXCESS AGGREGATE
CONTRIBUTIONS". Forfeitures of "Excess Aggregate Contributions" may
either be reallocated to the accounts of Non-Highly Compensated
Employees or applied to reduce Employer contributions, as elected by
the Employer in the Adoption Agreement with respect to Matching
Contributions.
(4) ACCOUNTING FOR "EXCESS AGGREGATE
CONTRIBUTIONS". "Excess Aggregate Contributions" shall be forfeited,
if forfeitable or distributed on a pro-rata basis from the
Participant's "Employee Contribution" account, Matching Contribution
account and Qualified Matching Contribution account (and, if
applicable, the Participant's Qualified Nonelective Contribution
account or Elective Deferral account, or both).
(5) DEFINITIONS. The following definitions apply:
(a) "EXCESS AGGREGATE CONTRIBUTIONS"
shall mean, with respect to any Plan Year, the excess of:
(i) The aggregate "Contribution
Percentage Amounts" actually taken into account in
computing the ACP of Highly Compensated Employees for
such Plan Year, over
(ii) 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" under Section 3.4 and
then determining "Excess Contributions" under Section 3.4.
(6) VESTING AND ACCOUNTS. The Participant's
Accrued Benefit derived from Employee Contributions shall be
nonforfeitable at all times. Separate accounts for Employee
Contributions shall be maintained for each Participant. Each account
shall be credited with the applicable contributions and earnings
thereon.
3.3 QUALIFIED VOLUNTARY EMPLOYEE CONTRIBUTIONS. The rules
relating to Qualified Voluntary Employee Contributions are as follows:
(A) NOT PERMITTED AFTER DECEMBER 31, 1986. No Qualified
Voluntary Employee Contributions shall be permitted after December 31, 1986.
Contributions made prior to that date shall be maintained in separate
accounts. Such accounts shall share in gains or losses of the Trust in the
manner described in Article V. No part of such accounts shall be used to
purchase life insurance. Withdrawals from such accounts are provided for in
Sections 7.10(B) and 7.12.
(B) QUALIFIED VOLUNTARY EMPLOYEE CONTRIBUTION AND
EARNINGS THEREON VESTED AT ALL TIMES. The interest of each Participant in
any Qualified Voluntary Employee Contributions made on his behalf before
January 1, 1987, and the earnings thereon shall be nonforfeitable at all
times.
(C) RESPONSIBILITY OF TRUSTEE. The Trustee shall be
accountable for Qualified Voluntary Employee Contributions received by it,
but shall have no duty to determine that the Qualified Voluntary
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<PAGE> 40
Employee Contributions received are of the correct amount or are correctly
allocated by the Employer to the Participants who made them.
3.4 ELECTIVE DEFERRAL CONTRIBUTIONS. The rules relating to
Elective Deferral Contributions are as follows:
(A) AMOUNT. If the Adoption Agreement provides for
Elective Deferral Contributions, the Employer shall make an Elective
Deferral Contribution to the Plan on behalf of each Participant who has
elected to defer a portion of the Compensation otherwise payable for the
Plan Year and have it contributed to the Plan. Such an election may only be
made pursuant to a written salary reduction agreement between the Employer
and the Participant. The agreement shall be on the Appropriate Form
prescribed by the Administrative Committee, and the agreement shall specify
the percentage or amount of Compensation that the Participant desires to
defer (but in no event may Elective Deferral Contributions exceed for any
Plan Year, after taking into account any Employer Contributions for such
Plan Year under this Plan and under any other qualified profit-sharing or
qualified stock-bonus plan the amount allowable under Section 3.1(B)(1) for
the Taxable Year which ends with or within such Plan Year, or the
limitations set forth in Section 3.8 below). A Participant shall not be
permitted to enter into more than one salary reduction agreement in the
periods specified in the Adoption Agreement, and the agreement for any such
period must be entered into before the first day of such period. The
Elective Deferral Contribution made for a Participant shall be in an amount
equal to the amount specified in the Participant's salary reduction
agreement; provided, however, that the Elective Deferral Contribution
otherwise to be made for a Participant shall be reduced if and to the extent
necessary to comply with the limitations of Section 3.4(B). An Elective
Deferral Contribution made for a Participant shall be allocated to his
Elective Deferral Account pursuant to Section 5.1(D). In the event the
requirements of Section 3.4(B) would not otherwise be met, but only if the
Adoption Agreement so provides, the Employer may make, on behalf of
Non-Highly Compensated Employees, for any Plan Year, such Qualified
Nonelective Contributions as are necessary to meet the requirements of
Section 3.4(B). Such Employer Qualified Nonelective Contributions must be
made by the Employer no later than 30 days after the end of the Plan Year.
Such Employer Qualified Nonelective Contributions shall be separately
accounted for and no portion of such Employer Qualified Nonelective
Contributions attributable to Plan Years beginning after December 31, 1988,
may be withdrawn upon hardship of the Participant. Moreover, such Employer
Qualified Nonelective Contributions must satisfy all other requirements
relating to Qualified Nonelective Contributions as set forth in Section
1.70. The CODA provisions may not be integrated with social security.
(B) ELECTIVE DEFERRALS.
(1) MAXIMUM AMOUNT OF ELECTIVE DEFERRALS.
Effective as of January 1, 1987, no Employee shall be permitted to
have Elective Deferrals made under this Plan during the taxable year
of such Employee in excess of $7,000 multiplied by the Adjustment
Factor as provided by the Secretary of the Treasury and as in effect
at the beginning of such taxable year of the Employee. The foregoing
limit shall not apply to Elective Deferrals of amounts attributable to
service performed in 1986 and described in section 1105(c)(5) of the
Tax Reform Act of 1986.
(2) "ACTUAL DEFERRAL PERCENTAGE" TEST
REQUIREMENT. The "Actual Deferral Percentage" (ADP) for Participants
who are Highly Compensated Employees for each Plan Year and the ADP
for Participants who are Non-Highly Compensated Employees for the same
Plan Year must satisfy one of the following tests:
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<PAGE> 41
(a) The ADP for Participants who are
Highly Compensated Employees for the Plan Year shall not
exceed the ADP for Participants who are Non-Highly Compensated
Employees for the same Plan Year multiplied by 1.25; or
(b) The ADP for Participants who are
Highly Compensated Employees for the Plan Year shall not
exceed the ADP for Participants who are Non-Highly Compensated
Employees for the 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
Non-Highly Compensated Employees by more than two percentage
points.
(3) SPECIAL RULES. The following special rules
apply:
(a) The ADP for any Participant who is a
Highly Compensated Employee for the Plan Year and who is
eligible to have Elective Deferrals (and Qualified Nonelective
Contributions or Qualified Matching Contributions, or both, if
treated as Elective Deferrals for purposes of the ADP test)
allocated to his accounts under two or more cash or deferred
arrangements described in section 401(k) of the Code (CODAs),
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 CODA. If a Highly
Compensated Employee participates in two or more CODAs that
have different Plan Years, all CODAs ending with or within the
same calendar year shall be treated as a single CODA.
Notwithstanding the foregoing, certain CODAs shall be treated
as separate CODAs if mandatorily disaggregated pursuant to
regulations under section 401(k) of the Code.
(b) In the event that this Plan
satisfies the requirements of section 401(k), 401(a)(4), or
410(b) of the Code only if aggregated with one or more other
plans, or if one or more other plans satisfy the requirements
of such sections of the Code only if aggregated with this
Plan, then this Section shall be applied by determining the
ADP of Employees as if all such plans were a single plan. For
Plan Years beginning after December 31, 1989, plans may be
aggregated in order to satisfy section 401(k) of the Code only
if they have the same Plan Year.
(c) For purposes of determining the ADP
of a Participant who is a five-percent owner or one of the ten
most highly-paid Highly Compensated Employees, the Elective
Deferrals (and Qualified Nonelective Contributions or
Qualified Matching Contributions, or both, if treated as
Elective Deferrals for purposes of the ADP test) and
"Applicable Compensation" of such a Participant shall include
the Elective Deferrals (and, if applicable, Qualified
Nonelective Contributions and Qualified Matching
Contributions, or both) and "Applicable Compensation" for the
Plan Year of Family Members of such Participant. Family
Members, with respect to such Highly Compensated Employees,
shall be disregarded as separate Employees in determining the
ADP both for Participants who are Non-Highly Compensated
Employees and for Participants who are Highly Compensated
Employees.
(d) 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 the contributions relate.
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<PAGE> 42
(e) 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.
(f) 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.
(4) DEFINITIONS. The following definitions apply:
(a) "ACTUAL DEFERRAL PERCENTAGE" shall
mean, for a specified group of Participants for a Plan Year,
the average of the ratios (calculated separately for each
Participant in such group) of (i) the amount of Employer
contributions actually paid over to the Trust on behalf of
such Participant for the Plan Year to (ii) the Participant's
"Applicable Compensation" for such Plan Year (whether or not
the Employee was a Participant for the entire Plan Year).
Employer contributions on behalf of any Participant shall
include any Elective Deferrals made pursuant to the
Participant's deferral election (including "Excess Elective
Deferrals" of Highly Compensated Employees), but excluding
"Excess Elective Deferrals of Non-Highly Compensated Employees
that arise solely from Elective Deferrals made under the plan
or plans of the Employer and excluding Elective Deferrals that
are taken into account in the "Contribution Percentage" test
(provided the ADP test is satisfied both with and without
exclusion of these Elective Deferrals) and, 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.
(b) "APPLICABLE COMPENSATION" shall have
the meaning set forth in Section 3.2(F)(3)(g).
(5) DISTRIBUTION OF "EXCESS ELECTIVE DEFERRALS".
(a) IN GENERAL. A Participant may
assign to this Plan any "Excess Elective Deferrals" made
during such Participant's taxable year by notifying the Plan
Administrator, in accordance with Section 3.4(B)(5)(c) 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 account "Excess Elective
Deferrals" were assigned for the preceding taxable year of
such Participant and who claims "Excess Elective Deferrals"
for such taxable year of the Participant.
(b) DEFINITION. For purposes of the
Plan, "EXCESS ELECTIVE DEFERRALS" shall mean those Elective
Deferrals that are includible in a Participant's gross income
under section 402(g) of the Code to the extent such
Participant's Elective Deferrals for a taxable year exceed the
dollar limitation under such Code section. "Excess Elective
Deferrals" shall be
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<PAGE> 43
treated as "Annual Additions" (within the meaning of Section
3.8(D)(1)) under the Plan, unless such amounts are distributed
no later than the first April 15 following the close of the
Participant's taxable year.
(c) CLAIMS. The Participant's claim
shall be in writing; shall be submitted to the Plan
Administrator no later than March 1; shall specify the
Participant's "Excess Elective Deferral" for the preceding
taxable year of such Participant (which shall not exceed the
amount of the Participant's Elective Deferral under this Plan
for such taxable year); and shall be accompanied by the
Participant's written statement that if such amounts are not
distributed, such "Excess Elective Deferral", when added to
other Elective Deferrals exceeds the limit imposed on the
Participant by section 402(g) of the Code for the taxable year
of the Participant in which the Elective Deferral occurred.
(d) DETERMINATION OF INCOME OR LOSS.
"Excess Elective Deferrals" shall be adjusted for income or
loss. The income or loss allocable to "Excess Elective
Deferrals" is the income or loss allocable to the
Participant's Elective Deferrals for the year multiplied by a
fraction, the numerator of which is such Participant's "Excess
Elective Deferrals" for the year and the denominator of which
is the Participant's account balance attributable to Elective
Deferrals without regard to any income or loss occurring
during such taxable year. Income or loss allocable to the
period between the end of the taxable year of the Participant
and the date of the distribution shall be disregarded in
determining income or loss.
(6) DISTRIBUTION OF "EXCESS CONTRIBUTIONS".
(a) IN GENERAL. Notwithstanding any other
provision of the 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 beginning after
December 31, 1987, to Participants to whose accounts such
"Excess Contributions" were allocated for the preceding Plan
Year. If such "Excess Contributions" are distributed more
than two and one-half months after the last day of the Plan
Year in which such "Excess Contributions" arose, a ten percent
excise tax will be imposed on the Employer maintaining the
plan with respect to such "Excess Contributions". 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 of section 414(q)(6) of the
Code 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" shall be treated as
"Annual Additions" (within the meaning of Section 3.8(D)(1))
under the Plan.
(b) DETERMINATION OF INCOME OR LOSS. "Excess
Contributions" shall be adjusted for any income or loss. The
income or loss allocable to "Excess Contributions" is the
income or loss allocable to the 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 Plan Year and the denominator
of which is the Participant's account balance attributable to
Elective Deferrals (and Qualified Nonelective Contributions or
Qualified Matching Contributions, or both, if any of such
contributions are included in the ADP test) without regard to
any income or loss occurring during such Plan Year. Income or
loss
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<PAGE> 44
allocable to the period between the end of the Plan Year and
the date of the distribution shall be disregarded in
determining income or loss.
(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.
(d) DEFINITION. "EXCESS CONTRIBUTION" shall
mean, with respect to any Plan Year, the excess of:
(i) The aggregate amount of
Employer contributions actually taken into account in
computing the ADP of Highly Compensated Employees for
such Plan Year, over
(ii) 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 ratios used in
determining the ADP of Highly Compensated Employees,
beginning with the highest of such ratios).
(e) REDUCTION FOR "EXCESS ELECTIVE
DEFERRALS" DISTRIBUTED. The "Excess Contributions" which
would otherwise be distributed to the Participant shall be
reduced, in accordance with regulations, by the amount of
"Excess Elective Deferrals" distributed to the Participant.
(C) VESTING AND ACCOUNTS. The interest of each
Participant in his Accrued Benefit derived from such Participant's Elective
Deferral Contributions and the earnings thereon shall be nonforfeitable at
all times. Separate accounts for Elective Deferral Contributions shall be
maintained for each Participant. Each account shall be credited with the
applicable contributions and earnings thereon.
(D) MANNER OF MAKING ELECTIVE DEFERRAL CONTRIBUTION. The
Employer shall contribute the Elective Deferral Contributions to the Plan
within the earlier of (1) 30 days following the pay period to which such
Elective Deferral Contributions relate, or (2) 30 days following the end of
the Plan Year for which such Elective Deferral Contributions are being made.
(E) RESPONSIBILITY OF TRUSTEE. The Trustee shall be
accountable for Elective Deferral Contributions received by it, but shall
have no duty to determine that the Elective Deferral Contributions received
are of the correct amount or are correctly allocated by the Administrative
Committee to the Participant on whose behalf such Elective Deferral
Contributions were made.
3.5 MATCHING CONTRIBUTIONS. The rules relating to Matching
Contributions are as follows:
(A) AMOUNT. If the Adoption Agreement provides for
Matching Contributions, the Employer shall make a Matching Contribution on
behalf of each Participant who has elected to make Elective Deferral
Contributions or Participant Contributions to the Plan in the amounts set
forth in the Adoption
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<PAGE> 45
Agreement. The amount of the Matching Contribution shall be the amount
selected by the Employer in the Adoption Agreement to match such Elective
Deferral Contributions and/or Participant Contributions. A Matching
Contribution for a Participant shall be allocated to his Matching Account
pursuant to Section 5.1(E). The Employer may also make Qualified Matching
Contributions to the extent permitted by the applicable Adoption Agreement.
(B) TIME. Matching Contributions, for any Plan year,
shall be paid to the Trustee no later than the due date (including
extensions of time) for filing the Employer's Federal income tax return for
the Taxable Year which ends with or within such Plan Year.
(C) RESPONSIBILITY OF TRUSTEE. The Trustee shall be
accountable for Matching Contributions received by it, but shall have no
duty to determine that the Matching Contributions are of the correct amount
or are correctly allocated by the Administrative Committee to the
Participant on whose behalf such Matching Contributions were made.
(D) LIMITATIONS. All Matching Contributions are subject
to the requirements of Sections 3.2(F) and 3.2(G).
(E) VESTING AND ACCOUNTS. Matching Contributions shall
be vested in accordance with Section A.3.5(F) of the Adoption Agreement. In
any event, Matching Contributions shall be fully vested at Normal Retirement
Age, upon the complete or partial termination of the Plan, or upon the
complete discontinuance of Employer contributions. Qualified Matching
Contributions shall be vested when made.
Forfeitures of Matching Contributions, other than "Excess
Aggregate Contributions" (within the meaning of Section 3.2(G)) shall be
made in accordance with Sections 5.5 and 7.6(C) and Section A.7.6(C) of the
Adoption Agreement.
Separate accounts for Matching Contributions shall be
maintained for each Participant. Each account shall be credited with the
applicable contributions and earnings thereon.
Notwithstanding the foregoing, Matching Contributions
(including Qualified Matching Contributions) shall be forfeited if the
contributions to which they relate are "Excess Deferrals", "Excess
Contributions", or "Excess Aggregate Contributions". [SEE TREAS. REG. Section
1.401(A)(4)-11(G)(6) EXAMPLE 8]
3.6 CONTRIBUTIONS HELD IN TRUST. The Trustee covenants and agrees
that it holds, and will hold, all sums (including any Employer Contributions,
any Elective Deferral Contributions, any Matching Contributions, any
Participant Contributions, any Qualified Matching Contributions, any Qualified
Nonelective Contributions and, if applicable, prior Qualified Voluntary
Employee Contributions) which, from time to time, have been, or may be, paid to
it as Trustee hereunder, in trust, subject to the provisions of the Plan, for
the purposes and upon the terms, conditions and powers set forth in this Plan
and Trust Agreement.
3.7 RETURN OF EMPLOYER CONTRIBUTIONS. The rules relating to the
return of Employer Contributions are as follows:
(A) EXCLUSIVE BENEFIT RULE AND EXCEPTIONS THERETO. The
Trust Fund shall be held by the Trustee for the exclusive purpose of
providing benefits to Participants in the Plan and their Beneficiaries and
defraying reasonable expenses of administering the Plan. No part of the
Trust Fund shall at any time inure to the benefit of the Employer; provided,
however, that Employer Contributions and/or Elective Deferral
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Contributions and/or Matching Contributions to the Trust Fund shall be
refunded to the Employer, to the extent such refunds do not, in themselves,
deprive the Plan of its qualified status, under the following circumstances
and subject to the following limitations:
(1) MISTAKE OF FACT. In the case of Employer
Contributions and/or Elective Deferral Contributions and/or Matching
Contributions which are made, in whole or in part, by reason of a
mistake of fact (as for example, incorrect information as to the
eligibility or Compensation of a Participant, or a mathematical
error), so much of such Employer Contributions and/or Elective
Deferral Contributions and/or Matching Contributions as is
attributable to the mistake of fact shall be returned to the Employer
on demand, upon presentation to the Trustee of evidence of the mistake
of fact and calculations as to the impact of such mistake. Demand and
repayment must be effected within one year after the date of payment
of the Employer Contributions and/or Elective Deferral Contributions
and/or Matching Contributions to which the mistake applies.
(2) DISALLOWANCE OF DEDUCTION. In the event the
deduction of the contribution made by the Employer is disallowed under
section 404 of the Code, such contribution (to the extent disallowed)
shall be returned to the Employer within one year of the disallowance
of the deduction.
(3) INITIAL DISQUALIFICATION. If any Employer
and/or Elective Deferral Contributions and/or Matching Contributions
to the Plan are conditioned on initial qualification of the Plan under
section 401 of the Code and if the Plan receives an adverse
determination with respect to its initial qualification, any such
Employer Contributions and/or Elective Deferral Contributions and/or
Matching Contributions shall be returned to such Employer within one
year after such adverse determination but only if the application for
determination is made by the time prescribed by law for filing the
Employer's Federal income tax return for the Taxable Year in which
such Plan was adopted or such later date as the Secretary of the
Treasury shall provide.
(B) REFUND TO BE DEDUCTED AS INVESTMENT LOSS WITH CERTAIN
EXCEPTIONS. In the event that any refund is paid to the Employer hereunder,
such refund shall be made without interest and shall be deducted from the
Employer Accounts and/or Elective Deferral Accounts and/or Matching Accounts
of the Participants as an investment loss except to the extent that the
amount of the refund can be attributed to one or more specific Participants
(as in the case of certain mistakes of fact and disallowances of
Compensation resulting in reduction of deductible Employer Contributions) in
which case the amount of the refund attributable to each such Participant's
Employer Account and/or Elective Deferral Account and/or Matching Account
shall be deducted directly from such Employer Account and/or Elective
Deferral Account and/or Matching Account.
(C) LIMITATIONS ON REFUNDS. Notwithstanding any other
provisions of this Section 3.7, no refund shall be made to the Employer:
(1) To the extent such refund is specifically
chargeable to the Employer Account(s) and/or Elective Deferral
Account(s) and/or Matching Account(s) of any Participant(s) in excess
of 100 percent of the amount in such Account(s);
(2) If the amount otherwise subject to refund
hereunder has been distributed to Participants and/or their
Beneficiaries (in which case the Employer shall have a claim directly
against the distributees to the extent of the refund to which it is
entitled);
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(3) To the extent the amount is not in excess of
the amount which would have been contributed had no mistake of fact or
mistake in determining the deduction occurred (in which case the
amount subject to refund shall be limited to the excess of (a) the
amount of the Employer Contribution and/or Elective Deferral
Contribution and/or Matching Contribution over (b) the amount that the
Employer would have contributed, had there not occurred a mistake of
fact or a mistake in determining the amount of the deduction);
(4) Of earnings attributable to the excess
Employer Contribution and/or Elective Deferral Contribution and/or
Matching Contribution;
(5) To the extent there are losses attributable
to the amount subject to refund (in which case the losses shall reduce
the amount to be returned); and
(6) To the extent the amount subject to refund
would cause the balance of the Employer Account and/or Elective
Deferral Account and/or Matching Account of any Participant to be
reduced to less than the balance which would have been in such
Employer Account and/or Elective Deferral Account and/or Matching
Account had the amount subject to refund not been contributed (in
which case the amount to be refunded to the Employer shall be limited
so as to avoid such reduction).
(D) FURTHER LIMITATIONS ON REFUNDS. All refunds under
this Section 3.7 shall be limited in amount, circumstance and timing to the
provisions of section 403(c) of ERISA, and no such refund shall be made if,
solely on account of such refund, the Plan would cease to be a qualified
plan under section 401(a) of the Code or to meet the requirements of section
401(k) of the Code.
3.8 LIMITATIONS ON ALLOCATIONS. The limitations relating to
allocations under the Plan are as follows:
(A) LIMITATION APPLICABLE WHERE NO OTHER EMPLOYEE PENSION
BENEFIT PLAN OR WELFARE BENEFIT FUND OR INDIVIDUAL MEDICAL BENEFIT ACCOUNT
MAINTAINED.
(1) BASIC LIMITATION. If the Participant does
not participate in, and has never participated in, any other Employee
Pension Benefit Plan maintained by the "Employer" (as defined in
Section 3.8(D)(5)) or Welfare Benefit Fund maintained by the
"Employer" or individual medical benefit account (as defined in
section 415(l)(2) of the Code) maintained by the "Employer" and which
provides an "Annual Addition" (as defined in Section 3.8(D)(1)) by the
"Employer", the amount of the "Annual Additions" which may be
allocated under this Plan to such Participant's accounts during any
Limitation Year shall not exceed the lesser of the "Maximum
Permissible Amount" (as defined in Section 3.8(D)(8)) or any other
limitation contained in the Plan. If the Employer contribution that
would otherwise be contributed or allocated to the Participant's
account would cause the "Annual Additions" for the Limitation Year to
exceed the "Maximum Permissible Amount", the amount contributed or
allocated shall be reduced so that the "Annual Additions" for the
Limitation Year will equal the "Maximum Permissible Amount".
(2) ESTIMATION OF LIMITATION COMPENSATION. Prior to
determining the Participant's actual Limitation 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 Limitation Compensation for the Limitation Year,
uniformly determined for Participants similarly situated.
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(3) DETERMINATION OF ACTUAL LIMITATION COMPENSATION.
As soon as is administratively feasible after the end of the
Limitation Year, the "Maximum Permissible Amount" for the Limitation
Year shall be determined on the basis of the Participant's actual
Limitation Compensation for the Limitation Year.
(4) DISPOSITION OF "EXCESS AMOUNTS". If,
pursuant to Section 3.8(A)(3), or as a result of the allocation of
forfeitures or under other limited facts and circumstances
satisfactory to the Commissioner of Internal Revenue there is an
"Excess Amount" (as defined in Section 3.8(D)(6)) with respect to a
Participant for a Limitation Year, such "Excess Amount" shall be
disposed of as follows:
(a) First, any Participant
Contributions, to the extent their return would reduce the
"Excess Amount", shall be paid to the Participant as soon as
is administratively feasible. The Administrative Committee
shall certify to the Trustee the amount of any such reduction
to be returned to any Participant and the name and address of
the Participant.
(b) Second, if, after the application of
Section 3.8(A)(4)(a), an "Excess Amount" still exists, and the
Participant is covered by the Plan at the end of a Limitation
Year, the "Excess Amount"in the Participant's account shall be
used to reduce Employer contributions (including any
allocation of forfeitures), for such Participant in the next
Limitation Year (and for each succeeding Limitation Year as
necessary).
(c) If, after the application of Section
3.8(A)(4)(a) an "Excess Amount" still exists, and the
Participant is not covered by the Plan at the end of a
Limitation Year, the "Excess Amount" shall be held unallocated
in a suspense account. The suspense account shall be applied
in the next Limitation Year (and succeeding Limitation Years,
as necessary) to reduce Employer contributions for all
remaining Participants.
(d) If a suspense account is in existence at
any time during a Limitation Year pursuant to this Section
3.8(A)(4), it shall not participate in the allocation of the
Trust's investment gains and losses. If a suspense account is
in existence at any time during a particular Limitation Year,
all amounts in the suspense account must be allocated and
reallocated to Participants' accounts before any "Employer"
contributions or any Employee contributions may be made to the
Plan for that Limitation Year. "Excess Amounts" may not be
distributed to Participants or former Participants. In the
event the Plan of an adopting "Employer" is terminated and any
portion of the "Excess Amount" cannot be allocated to
Participants under this Section 3.8(A)(4), such portion of
such "Excess Amount" shall revert to such adopting "Employer".
(B) MULTI-PLAN LIMITATIONS FOR ADDITIONAL REGIONAL
PROTOTYPE DEFINED CONTRIBUTION PLANS AND/OR WELFARE BENEFIT FUNDS AND/OR
INDIVIDUAL MEDICAL BENEFIT ACCOUNTS.
(1) LIMITATION. This Section 3.8(B) applies, if,
in addition to this Plan, the Participant is covered under another
qualified "Regional Prototype Plan" which is a Defined Contribution
Plan maintained by the "Employer" and/or a Welfare Benefit Fund
maintained by the "Employer" and/or an individual medical benefit
account (as defined in section 415(l)(2) of the Code) maintained by
the "Employer" which provides an "Annual Addition", during any
Limitation Year. The "Annual Additions" which may be credited under
this Plan to a Participant's account for any such Limitation Year
shall not exceed the lesser of:
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(a) The "Maximum Permissible Amount"
reduced by the sum of any "Annual Additions" credited to such
Participant's accounts under such other Defined Contribution
Plan or Plans and under such other Welfare Benefit Fund or
Funds and under such individual medical benefit account or
accounts for the same Limitation Year; or
(b) Any other limitation contained in
this Plan.
If the "Annual Additions" with respect to the
Participant under other Defined Contribution Plans and Welfare Benefit
Funds maintained by the Employer are less than the "Maximum
Permissible Amount" and the Employer contribution that would otherwise
be contributed or allocated to the Participant's account under this
Plan would cause the "Annual Additions" for the Limitation year to
exceed this limitation, the amount contributed or allocated shall be
reduced so that the "Annual Additions" under all such plans and funds
for the Limitation Year will equal the "Maximum Permissible Amount".
If the "Annual Additions" with respect to the Participant under such
other Defined Contribution Plans and Welfare Benefit Funds in the
aggregate are equal to or greater than the "Maximum Permissible
Amount", no amount shall be contributed or allocated to the
Participant's account under this Plan for the Limitation Year.
(2) ESTIMATION OF LIMITATION COMPENSATION. Prior
to determining the Participant's actual Limitation Compensation for
the Limitation Year, the Employer may determine the "Maximum
Permissible Amount" for a Participant in the manner described in
Section 3.8(A)(2).
(3) DETERMINATION OF ACTUAL LIMITATION
COMPENSATION. As soon as is administratively feasible after the end
of the Limitation Year, the "Maximum Permissible Amount" for the
Limitation Year shall be determined on the basis of the Participant's
actual Limitation Compensation for the Limitation Year.
(4) ORDER OF DETERMINING "EXCESS AMOUNTS". If
pursuant to Section 3.8(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" shall be deemed to consist of the "Annual
Additions" last allocated, except that "Annual Additions" attributable
to a Welfare Benefit Fund or to an individual medical benefit account
shall be deemed to have been allocated first regardless of the actual
allocation date.
(5) SIMULTANEOUS ALLOCATION OF "EXCESS AMOUNTS".
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 shall 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 "Regional Prototype Plans" maintained by the
"Employer" which are Defined Contribution Plans.
(6) DISPOSITION OF "EXCESS AMOUNTS". Any "Excess
Amounts" attributed to this Plan shall be disposed of in accordance
with Section 3.8(A)(4).
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<PAGE> 50
(7) LIMITATION WHERE PARTICIPANT COVERED BY
NON-REGIONAL PROTOTYPE DEFINED CONTRIBUTION PLAN. If the Participant
is covered under another qualified Defined Contribution Plan
maintained by the "Employer" which is not a "Regional Prototype Plan"
(as defined in Section 3.8(D)(10)), "Annual Additions" which may be
credited to the Participant's account under this Plan for any
Limitation Year shall be limited in accordance with Sections 3.8(B)(1)
through 3.8(B)(6) as though the other plan were a "Regional Prototype
Plan" unless the "Employer" provides other limitations in Section
A.3.8.(B) of the Adoption Agreement.
(C) MULTI-PLAN LIMITATIONS FOR ADDITIONAL PLAN WHICH IS A
DEFINED BENEFIT PLAN.
(1) LIMITATION. If, in addition to this Plan,
the "Employer" maintains or has maintained another plan which is a
Defined Benefit Plan covering any Participant in this Plan, the sum
of the Participant's "Defined Benefit Plan Fraction" and "Defined
Contribution Plan Fraction" shall not exceed 1.0 in any Limitation
Year. The "Annual Additions" which may be credited to the
Participant's accounts under this Plan for any Limitation Year shall
be limited as elected in Section A.3.8(C) of the Adoption Agreement.
(2) ELECTION OF PLAN LIMITATION. If Section
A.3.8(C)(1) of the Adoption Agreement is checked, the "Annual
Additions" which may be credited to a Participant's accounts shall be
reduced to the extent necessary so that they shall not exceed the
limitations in Sections 3.8(A) and 3.8(B) and, in addition, shall be
reduced to the extent necessary to prevent the decimal equivalent of
the sum of the "Defined Benefit Plan Fraction" (as defined in Section
3.8(D)(2)) and of the "Defined Contribution Plan Fraction" (as defined
in Section 3.8(D)(4)) for any Limitation Year beginning after December
31, 1982, with respect to such Participant, from exceeding 1.0.
(3) ORDER OF "ANNUAL ADDITIONS" REDUCTIONS. If,
as a result of Section 3.8(C)(2), the amount of the "Annual
Additions" which may be allocated to the accounts of any Participant
under this Plan is reduced for any Limitation Year, such reduction
shall be made as follows:
(a) The Participant Contribution portion
of such "Annual Additions" of such Participant for such
Limitation Year shall be reduced; and
(b) If the "Annual Additions" allocable
to such Participant Contributions are required to be reduced
to zero, then any Matching Contributions and Employer
Contributions (in that order) on behalf of such Participant
for such Limitation Year shall be reduced; and
(c) If the "Annual Additions" allocable
to Participant Contributions, Matching Contributions and
Employer Contributions are required to be reduced to zero,
then the Elective Deferral Contributions on behalf of such
Participant for such Limitation Year shall be reduced.
(4) TREATMENT OF "ANNUAL ADDITIONS" REDUCTIONS.
If as a result of Section 3.8(C)(2), the amount of the "Annual
Additions" which may be allocated under this Plan to any Participant's
accounts for any Limitation Year is reduced, such reduction shall be
treated as follows:
(a) The amount of such reduction
consisting of Participant Contributions shall be paid to the
Participant as soon as is administratively feasible; and
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(b) The amount of such reduction
consisting of Employer Contributions, Matching Contributions
and Elective Deferral Contributions shall be treated as an
"Excess Amount" and disposed of in accordance with Section
3.8(A)(4).
(D) DEFINITIONS. For purposes of this Article III, the
following terms shall be defined as follows:
(1) "ANNUAL ADDITIONS" shall mean, with respect
to any Participant, the amounts allocated to such Participant's
accounts during the Limitation Year that constitute:
(a) "Employer" contributions;
(b) Employee contributions;
(c) Forfeitures;
(d) Amounts allocated, after March 31,
1984, to an individual medical benefit account, as defined in
section 415(l)(2) of the Code, which is part of a pension or
annuity plan maintained by the "Employer";
(e) 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, maintained by the
"Employer"; and
(f) Any "Excess Amount" applied under
Sections 3.8(A) or 3.8(B) or 3.8(C) (if applicable), in the
Limitation Year to reduce "Employer" contributions for such
Limitation Year.
(2) "DEFINED BENEFIT PLAN FRACTION" shall mean a
fraction, the numerator of which is the sum of the Participant's
"Projected Annual Benefits" (as defined in Section 3.8(D)(9)) under
all the Defined Benefit Plans (whether or not terminated) maintained
by the "Employer", and the denominator of which is the lesser of 125
percent of the dollar limitation determined for the Limitation Year
under sections 415(b) and (d) of the Code or 140 percent of the
Participant's "Highest Average Compensation" (as defined in Section
3.8(D)(7)), 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 shall not be less than 125 percent of
the sum of the annual benefits under such Plans which the Participant
had accrued as of the close of the last Limitation Year beginning
before January 1, 1987, disregarding any changes in the terms and
conditions of the Defined Benefit Plan after May 5, 1986. The
preceding sentence applies only if the Defined Benefit Plans
individually and in the aggregate satisfied the requirements of
section 415 of the Code for all Limitation Years beginning before
January 1, 1987.
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(3) "DEFINED CONTRIBUTION DOLLAR LIMITATION"
shall mean $30,000 or, if greater, one-fourth of the defined benefit
dollar limitation set forth in section 415(b)(1) of the Code as in
effect for the Limitation Year.
(4) "DEFINED CONTRIBUTION PLAN FRACTION" shall
mean 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, and individual medical
benefit accounts (as defined in section 415(l)(2) of the Code)
maintained by the "Employer"), and the denominator of which is the sum
of the maximum aggregate amounts for the current and all prior
Limitation Years of service with the "Employer" (regardless of whether
a Defined Contribution Plan was maintained by the "Employer"). The
maximum aggregate amount in any Limitation Year is the lesser of 125
percent of the dollar limitation determined under sections 415(b) and
415(d) of the Code in effect under section 415(c)(1)(A) of the Code or
35 percent of the Participant's Limitation Compensation for such
Limitation 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 shall
be adjusted if the sum of this fraction and the "Defined Benefit Plan
Fraction" (as defined in Section 3.8(D)(2)) would otherwise exceed 1.0
under the terms of this Plan. Under the adjustment, an amount equal
to the product of (a) the excess of the sum of the fractions over 1.0
times (b) the denominator of this fraction, shall be permanently
subtracted from the numerator of this fraction. The adjustment is
calculated using the fractions as they would be computed as of the end
of the last Limitation Year beginning before January 1, 1987, and
disregarding any changes in the terms and conditions of the Plan made
after May 5, 1986, but using the section 415 limitation applicable to
the first Limitation Year beginning on or after January 1, 1987.
The "Annual Addition" for any Limitation Year
beginning before January 1, 1987, shall not be recomputed to treat all
Employee contributions as "Annual Additions".
(5) "EMPLOYER" shall mean the Employer that
adopts the Plan, and all members of a controlled group of corporations
(as defined in section 414(b) of the Code as modified by section
415(h) of the Code), all commonly controlled trades or businesses (as
defined in section 414(c) of the Code as modified by section 415(h) of
the Code) or affiliated service groups (as defined in section 414(m)
of the Code) of which the adopting Employer is a part, and any other
entity required to be aggregated with the Employer pursuant to
Treasury regulations under section 414(o) of the Code.
(6) "EXCESS AMOUNT" shall mean the excess of the
Participant's "Annual Additions" for the Limitation Year over the
"Maximum Permissible Amount", less loading and other administrative
charges allocable to such excess.
(7) "HIGHEST AVERAGE COMPENSATION" shall mean the
average compensation for the three consecutive Accrual Computation
Periods with the "Employer" that produces the highest average.
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(8) "MAXIMUM PERMISSIBLE AMOUNT" shall mean the
maximum "Annual Addition" that may be contributed or allocated to a
Participant's account under the Plan for any Limitation Year which
maximum is the lesser of:
(a) The "Defined Contribution Dollar
Limitation" (as defined in Section 3.8(D)(3)); or
(b) 25 percent of the Participant's
Limitation Compensation for the Limitation Year.
If a short Limitation Year is created because of an
amendment changing the Limitation Year to a different Computation
Period, the "Maximum Permissible Amount" shall not exceed the "Defined
Contribution Dollar Limitation" multiplied by the following fraction:
NUMBER OF MONTHS IN THE SHORT LIMITATION YEAR
---------------------------------------------
12
(9) "PROJECTED ANNUAL BENEFIT" shall mean 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.
(10) "REGIONAL PROTOTYPE PLAN" shall mean a plan
the form of which is the subject of a favorable notification letter
from the Internal Revenue Service.
(E) SPECIAL RULE. The compensation limitation referred
to in Section 3.8(D)(8)(b) shall not apply to any contribution for medical
benefits (within the meaning of section 401(h) or section 419A(f)(2) of the
Code) which is otherwise treated as an "Annual Addition" under section
415(l)(1) or section 419A(d)(2) of the Code.
3.9 ROLLOVER CONTRIBUTIONS. The rules relating to Rollover
Contributions are as follows:
(A) GENERAL. If permitted by the Adoption Agreement, any
Participant may, with the approval of the Administrative Committee, make a
Rollover Contribution. The Trustee shall credit the amount of any Rollover
Contribution to the Participant's Rollover Account as of the date the
Rollover Contribution is made. A Rollover Contribution shall be fully
vested on the date of contribution. The limitations of Section 3.8 shall
not apply to Rollover Contributions. All Rollover Contributions shall be in
cash and/or other property acceptable to the Trustee. If permitted by the
Adoption Agreement, Employees other than Participants may be permitted to
make Rollover Contributions to the Plan.
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(B) TRUSTEE-TO-TRUSTEE TRANSFERS OF ROLLOVER CONTRIBUTIONS TO
PLAN. Effective January 1, 1993, if the Adoption Agreement provides for
Rollover Contributions and, if the Participant or other Employee eligible to
make a Rollover Contribution to the Plan (1) elects to have such Rollover
Contribution paid directly to the Plan, and (2) specifies the Plan as the
plan to which such Rollover Contribution is to be paid (in such form and at
such time as the Administrative Committee may prescribe), such Rollover
Contribution shall be made in the form of a direct trustee-to-trustee
transfer as described in section 401(a)(31) of the Code, as in effect on and
after January 1, 1993.
(C) ELIGIBLE ROLLOVER DISTRIBUTIONS FROM PLAN. This
Section 3.9(C) applies to distributions made on or after January 1, 1993.
(1) ELECTION OF DIRECT ROLLOVER. Notwithstanding
any provision of the Plan to the contrary that would otherwise limit a
"Distributee's" election under this Section 3.9(C), 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".
(2) DEFINITIONS.
(a) "ELIGIBLE ROLLOVER DISTRIBUTION".
An "Eligible Rollover Distribution" is any distribution of all
or any portion of the balance to the credit of the
"Distributee", except that an "Eligible Rollover Distribution"
does not include: any distribution that is one of a series of
substantially equal periodic payments (not less frequently
than annually) made for the life (or life expectancy) of the
"Distributee" or the joint lives (or joint life expectancies)
of the "Distributee" and the "Distributee's" designated
beneficiary, or for a specified period of ten years or more;
any distribution to the extent such distribution is required
under section 401(a)(9) of the Code; the portion of any
distribution that is not includible in gross income
(determined without regard to the exclusion for net unrealized
appreciation with respect to employer securities); and any
other distribution(s) that is reasonably expected to total
less than $200 during a year.
(b) "ELIGIBLE RETIREMENT PLAN". An
"Eligible Retirement Plan" is an individual retirement account
described in section 408(a) of the Code, an individual
retirement annuity described in section 408(b) of the Code, an
annuity plan described in section 403(a) of the Code, or a
qualified plan described in section 401(a) of the Code, that
accepts the "Distributee's" "Eligible Rollover Distribution".
However, in the case of an "Eligible Rollover Distribution" to
the surviving spouse, an "Eligible Retirement Plan" is an
individual retirement account or individual retirement
annuity.
(c) "DISTRIBUTEE". A "Distributee"
includes an employee or former employee. In addition, the
employee's or former employee's surviving spouse and the
employee's or former employee's spouse or former spouse who is
the alternate payee under a Qualified Domestic Relations
Order, as defined in section 414(p) of the Code, are
"Distributees" with regard to the interest of the spouse or
former spouse.
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(d) "DIRECT ROLLOVER". A "Direct
Rollover" is a payment by the Plan to the "Eligible Retirement
Plan" specified by the "Distributee".
3.10 TRANSFERS OF ACCOUNTS FROM AND TO OTHER QUALIFIED PLANS. The
rules relating to transfers of accounts are as follows:
(A) TRANSFER OF ACCOUNTS FROM OTHER QUALIFIED PLANS.
(1) GENERAL RULES. If permitted by the Adoption
Agreement, Participants may have the assets in their accounts in other
plans transferred to this Plan provided:
(a) The other plan is a plan which
formerly covered the Participant and is qualified under
section 401(a) of the Code but is not a Defined Benefit Plan
or a money purchase pension plan (including a target benefit
plan) or a plan which provided for distribution or should have
provided for distribution in the form of qualified joint and
survivor annuities or a direct or indirect transferee from any
such plan unless the Plan adopted hereunder by the Employer is
a money purchase plan;
(b) The Administrative Committee
approves such transfer;
(c) The Trustee accepts such transfer;
and
(d) The transferred assets consist
solely of cash and/or other property acceptable to the
Trustee.
The Trustee shall credit the fair market value of such transferred
assets to the Transfer Account of the Participant on whose behalf such
assets were transferred as of the date of the transfer. The interest
of a Participant in his Transfer Account shall be fully vested on the
date of the transfer. The limitations of Section 3.8 shall not apply
to such transfers. If permitted by the Adoption Agreement, Employees
other than Participants may be permitted to make direct transfers to
the Plan.
(2) LIMITATIONS APPLICABLE TO TRANSFERS FROM
PLANS COVERING CERTAIN KEY EMPLOYEES AND FIVE-PERCENT OWNERS. In the
event assets are transferred from a qualified plan covering Key
Employees in a Top-Heavy Plan, or five-percent owners (within the
meaning of section 416(i)(1) of the Code) of their former employer,
the following restrictions apply:
(a) Separate Transfer Accounts must be
maintained for the assets transferred by each of the former
Key Employees or five-percent owners;
(b) The former five-percent owners or
the former Key Employees (if they were five-percent owners of
their former employer) may, subject to the terms of the Plan,
receive benefits from such separate Transfer Accounts before
they attain age 59 1/2 or become disabled, but subject to any
penalties provided by the Code for such distributions; and
(c) The former five-percent owners or
the former Key Employees (if they were five-percent owners of
their former employer) must commence receiving benefits from
such separate Transfer Accounts not later than the April 1 of
the calendar year following the calendar year in which they
attain age 70 1/2.
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(B) TRANSFERS OF ACCOUNTS TO OTHER QUALIFIED PLANS. Upon
the request of a Participant who has terminated his services with the
Employer or whose coverage under this Plan has terminated, but only with the
approval of the Administrative Committee, the Trustee shall transfer all
amounts held in the Plan for the account of such Participant to another plan
or plans (including another qualified plan of the Employer) provided such
other plan or plans meet the requirements of section 401(a) of the Code and
such other plan or plans are maintained by the employer of such Participant
(or the Employer) and any required governmental notifications have been made
and further provided that any request is accompanied by an acceptance letter
from the trustee of the transferee plan or plans. Neither the Trustee nor
the Administrative Committee shall have any further liability under this
Plan with respect to amounts so transferred.
3.11 TOP-HEAVY PROVISIONS. If the Plan is or becomes top-heavy in
any Plan Year beginning after December 31, 1983, the provisions of this Section
3.11 shall supersede any conflicting provisions in the Plan or in the Adoption
Agreement. The following provisions shall be effective with respect to any
adopting Employer in any Plan Year in which the Plan, with respect to such
adopting Employer, is determined to be a Top-Heavy Plan.
(A) MINIMUM ALLOCATION.
(1) GENERAL. Except as otherwise provided in
Section 3.11(A)(4), the Employer contributions and forfeitures
allocated for any Plan Year in which the Plan is a Top-Heavy Plan on
behalf of any Participant who is not a Key Employee shall not be less
than the lesser of three percent of such Participant's "Compensation"
(as defined in Section 3.11(A)(3)) for such Plan Year 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 Key
Employee's "Compensation", as limited by section 401(a)(17) of the
Code, allocated on behalf of any Key Employee for that Plan Year. The
minimum allocation shall be determined without regard to any Social
Security contribution. This minimum allocation shall be made even
though, under other Plan provisions, the Participant would not
otherwise be entitled to receive an allocation, or would have received
a lesser allocation in the Plan Year because:
(a) The Participant failed to complete 1,000
Hours of Service (or any equivalent provided in the Plan);
(b) The Participant failed to make mandatory
employee contributions to the Plan; or
(c) The Participant's "Compensation" was less
than a stated amount.
(2) NONFORFEITABILITY OF MINIMUM ALLOCATION. The
minimum allocation required (to the extent required to be
nonforfeitable under section 416(b) of the Code) may not be forfeited
under section 411(a)(3)(B) or 411(a)(3)(D) of the Code.
(3) DEFINITION OF "COMPENSATION". For purposes
of computing the minimum allocation, "Compensation" shall mean
Limitation Compensation, as defined in Section A.1.47 of the Adoption
Agreement as limited by section 401(a)(17) of the Code.
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(4) EXCEPTIONS.
(a) LAST DAY OF PLAN YEAR RULE. The
provisions in Section 3.11(A)(1) shall not apply to any Participant who
was not employed by the Employer on the last day of the Plan Year.
(b) MINIMUM ALLOCATION OR BENEFIT
PROVIDED UNDER OTHER PLAN. The provisions in Section
3.11(A)(1) shall not apply to any Participant to the extent
the Participant is covered under any other Employee Pension
Benefit Plan(s) of the Employer and the Employer has provided
in Section A.3.11(A)(2) of the Adoption Agreement that the
minimum allocation or benefit requirements applicable to
Top-Heavy Plans shall be met in the other Employee Pension
Benefit Plan(s). [NOTE: THIS PROVISION MAY CAUSE THE PLAN TO
FAIL TO SATISFY THE UNIFORMITY REQUIREMENT OF TREAS. REG.
Section 1.401(A)(4)-2(B)(2)(II) FOR PLANS USING A
DESIGN-BASED SAFE HARBOR, EVEN THOUGH ALL OTHER REQUIREMENTS
OF THE SAFE HARBOR ARE MET.]
(5) ELECTIVE DEFERRALS AND MATCHING
CONTRIBUTIONS. Neither Elective Deferrals nor Matching Contributions
may be taken into account for the purpose of satisfying the minimum
top-heavy contribution requirement under Section 3.11(A)(1).
(B) VESTING. For any Plan Year in which this Plan is a
Top-Heavy Plan, one of the minimum vesting schedules as elected by the
Employer in the Adoption Agreement shall automatically apply to the Plan.
The minimum vesting schedule applies to all benefits within the meaning of
section 411(a)(7) of the Code except those attributable to Employee
contributions, including benefits accrued before the effective date of
section 416 of the Code and benefits accrued before the Plan became a
Top-Heavy Plan. Further, no decrease in a Participant's nonforfeitable
percentage may occur in the event the Plan's status as a Top-Heavy Plan
changes for any Plan Year. However, this Section 3.11(B) does not apply to
the account balances 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
account balance attributable to Employer contributions and forfeitures shall
be determined without regard to this Section 3.11(B).
Notwithstanding the above, in the event the vesting schedule
selected under Section 7.6 provides for more rapid vesting than the vesting
schedule selected under this Section 3.11(B), the vesting schedule selected
under this Section 3.11(B) shall be superseded by the vesting schedule under
Section 7.6 but only to the extent more rapid vesting is provided in such
schedule.
The Participant shall at all times have a nonforfeitable right
to all of his Accrued Benefit under the Plan attributable to Elective
Deferral Contributions, Participant Contributions and Qualified Voluntary
Employee Contributions.
ARTICLE IV
ACCOUNTS
4.1 SEPARATE ACCOUNTS. The Administrative Committee shall
maintain or cause to be maintained, for each Participant, in accordance with
the provisions of this Section 4.1, a separate Employer Account and, if
Matching Contributions are permitted in accordance with Section 3.5, a separate
Matching Account, and if
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Elective Deferral Contributions are permitted in accordance with Section 3.4, a
separate Elective Deferral Account, and if Participant Contributions are
permitted in accordance with Section 3.2, a separate Participant Account, and,
if Rollover Contributions are made on behalf of a Participant, a separate
Rollover Account, and, if direct transfers are made to the Plan on behalf of a
Participant pursuant to Section 3.10, a separate Transfer Account, and, if
Qualified Voluntary Employee Contributions have been permitted in accordance
with Section 3.3, a separate QVEC Account, to which Employer, Matching,
Elective Deferral, Participant and Rollover Contributions and direct transfers
and Qualified Voluntary Employee Contributions, respectively, shall be
credited. The Administrative Committee shall also maintain or cause to be
maintained, for each such Participant, in accordance with the provisions of
this Section 4.1, a record of the value of the Participant's Employer,
Matching, Elective Deferral, Participant, Rollover, Transfer and QVEC Accounts,
which shall represent the interest of such Participant in the assets of the
accounts maintained by the Trustee for his benefit. Separate accounts shall
also be maintained, in accordance with Section 3.1(B)(3)(b) for any Qualified
Matching Contributions and/or Qualified Nonelective Contributions made to the
Plan on behalf of any Participant.
ARTICLE V
ALLOCATION OF CONTRIBUTIONS, EARNINGS AND FORFEITURES
5.1 ALLOCATIONS OF CONTRIBUTIONS. The rules relating to
allocations of contributions are as follows:
(A) EMPLOYER CONTRIBUTIONS. The Administrative Committee
shall allocate the Employer Contribution for each Plan Year for which an
Employer Contribution is made among the Employer Accounts of each
Participant entitled to receive an allocation, in accordance with the terms
of the Adoption Agreement. Each such allocation shall be effective as of
the last day of the Plan Year, except as otherwise specified in the Plan or
Adoption Agreement.
(B) PARTICIPANT CONTRIBUTIONS. The Trustee, upon
instructions from the Administrative Committee, shall, as of the date
received from the Employer, allocate any amounts contributed by a
Participant, in accordance with Section 3.2, to the Participant Account of
such Participant.
(C) QUALIFIED VOLUNTARY EMPLOYEE CONTRIBUTIONS. No
Qualified Voluntary Employee Contributions are permitted after December 31,
1986.
(D) ELECTIVE DEFERRAL CONTRIBUTIONS. The Trustee, upon
instructions from the Administrative Committee, shall, as of the date
received from the Employer, allocate any Elective Deferral Contributions
made on behalf of any Participant in accordance with Section 3.4, to the
Elective Deferral Account of such Participant.
(E) MATCHING CONTRIBUTIONS. The Trustee, upon
instructions from the Administrative Committee, shall, as of the date
received from the Employer, allocate any Matching Contributions made on
behalf of any Participant, in accordance with Section 3.5 and the Adoption
Agreement, to the Matching Account of such Participant.
(F) ROLLOVER CONTRIBUTIONS. The Trustee, upon
instructions from the Administrative Committee, shall as of the date
received from the Employer or as of the date received in a
trustee-to-trustee transfer under Section 3.9(B), allocate any amounts
contributed by a Participant or transferred to the Trustee
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on his behalf under Section 3.9(B), in accordance with Section 3.9, to the
Rollover Account of such Participant.
(G) DIRECT TRANSFERS. The Trustee shall, as of the date
received from another qualified plan, pursuant to instructions of the
Administrative Committee, allocate any amounts transferred on behalf of a
Participant pursuant to Section 3.10, to the Transfer Account of such
Participant.
(H) QUALIFIED MATCHING AND QUALIFIED NONELECTIVE
CONTRIBUTIONS. The Trustee, upon instructions from the Administrative
Committee, shall, as of the date received from the Employer, allocate any
Qualified Matching and/or Qualified Nonelective Contribution made on behalf
of any Participant, to the separate account or accounts of such Participant
in accordance with Section 3.1(B)(3)(b).
5.2 ADVICE TO TRUSTEE RE ALLOCATIONS OF CONTRIBUTIONS AND DIRECT
TRANSFERS. The Administrative Committee shall, at the time contributions or
direct transfers are transmitted to the Trustee, deliver to the Trustee a
schedule showing the amounts allocated to the Employer, the Matching, the
Elective Deferral, the Participant, the Rollover, the Transfer and the QVEC
Accounts and the Qualified Matching Contribution account and the Qualified
Nonelective Contribution account of each Participant and, if Section 6.1(B) is
applicable to this Plan, indicating the manner in which the Participant has
directed that such contributions or direct transfers be invested.
5.3 VALUATIONS. The Trustee, as of each Valuation Date, shall
cause a valuation to be made of the assets of the Trust Fund and of each
Employer, Matching, Elective Deferral, Participant, Rollover, Transfer and QVEC
Account and of each Qualified Matching Contribution account and Qualified
Nonelective Contribution account in such Fund at their current fair market
value. In each such valuation, the Trustee shall credit all income and profits
realized since the preceding Valuation Date in accordance with Section 5.4 and
shall deduct all losses, costs, charges and expenses of administering the Trust
Fund since the preceding Valuation Date.
The Trustee shall furnish the Administrative Committee with a report
of each such valuation of the Trust Fund.
5.4 ALLOCATION OF INCREASES AND DECREASES. As of each Valuation
Date, in determining the valuation of each Employer, Matching, Elective
Deferral, Participant, Rollover, Transfer and QVEC Account and of each
Qualified Matching Contribution account and Qualified Nonelective Contribution
account under Section 5.3, upon receipt of the Trustee's report, the
Administrative Committee shall allocate the increase or decrease in the fair
market value of the assets of the Trust Fund, after reduction for any
forfeitures under Section 7.6, and any interim Employer, Matching, Elective
Deferral, Participant, Rollover and Qualified Voluntary Employee Contributions
and direct transfers and Qualified Matching and Qualified Nonelective
Contributions to the Employer, Matching, Elective Deferral, Participant,
Rollover and QVEC Accounts and Transfer Account and Qualified Matching
Contribution and Qualified Nonelective Contribution accounts of each
Participant in the proportion that the amount in the Employer, Matching,
Elective Deferral, Participant, Rollover and QVEC Accounts and Transfer Account
and Qualified Matching Contribution and Qualified Nonelective Contribution
accounts of each Participant bears respectively to the total amount in the
Employer, Matching, Elective Deferral, Participant, Rollover and QVEC Accounts
and Transfer Accounts and Qualified Matching Contribution and Qualified
Nonelective Contribution accounts of all Participants, all as determined on the
first day or last day (as specified in the Adoption Agreement) of the period in
which the Valuation Date occurs (except that the last day of the period shall
be used for the initial allocation for any Employer). At the discretion of the
Administrative Committee, in allocating increases and decreases, the
Administrative Committee may take into account on a uniform and
nondiscriminatory basis contributions and forfeitures allocated during the
period in which the Valuation Date occurs. For purposes of this Section 5.4,
in the event the Adoption Agreement provides for
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Participant directed investments pursuant to Section 6.1(B), each Account (and
each other account) subject to such Participant directed investments shall be
treated as a separate Trust Fund.
5.5 FORFEITURES. All amounts forfeited by separated Participants
of an adopting Employer in accordance with Section 7.6 shall be debited to the
Employer and/or Matching Accounts of the respective Participants employed by
such adopting Employer who are subject to such forfeitures. Subject to Section
3.8 and, except as otherwise provided in the Adoption Agreement, forfeitures
shall be aggregated with Employer, and/or Matching Contributions for the Plan
Year and shall be allocated to the Accounts of the remaining Participants
employed by such adopting Employer in the same manner as is provided for the
allocation of Employer, and/or Matching Contributions under Section 5.1. Such
allocation shall be effected as of the date specified in the Adoption
Agreement. Notwithstanding the foregoing, the forfeited amounts may first be
used to restore a rehired Participant's non-vested account that was forfeited,
as provided in Section 7.6(C).
ARTICLE VI
INVESTMENT OF ACCOUNTS
6.1 INVESTMENT OF ACCOUNTS. The Employer shall indicate in the
Adoption Agreement whether the Trustee, the Participant (or Beneficiary, if
applicable) and/or an Investment Manager shall have the power to direct
investment of Employer, Matching, Elective Deferral, Participant, Rollover,
Transfer and/or QVEC Accounts and/or of any other account (e.g., Qualified
Matching Contribution account and Qualified Nonelective Contribution account)
under the Plan. To the extent the Participant (or Beneficiary, if applicable)
does not have the power to direct the investment of his accounts under the
Plan, such Participant (or Beneficiary, if applicable) shall have a ratable
interest in all assets of the Trust.
(A) INVESTMENT BY TRUSTEE AND/OR INVESTMENT MANAGER. If
the Trustee or an Investment Manager is selected to direct investment of
Employer and/or Matching and/or Elective Deferral and/or Participant and/or
Rollover and/or Transfer and/or QVEC Accounts and/or Qualified Matching
Contribution account and/or Qualified Nonelective Contribution account
and/or other accounts, the Trustee, subject to the requirements set forth in
Article X, or, if an Investment Manager has been selected to direct
investments, the Trustee, subject to the directions of the Investment
Manager and subject to the requirements set forth in Articles X and XII,
shall have full discretion and authority to invest and reinvest the
principal and income of that portion of the Trust Fund committed to it for
investment in any form of property not prohibited by law (without
restriction to investments authorized by State law for fiduciaries).
Consistent with this authority, but not by way of limitation, the Trustee is
hereby specifically empowered with respect to that portion of the Trust Fund
committed to it:
(1) To invest any part or all of the assets in
any common stocks, bonds, insurance contracts, mortgages, notes or
other property of any kind, real or personal. All such investments
shall be diversified as provided by law, unless it is clearly prudent
not to do so;
(2) To invest any part or all of the assets in
any common, collective, pooled or group trust fund meeting the
requirements of Rev. Rul. 81-100, 1981-1 CB 326 and operated by a bank
or similar financial institution (even if such bank or other
institution serves as Trustee) supervised by the United States or any
State, provided such investments are available only to pension and
profit-sharing trusts which meet the requirements of section 401(a)
and related Code sections. So long as any portion
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of the Trust Fund is so invested, the instrument establishing such
common, collective, pooled or group trust fund shall constitute an
integral part of this Plan and Trust Agreement;
(3) To invest all or part of the assets in
deposits which bear a reasonable interest rate, including certificates
of deposit, in any bank, savings or similar financial institution
(even if such bank or other institution serves as Trustee) supervised
by the United States or any State;
(4) To hold cash uninvested for a reasonable
period of time and to deposit such sums in an account of any banking,
savings, or similar financial institution (even if such bank or other
institution serves as Trustee) supervised by the United States or any
State;
(5) To manage, purchase, grant options to
purchase, dispose of, abandon, improve, repair, insure, lease for any
future or present term or otherwise deal with all property, real or
personal, on such terms and conditions as the Trustee shall decide,
without liability on the purchasers to see to the application of the
purchase money or to the propriety of any such disposition;
(6) To borrow money or assume indebtedness, for
the purposes of the Plan, upon such terms as the Trustee deems
advisable. All or part of the assets may be pledged as security for
such loans or mortgages and no person lending to the Trustee need see
to the application of money lent or the propriety of borrowing.
Notwithstanding anything in this Section 6.1(A)(6) to the contrary, in
the event the Trustee borrows against the loan values of Insurance
Contracts purchased under the terms of the Plan, the amounts so
borrowed must be borrowed on a pro rata basis under each Insurance
Contract held by the Trustee;
(7) To extend mortgages or to invest in loans to
a Participant in accordance with, and as provided by, Section 7.11;
(8) To join in or oppose the reorganization,
recapitalization, consolidation, sale or merger of corporations or
properties, including those in which it is interested as Trustee, upon
such terms as deemed appropriate;
(9) To hold investments in nominee or bearer
form, provided the requirements of section 403(a) of ERISA are not
violated by so registering and so holding such investments;
(10) To give proxies;
(11) To provide benefits by annuity contracts
issued by an Insurer, if so instructed by the Administrative
Committee;
(12) To deduct from and charge against the Trust
Fund any taxes paid by it, which may be imposed upon the Trust Fund or
the income thereof, or which the Trustee is required to pay with
respect to the interest of any person therein;
(13) To receive and withdraw from the Trust Fund
reasonable compensation for the Trustee's services (unless the Trustee
is a full-time employee of the Employer in which case no additional
compensation shall be paid to the Trustee) and expenses hereunder,
including the compensation of an Investment Manager and legal fees,
and charge the Trust Fund, upon approval by the Administrative
Committee, for the compensation and expenses of any independent
accountant or actuary who may be
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employed from time to time by the Trustee, Employer or Administrative
Committee in connection with this Plan and Trust Agreement;
(14) To invest Trust assets allocable to Employer
contributions in Qualifying Employer Securities but only to the extent
the Plan and Adoption Agreement so provide and only if such Employer
contributions are not subject to Participant directed investment and,
if the Plan, as adopted by the Employer, is a money purchase plan,
only if immediately after the acquisition of such Qualifying Employer
Securities, the aggregate fair market value of such Qualifying
Employer Securities does not exceed ten percent of the fair market
value of Plan assets. In no event shall Trust assets be invested in
employer real property. In no event shall Employer contributions
subject to Participant directed investment or Participant, Matching,
Qualified Matching, Elective Deferral, Rollover or Qualified Voluntary
Employee Contributions or direct transfers be invested in Qualifying
Employer Securities unless such investment is in compliance with
applicable Federal and state securities laws and, if the Plan, as
adopted by the Employer, is a money purchase plan, is in compliance
with the ten percent limit described above;
(15) If the Trustee is a bank, to invest any part
or all of the assets in a common trust fund of said Trustee bank
provided such common trust fund is described in section 584 of the
Code; and
(16) If a bank, to accept employment and
thereafter act as agent for the Employer or Administrative Committee
to perform multiple or ancillary services for the Plan, its
Participants and Beneficiaries and to receive and withdraw from the
Trust Fund reasonable compensation therefor. Nothing done by the
Trustee as agent shall enlarge or increase in any manner the
responsibilities or liabilities of the Trustee hereunder which shall
be governed solely by the terms of the Plan and by applicable law.
(B) INVESTMENT BY PARTICIPANT OR BENEFICIARY. If the
Participant or Beneficiary (if applicable) is selected to direct investment
of his Employer and/or Matching and/or Elective Deferral and/or Participant
and/or Rollover and/or Transfer and/or QVEC Accounts and/or Qualified
Matching Contribution accounts and/or Qualified Nonelective Contribution
accounts and/or other accounts, the investment of all sums in the Employer
and/or Matching and/or Elective Deferral and/or Participant and/or Rollover
and/or Transfer and/or QVEC Accounts and/or Qualified Matching Contribution
accounts and/or Qualified Nonelective Contribution accounts and/or other
accounts of any Participant or Beneficiary (if applicable) shall be
directed, subject to any limitations on investments indicated in the
Adoption Agreement, by such Plan Participant or Beneficiary (if applicable),
as provided in Section 6.1(B)(1) below:
(1) Participant or Beneficiary investment
instructions shall be made in writing on the Appropriate Form or
otherwise as determined by the Administrative Committee. Such
instructions, whether in writing or as otherwise determined by the
Administrative Committee, shall be given to the Administrative
Committee or its agent who, in turn, shall notify the Trustee of the
instructions contained therein. The Trustee may, in his or its
discretion, require written confirmation of such instructions from the
Administrative Committee. In any case, the Participant or Beneficiary
shall be given the opportunity to obtain written confirmation from the
Administrative Committee or its agent of the Participant's or
Beneficiary's investment instructions.
(2) No Fiduciary, including, but not limited to,
the Administrative Committee and the Trustee, shall be liable for any
loss or by reason of any breach which results from the Participant's
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or Beneficiary's exercise of control as provided in this Section
6.1(B). It is the intent that any Plan subject to this Section 6.1(B)
shall constitute a plan described in section 404(c) of ERISA and 29
CFR Section 2550.404c-1.
(3) Any sums for which no adequate Participant or
Beneficiary investment instructions have been received by the Trustee,
in accordance with this Section 6.1(B), shall be deposited in an
interest bearing passbook account of any banking, savings, or similar
financial institution supervised by the United States or any State
until such Participant or Beneficiary investment instructions have
been received.
(4) Notwithstanding any other provision in the
Plan to the contrary, the Participant or Beneficiary may not direct
the investment of his Employer and/or Matching and/or Elective
Deferral and/or Participant and/or Rollover and/or Transfer and/or
QVEC Accounts and/or Qualified Matching Contribution and/or Qualified
Nonelective Contribution accounts and/or other accounts in:
(a) Qualifying Employer Securities
unless such investment is in compliance with applicable
Federal and state securities laws and, if the Plan, as adopted
by the Employer, is a money purchase plan, is in compliance
with the ten percent limit described above;
(b) "Collectibles"; "collectibles" include
any work of art, rug, antique, gem, stamp, coin, alcoholic
beverage, or any other item of tangible personal property
specified by the Secretary of the Treasury pursuant to section
408(m) of the Code;
(c) Any investment which would result in
a prohibited transaction described in section 406 of ERISA or
section 4975 of the Code; or
(d) Any investment which would generate
income that would be taxable to the Plan.
6.2 INSURANCE CONTRACTS. The rules relating to Insurance
Contracts are as follows:
(A) INVESTMENT IN INSURANCE CONTRACTS. The Trustee or
the Investment Manager, if appropriate, if the Trustee or an Investment
Manager has been selected to direct investment of Employer and/or Matching
Accounts and/or Participant Accounts and/or Elective Deferral Accounts
and/or Rollover Accounts and/or Qualified Matching Contribution accounts
and/or Qualified Nonelective Contribution accounts under the Adoption
Agreement, may direct that Employer and/or Participant and/or Elective
Deferral and/or Rollover and/or Matching Contributions and/or Qualified
Matching Contributions and/or Qualified Nonelective Contributions made on
behalf of Participants be used to pay premiums on Insurance Contracts. If
the Participant or Beneficiary has been selected to direct investment of his
Employer and/or Matching Accounts and/or Participant Accounts and/or
Elective Deferral Accounts and/or Rollover Accounts and/or Qualified
Matching Contribution accounts and/or Qualified Nonelective Contribution
accounts under the Adoption Agreement, the Participant or Beneficiary (if
applicable) may direct, on the Appropriate Form furnished by, and returned
to, the Administrative Committee, that Employer and/or Matching and/or
Participant and/or Elective Deferral and/or Rollover Contributions and/or
Qualified Matching Contributions and/or Qualified Nonelective Contributions
made on his behalf be used to pay premiums on Insurance Contracts. Any
death benefit payable under any non-transferable annuity or endowment
policies thereunder shall not exceed 100 times the anticipated monthly
annuity to be provided thereby. Moreover, the portion of any Employer,
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Elective Deferral and/or Matching and/or Qualified Matching and/or Qualified
Nonelective Contributions, if used to purchase:
(1) Ordinary life insurance, shall not exceed
one-half of such Employer, Elective Deferral, Matching, Qualified
Matching and Qualified Nonelective Contributions;
(2) Term or universal life insurance, shall not
exceed one-quarter of such Employer, Elective Deferral, Matching,
Qualified Matching and Qualified Nonelective Contributions; or
(3) Both ordinary life and term or universal life
insurance, shall not exceed, after adding the term insurance premium
to one-half of the ordinary life insurance premium, one-quarter of
such Employer, Elective Deferral, Matching, Qualified Matching and
Qualified Nonelective Contributions.
The Trustee shall purchase only such Insurance Contracts from
an Insurer as shall conform with the requirements of the Plan. In the event
of any conflict between the provisions of the Plan and the terms of any
Insurance Contract issued thereunder, the Plan provisions shall control.
All Insurance Contracts other than annuity policies shall
provide settlement options for conversion into annuity policies, either
directly or through conversion into cash and thereupon purchase of annuity
policies, in accordance with the terms of the Plan. When benefits become
payable, the Trustee shall direct the Insurer to convert such policies to
cash or distribute them, in accordance with the provisions of the Plan, to a
Participant. All Employer, Participant, Elective Deferral, Rollover,
Matching, Qualified Matching and Qualified Nonelective Contributions applied
to purchase Insurance Contracts shall be credited to the Participant's
Employer, Participant, Elective Deferral, Rollover, Matching, Qualified
Matching Contribution and Qualified Nonelective Contribution accounts and
shall be held by the Trustee until distributed in accordance with the terms
of the Plan. No direct transfers may be used to purchase any type of life
insurance.
(B) INSURANCE CONTRACTS TO BE HELD AND OWNED BY TRUSTEE.
The Trustee shall apply for, hold and own each Insurance Contract purchased
pursuant to the Plan. The Trustee shall exercise any right contained in the
Insurance Contract. The Insurance Contracts shall provide that the proceeds
shall be payable to the Trustee. The Trustee, however, shall be required to
pay over all proceeds of the Insurance Contract(s) to the Participant's
designated Beneficiary in accordance with the distribution provisions of the
Plan. A Participant's Spouse shall be the designated Beneficiary of the
proceeds in all circumstances unless a qualified election has been made in
accordance with Section 7.2(B). Under no circumstances shall the Trust
retain any part of the proceeds. If, upon the Disability, retirement or
termination of employment of the Participant, or upon the termination of the
Plan, if earlier, the Insurance Contract is not converted into cash, it
shall, subject to the terms of the Plan, be delivered to the Participant
covered thereunder.
6.3 VOTING AND OTHER ACTIONS. The rules pertaining to voting of
securities and other related rules are as follows:
(A) TRUSTEE AND/OR INVESTMENT MANAGER DIRECTED
INVESTMENTS. If the Trustee and/or an Investment Manager is selected to
direct investment of Employer and/or Matching and/or Elective Deferral
and/or Participant and/or Rollover and/or Transfer and/or QVEC Accounts
and/or Qualified Matching Contribution and/or Qualified Nonelective
Contribution accounts and/or other accounts under the Adoption Agreement,
the Trustee shall have, with respect to the accounts committed to it for
investment, all of the rights of an individual owner, including the power to
vote stock held in such accounts, to give proxies, to participate
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in any voting trusts, mergers, consolidations or liquidations and to receive
or sell stock subscriptions or conversion rights. Moreover, the Trustee may
hold any securities in its or its nominee's name, or in another form as is
deemed appropriate. This may be done with or without disclosing the trust
relationship.
(B) PARTICIPANT OR BENEFICIARY DIRECTED INVESTMENTS. If
the Participant or Beneficiary is selected to direct investment of his
Employer and/or Matching and/or Elective Deferral and/or Participant and/or
Rollover and/or Transfer and/or QVEC Accounts and/or Qualified Matching
Contribution and/or Qualified Nonelective Contribution accounts and/or other
accounts under the Adoption Agreement, the Participant or Beneficiary shall
be accorded all rights and powers described in Section 6.3(A) above with
respect to such accounts.
ARTICLE VII
BENEFITS AND DISTRIBUTIONS
7.1 BENEFIT DETERMINATION. The rules pertaining to benefit
determinations and certain other related matters are as follows:
(A) AMOUNT OF BENEFITS. The amount of any benefits
payable under this Article VII shall be determined as of the Valuation Date
coincident with, or if the Valuation Date does not coincide with the benefit
commencement date, the Valuation Date immediately preceding the benefit
commencement date. Except as otherwise provided in Section 7.9, all amounts
then credited to such Participant's Employer, Matching, Elective Deferral,
Participant, Rollover and/or QVEC Accounts and/or Transfer Account and/or
Qualified Matching Contribution and/or Qualified Nonelective Contribution
accounts and/or other account, including any Employer, Matching, Elective
Deferral, Participant, Rollover, QVEC, Qualified Matching Contribution and
Qualified Nonelective Contribution and other Employer contribution and
direct transfer not yet paid by the Employer to the Trustee but due the
Participant, shall be paid to the Participant in accordance with the
provisions of this Article VII.
(B) MANNER OF DISTRIBUTION.
(1) PROFIT-SHARING OR PROFIT-SHARING 401(K) PLAN.
Except as otherwise provided in this Article VII, if the Plan, as
adopted by the Employer, is a profit-sharing or profit-sharing 401(k)
plan, benefits shall be paid in one lump sum to the Participant unless
the Participant elects, no later than 30 days prior to the Valuation
Date immediately preceding the benefit commencement date, to receive
his benefits in equal or substantially equal monthly, quarterly, semi-
annual or annual installment payments over a period certain specified
by the Participant in such election, but in no event may such period
(a) extend beyond the life expectancy of the Participant or the joint
life expectancies of the Participant and his Beneficiary, provided
such Beneficiary is an individual or (b) violate the requirements of
Section 7.13. If a Participant's Accrued Benefit is to be paid in
installments, the Administrative Committee, in its sole discretion,
may direct the Trustee to segregate such Accrued Benefit from other
Trust assets and place it in a separate account. Such separate
account shall, until final payment to the Participant is made, be
invested in one or more accounts in one or more Federally insured
banks or saving institutions or a similar interest bearing account
allowing periodic withdrawals without penalty, as determined by the
Trustee, with all interest earned on such investment(s) credited to
such separate account and all disbursements charged thereto. Interest
earned during any period shall be paid with the next scheduled
installment payment. The installment election shall not be available
to any Participant whose Accrued
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Benefit is not more than $3,500. In such case the Participant shall
only be entitled to receive a lump sum payment of his Accrued Benefit.
(2) MONEY PURCHASE PLAN. Except as otherwise
provided in this Article VII, if the Plan, as adopted by the Employer
is a money purchase plan, benefits shall be paid in accordance with
the provisions of Section 7.14.
(C) ELECTIONS. An election under Section 7.1(B)(1) shall
be made on the Appropriate Form which the Administrative Committee shall
furnish to the Participant before the Valuation Date immediately preceding
the benefit commencement date. Any such election may, subject to the
approval of the Administrative Committee, be revoked and a new election made
at any time prior to the benefit commencement date. Any election under
Section 7.1(B)(2) shall be made in accordance with Section 7.14.
7.2 DESIGNATION OF BENEFICIARY AND ELECTION WITH RESPECT TO DEATH
BENEFIT. This Section 7.2 shall apply if the Plan, as adopted by the Employer
is a profit-sharing or profit-sharing 401(k) Plan. This Section 7.2 shall
apply if the Plan, as adopted by the Employer, is a money purchase plan only to
the extent not otherwise provided in Section 7.14.
(A) DESIGNATION OF BENEFICIARY. Effective August 23,
1984, in the event a Participant has a Surviving Spouse at his death, such
Surviving Spouse shall be the Participant's Beneficiary, unless the
Participant's Spouse has previously consented during the election period
provided in Section 7.2(C), in a manner conforming to a qualified election,
as described in Section 7.2(B), to the payment of the Participant's Accrued
Benefit (reduced by any security interest held by the Plan by reason of any
loans outstanding to such Participant) to a Participant-designated
Beneficiary other than the Surviving Spouse, except as otherwise provided in
the next succeeding sentence. In the event the Participant has no Surviving
Spouse at his death (or in the case of the Participant's death prior to
August 23, 1984, even if the Participant had a Surviving Spouse), the
Beneficiary shall be the Beneficiary designated by the Participant or, in
the event no Beneficiary has been designated or survives the Participant,
the Beneficiary shall be determined in accordance with Section 7.8(B). Such
Beneficiary (other than a Surviving Spouse, effective August 23, 1984) must
be designated on the Appropriate Form furnished by the Administrative
Committee, executed by the Participant and returned to the Administrative
Committee. Any such designation of Beneficiary may include contingent or
successive Beneficiaries, and need not designate individuals. Except as
otherwise provided with respect to a Surviving Spouse, a Participant may, at
any time, change his designation of Beneficiary by completing a new
designation form, but a designation of Beneficiary shall remain in effect
until such new form is received by the Administrative Committee.
(B) QUALIFIED ELECTION. For the consent by a Spouse to
payment of a Participant's Accrued Benefit (reduced by any security interest
held by the Plan by reason of any loans outstanding to such Participant) to
a Beneficiary other than the Spouse upon the Participant's death to be
valid, such consent must be made in writing on the Appropriate Form filed
with the Administrative Committee during the election period provided in
Section 7.2(C) and must be witnessed by a member of the Administrative
Committee as Plan representative or a notary public. Notwithstanding this
consent requirement, if the Participant establishes to the satisfaction of
such Plan representative that such written consent may not be obtained
because there is no Spouse or the Spouse cannot be located, the Spouse will
be deemed to have consented to the payment of the Participant's Accrued
Benefit (reduced by any security interest held by the Plan by reason of any
loans outstanding to such Participant) to a Beneficiary other than the
Spouse. Any consent necessary under this provision shall be valid only with
respect to the Spouse who signs the consent, or in the event of a deemed
consent, with respect to the Spouse who is deemed to have so consented. Any
spousal consent must
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acknowledge the specific non-spouse Beneficiary or contingent Beneficiary,
including any class of Beneficiaries or contingent Beneficiaries and if a
Beneficiary, contingent Beneficiary, or class of Beneficiaries or contingent
Beneficiaries is changed, the Spouse must consent to such change in the
manner provided above. Additionally, a revocation of a prior consent may be
made by a Participant without the consent of the Spouse at any time before
the commencement of benefits. The number of revocations or consents shall
not be limited. This Section 7.2(B) is effective August 23, 1984.
(C) ELECTION PERIOD. The election period for purposes of
the consent of the Spouse provided for in Section 7.2(B) shall be the period
which begins on the first day of the Plan Year in which the Participant
commences to participate in the Plan and ends on the date of the
Participant's death. This Section 7.2(C) is effective August 23, 1984.
7.3 NORMAL RETIREMENT. A Participant shall be fully vested in his
Accrued Benefit when he reaches his Normal Retirement Age. A Participant may
retire when he reaches his Normal Retirement Date. If he then retires, payment
of his Accrued Benefit shall be made or shall commence, unless otherwise
elected pursuant to Section 7.9(B), within 60 days following the Valuation Date
coincident with, or if the Valuation Date does not coincide with the date he
retires, the Valuation Date next succeeding, the date he retires. Payment
shall be made in one lump sum if the value of such Participant's Accrued
Benefit does not exceed (and, at the time of any prior distribution did not
exceed) $3,500 and otherwise in any of the methods described in Section 7.1(B)
except as otherwise provided in Section 7.14.
7.4 EARLY RETIREMENT. A Participant shall be fully vested in his
Accrued Benefit on his Early Retirement Date, if the Adoption Agreement
provides for an Early Retirement Date. A Participant may retire on his Early
Retirement Date, if the Adoption Agreement provides for an Early Retirement
Date. If he then retires, payment of his Accrued Benefit shall be made or
shall commence, within 60 days following the Valuation Date coincident with, or
if the Valuation Date does not coincide with the date he retires, the Valuation
Date next succeeding, the date he retires, if the value of the Participant's
Vested Accrued Benefit does not exceed (and, at the time of any prior
distribution did not exceed) $3,500, but otherwise only if the Participant so
requests in writing and if Section 7.14 applies, the Participant's spouse
consents thereto in accordance with Section 7.14 on the Appropriate Form. If
payment of a Participant's Accrued Benefit does not commence under the
preceding sentence, payment of such Participant's Accrued Benefit shall
commence within sixty days following the date the Participant would have
attained his Normal Retirement Date had he remained in the employ of the
Employer, unless the Participant requests earlier distribution, in writing on
the Appropriate Form, and if Section 7.14 applies, the Participant's spouse
consents thereto in accordance with Section 7.14, or unless otherwise elected
pursuant to Section 7.9(B). Any requests for payment under this Section 7.4
shall be made within the 90-day period preceding the date payment is to
commence. Payment shall be made in one lump sum if the value of such
Participant's Vested Accrued Benefit does not exceed (and, at the time of any
prior distributions did not exceed) $3,500 and otherwise in any of the methods
described in Section 7.1(B) except as otherwise provided in Section 7.14.
7.5 PARTICIPATION AFTER NORMAL RETIREMENT DATE. If a Participant
does not retire when he reaches his Normal Retirement Date, but continues
thereafter in the service of the Employer, he shall continue to participate in
the Plan until he actually retires. The Accrued Benefit of a Participant who
retires on, or after, his Normal Retirement Date shall continue to be fully
vested and shall be made or shall commence, unless otherwise elected pursuant
to Section 7.9(B), within 60 days following the Valuation Date coincident with,
or if the Valuation Date does not coincide with the date he retires, the
Valuation Date next succeeding, the date he actually retires. Payment shall be
made in one lump sum if the value of such Participant's Vested Accrued Benefit
does not exceed (and at the time of any prior distribution did not exceed)
$3,500 and otherwise in any
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of the methods described in Section 7.1(B) except as otherwise provided in
Section 7.14. In no event, however, shall payment commence later than the date
specified in Section 7.9(C). In the event such date is earlier than the
Valuation Date specified in the third preceding sentence, the amount to be
distributed shall be determined as of the Valuation Date immediately preceding
the date of the required distribution.
7.6 SEPARATION FROM SERVICE. The rules pertaining to benefit
determinations and certain other related matters upon separation from service
for any reason other than death, Disability or retirement are as follows:
(A) PAYMENT OF VESTED ACCRUED BENEFIT. If a Participant
separates from service for any reason other than death, Disability or
retirement on his Early Retirement Date (if the Adoption Agreement provides
for an Early Retirement Date) before he reaches his Normal Retirement Date,
his Vested Accrued Benefit shall be paid to him at such time as the Adoption
Agreement provides. When distribution is made, payment shall be made in one
lump sum if the value of such Participant's Vested Accrued Benefit does not
exceed (and at the time of any prior distribution did not exceed)$3,500 and
otherwise in any of the methods described in Section 7.1(B) except as
otherwise provided in Section 7.14.
(B) DETERMINATION OF VESTED ACCRUED BENEFIT.
(1) ELECTIVE DEFERRAL, PARTICIPANT, ROLLOVER,
TRANSFER AND QVEC ACCOUNTS. The portion of such Participant's Accrued
Benefit consisting of his interest in his Elective Deferral,
Participant, Rollover, Transfer, Qualified Matching Contribution,
Qualified Nonelective Contribution and QVEC Accounts shall at all
times be fully vested.
(2) EMPLOYER AND MATCHING ACCOUNTS. The portion
of such Participant's Accrued Benefit consisting of his interest in
his Employer and Matching Accounts shall vest in accordance with the
vesting schedule selected by the Employer in the Adoption Agreement.
(C) FORFEITURES.
(1) TIME OF FORFEITURES.
(a) NORMAL RULE.
(i) Unless the Adoption Agreement
provides otherwise, any portion of the Participant's
Employer and/or Matching Account which is not vested
in accordance with Section 7.6(B)(2) at the time of
his separation from service with the Employer shall
be forfeited and reallocated to the Employer and/or
Matching Accounts of the remaining Participants in
accordance with Section 5.5 as of the last day of the
Plan Year coinciding with, or if the last day of the
Plan Year does not so coincide, the last day of the
Plan Year next following, the date the Participant
incurs five consecutive One-Year Breaks In Service.
(ii) If a distribution is made to
a Participant at a time when such Participant has a
nonforfeitable right to less than 100 percent of his
Employer and/or Matching Account and, at the time of
such distribution, the Participant has not incurred
five consecutive One-Year Breaks In Service, the
Trustee shall retain the nonvested portion of the
Participant's Employer and/or Matching Account in his
Employer and/or
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Matching Account. Such Employer and/or Matching
Account may be invested in a Federally insured
savings account or invested as otherwise provided by
the Plan, as determined by the Administrative
Committee. In such case, the Participant's vested
interest in the Employer and/or Matching Account at
any relevant time shall not be less than an amount
("X") determined by the formula: X = P(AB + (RxD)) -
(RxD), where "P" is the vested percentage at the
relevant time; "AB" is the account balance (i.e., the
amount in the Employer and/or Matching Account) at
the relevant time; "D" is the amount of the payment;
"R" is the ratio of the account balance at the
relevant time to the account balance after payment;
and the relevant time is the time at which, under the
Plan, the Participant's vested interest in the amount
in the Employer and/or Matching Account cannot
increase.
(iii) If the Participant returns
to the service of the Employer before incurring five
consecutive One-Year Breaks In Service, the
Participant shall continue to vest in the amount in
his Employer and/or Matching Account in accordance
with the provisions set forth above.
(iv) If the Participant incurs
five consecutive One-Year Breaks In Service, the
amount in the Participant's Employer and/or Matching
Account, as determined under Section
7.6(C)(1)(a)(ii), shall be forfeited under Section
7.6(C)(1)(a) and shall be reallocated to the Employer
and/or Matching Accounts of the remaining
Participants in accordance with Section 5.5. Such
reallocation shall be effected on the last day of the
Plan Year coincident with, or if the last day of the
Plan Year does not so coincide, the last day of the
Plan Year next following, the date the Participant
incurs five consecutive One-Year Breaks In Service.
(b) SPECIAL RULE.
(i) PROFIT-SHARING OR
PROFIT-SHARING 401(K) PLAN. This Section
7.6(C)(1)(b)(i) applies to the Plan if the Plan, as
adopted by the Employer, is a profit-sharing or
profit-sharing 401(k) plan. If the Adoption
Agreement so provides, if a Participant separates
from the service of the Employer, and the value of
the Participant's Vested Accrued Benefit derived from
Employer and Employee contributions does not exceed
(or at the time of any prior distribution did not
exceed) $3,500 and Section A.7.6(A)(2) of the
Adoption Agreement is checked, the Participant shall
receive a distribution of the value of his entire
Vested Accrued Benefit (and if his entire Vested
Accrued Benefit is $-0-, he shall be deemed to have
received, as a cash-out of his Vested Accrued Benefit
under the Plan, such $0) at the time provided in the
Adoption Agreement and the nonvested portion of his
Accrued Benefit shall be forfeited at the time of
such distribution; if the value of the Participant's
Vested Accrued Benefit derived from Employer
contributions exceeds (or at the time of any prior
distribution exceeded) $3,500 and if Section
A.7.6(A)(1)(b) of the Adoption Agreement is checked
and if the Participant separates from the service of
the Employer, and elects to receive no less than the
entire value of the Participant's Vested Accrued
Benefit derived from Employer contributions,
distribution shall be made at the time provided in
the Adoption Agreement and the nonvested portion
shall be treated as a forfeiture at the time of
distribution to the Participant of his Vested Accrued
Benefit; if the Participant elects to have
distributed less than his entire Vested Accrued
Benefit derived from Employer
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contributions, the part of the nonvested portion that
will be treated as a forfeiture is the total
nonvested portion multiplied by a fraction, the
numerator of which is the amount of the distribution
attributable to Employer contributions and the
denominator of which is the total value of his Vested
Accrued Benefit derived from Employer contributions.
To the extent the nonvested portion is not or cannot
be forfeited at the time of a Participant's
separation from service because of the rules set
forth in this Section 7.6(C)(1)(b)(i), the rules of
Section 7.6(C) (1)(a) shall apply. If a Participant
receives a distribution pursuant to this Section
7.6(C)(1)(b)(i) (except as otherwise provided in the
immediately preceding sentence) and resumes
employment covered under the Plan, the Participant's
Accrued Benefit derived from Employer contributions
shall 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 on or before the earlier of
the fifth anniversary of the Participant's resumption
of covered employment or the date the Participant
incurs five consecutive One-Year Breaks In Service.
If an Employee is deemed to receive a distribution
pursuant to this Section, and the Employee resumes
employment covered under this Plan before the earlier
of the fifth anniversary of the Participant's
resumption of covered employment or the date the
Participant incurs five consecutive One-Year Breaks
In Service, upon the reemployment of such Employee,
the Employer-derived account balance of the Employee
shall be restored to the amount on the date of such
deemed distribution. Forfeitures under this Section
7.6(C)(1)(b)(i) shall be reallocated to the Employer
contribution accounts of the remaining Participants
in accordance with Section 5.5 or, if the Adoption
Agreement so provides, used to reduce Employer
contributions. Such reallocation (or, if applicable,
reduction in Employer contributions) shall be
effected no earlier that the first Valuation Date
coincident with or next following the date of the
forfeiture and no later than the last day of the Plan
Year, in which occurred the date of the forfeiture
under this Section 7.6(C)(1)(b) (i). A Participant's
Vested Accrued Benefit shall not, for purposes of the
cash out provisions, 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.
(ii) MONEY PURCHASE PLAN. This
Section 7.6(C)(1)(b)(ii) applies to the Plan if the
Plan, as adopted by the Employer, is a money purchase
plan. If the Adoption Agreement so provides, if a
Participant separates from the service of the
Employer, and the value of the Participant's Vested
Accrued Benefit derived from Employer and Employee
contributions does not exceed (or at the time of any
prior distribution did not exceed) $3,500 and Section
A.7.6(A)(2) of the Adoption Agreement is checked, the
Participant shall receive a distribution of the value
of the entire Vested Accrued Benefit (and if his
entire Vested Accrued Benefit is $-0-, he shall be
deemed to have received, as a cash-out of his Vested
Accrued Benefit under the Plan, such $0) at the time
provided in the Adoption Agreement and the nonvested
portion of his Accrued Benefit shall be forfeited at
the time of such distribution. If the value of a
Participant's Vested Accrued Benefit derived from
Employer and Employee contributions exceeds (or at
the time of any prior distribution exceeded) $3,500,
and the Vested Accrued Benefit is immediately
distributable, the Participant and the Participant's
Spouse (or where either the Participant or the Spouse
has died, the survivor) must consent to any
distribution of such Vested Accrued Benefit. The
consent of the Participant and the Participant's
Spouse shall be obtained in writing
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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 Vested Accrued
Benefit 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.
Notwithstanding the foregoing, only the
Participant need consent to the commencement of a
distribution in the form of a "Qualified Joint and
Survivor Annuity" (within the meaning of Section
7.14(D)(4)) while the account balance is immediately
distributable. (Furthermore, if payment in the form
of a "Qualified Joint and Survivor Annuity" is not
required with respect to the Participant pursuant to
Section 7.14, only the Participant need consent to
the distribution of an account balance that is
immediately distributable.) Neither the consent of
the Participant nor the Participant's Spouse shall be
required to the extent that a distribution is
required to satisfy section 401(a)(9) of the Code or
section 415 of the Code.
An Accrued Benefit is immediately
distributable if any part of the Accrued Benefit
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.
For purposes of determining the
applicability of the foregoing consent requirements
to distributions made before the first day of the
first Plan Year beginning after December 31, 1988,
the Participant's Vested Accrued Benefit shall not
include amounts attributable to accumulated
deductible employee contributions within the meaning
of section 72(o)(5)(B) of the Code. If the value of
the Participant's Vested Accrued Benefit derived from
Employer and Employee contributions exceeds (or at
the time of any prior distribution exceeded) $3,500
and if Section A.7.6(A)(1)(b) of the Adoption
Agreement is checked and if the Participant separates
from the service of the Employer and elects, with the
consent of his Spouse as provided above, to receive
no less than the entire value of the Participant's
Vested Accrued Benefit derived from Employer and
Employee contributions, distribution shall be made at
the time provided in the Adoption Agreement and the
nonvested portion shall be treated as a forfeiture at
the time of distribution to the Participant of his
Vested Accrued Benefit; if the Participant elects,
with the consent of his Spouse as provided above, to
have distributed less than his entire Vested Accrued
Benefit derived from Employer contributions, the part
of the nonvested portion that will be treated as a
forfeiture is the total nonvested portion multiplied
by a fraction, the numerator of which is the amount
of the distribution attributable to Employer
contributions and the denominator of which is the
total value of his Vested Accrued Benefit derived
from Employer contributions. To the extent the
nonvested portion is not or cannot be forfeited at
the time of a Participant's termination of service
because of the rules set forth in this Section
7.6(C)(1)(b)(ii), the rules of Section 7.6(C)(1)(a)
shall apply. If a Participant receives a
distribution pursuant to this Section 7.6(C)(1)
(b)(ii) (except as otherwise provided in the
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immediately preceding sentence) and resumes
employment covered under the Plan, the Participant's
Accrued Benefit derived from Employer contributions
shall 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 on or before the earlier of
the fifth anniversary of the Participant's resumption
of covered employment or the date the Participant
incurs five consecutive One-Year Breaks In Service.
If an Employee is deemed to receive a distribution
pursuant to this Section, and the Employee resumes
employment covered under this Plan before the earlier
of the fifth anniversary of the Participant's
resumption of covered employment or the date the
Employee incurs five consecutive One-Year Breaks In
Service, upon the reemployment of such Employee, the
Employer-derived account balance of the Employee
shall be restored to the amount on the date of such
deemed distribution. Forfeitures under this Section
7.6(C)(1) (b)(ii) shall be reallocated to the
Employer contribution accounts of the remaining
Participants in accordance with Section 5.5 or, if
the Adoption Agreement so provides, used to reduce
Employer contributions. Such reallocation (or, if
applicable, reduction in Employer contributions)
shall be effected no earlier that the first Valuation
Date coincident with or next following the date of
the forfeiture and no later than the last day of the
Plan Year , in which occurred the date of the
forfeiture under this Section 7.6(C)(1)(b)(ii).
(D) TERMINATION OF PLAN. If, upon termination of this
Plan, the Plan does not offer an annuity option (purchased from a
commercial provider), and if the Employer or any entity within the same
controlled group as the Employer does not maintain another Defined
Contribution Plan (other than an employee stock ownership plan described in
section 4975(e)(7) of the Code), the Participant's Vested Accrued Benefit
shall, without the Participant's consent, be distributed to the Participant.
However, if any entity within the same controlled group as the Employer
maintains another Defined Contribution Plan (other than an employee stock
ownership plan as defined in section 4975(e)(7) of the Code) then the
Participant's Vested Accrued Benefit shall be transferred, without the
Participant's consent, to the other plan if the Participant does not consent
to an immediate distribution.
(E) NO DIVESTMENT FOR CAUSE. There shall be no divestment of
a Participant's Vested Accrued Benefit under the Plan for cause.
7.7 DISABILITY. If, before reaching his Normal Retirement Date, a
Participant in the service of the Employer becomes subject to Disability as
established by competent medical proof satisfactory to the Administrative
Committee, such Participant shall then retire, and his Accrued Benefit shall be
fully vested and shall be paid to him, within 60 days following the Valuation
Date coincident with, or if the Valuation Date does not coincide with the date
of determination of Disability, the Valuation Date next succeeding, the date of
determination of Disability, by the Administrative Committee of his Disability,
if the value of such Accrued Benefit does not exceed (and at the time of any
prior distribution did not exceed) $3,500, but otherwise only if the
Participant so requests, and if Section 7.14 is applicable, with the consent of
the Participant's Spouse as provided in Section 7.14 in writing on the
Appropriate Form. If payment of a Participant's Accrued Benefit does not
commence under the preceding sentence, payment of such Participant's Accrued
Benefit shall commence within sixty days following the date the Participant
would have attained his Normal Retirement Date had he remained in the employ of
the Employer, unless the Participant requests, in writing on the Appropriate
Form, earlier distribution or unless otherwise elected pursuant to Section
7.9(B). Any requests for payment under this Section 7.7 shall be made within
the 90-day period preceding the date payment is to commence. Payment shall be
made in one lump sum if the value of such Participant's Accrued Benefit does
not exceed (and
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at the time of any prior distribution did not exceed) $3,500 and otherwise in
any of the methods described in Section 7.1(B), except as otherwise provided in
Section 7.14.
7.8 DEATH. This Section shall only apply to the extent Section
7.14 does not provide otherwise.
(A) AMOUNT AND DISTRIBUTION OF BENEFIT. If a Participant
dies while in the service of the Employer, his Accrued Benefit (reduced by
any security interest held by the Plan by reason of any loans outstanding to
such Participant) shall be fully vested and distribution thereof to the
Beneficiary or Beneficiaries provided under Section 7.2(A) shall be made or
commence no later than 60 days following the Valuation Date coincident with,
or if the Valuation Date does not coincide with the date of Death, the
Valuation Date immediately following, the date of death. If a Participant
dies before complete distribution to him of the Vested Accrued Benefit to
which he is entitled under Sections 7.3, 7.4, 7.5, 7.6 or 7.7, the
distribution of the remainder of such Vested Accrued Benefit (reduced by any
security interest held by the Plan by reason of any loans outstanding to
such Participant) to the Beneficiary or Beneficiaries provided under Section
7.2(A) shall be made or commence no later than 60 days following the
Valuation Date coincident with, or if the Valuation Date does not coincide
with the date of death, the Valuation Date immediately following, the date
of death.
(B) RECIPIENT OF BENEFIT WHERE NO BENEFICIARY DESIGNATED.
In the case of a Participant who is married on the date of his death and who
has not designated a Beneficiary, such Vested Accrued Benefit (reduced by
any security interest held by the Plan by reason of any loans outstanding to
such Participant) shall be distributed to such Participant's Surviving
Spouse. If no Beneficiary is designated or survives the Participant and if
the Participant has no Surviving Spouse, then such Vested Accrued Benefit
(reduced by any security interest held by the Plan by reason of any loans
outstanding to such Participant) shall be distributed to the Participant's
estate.
(C) MANNER OF DISTRIBUTION. Subject to Section 7.9(C),
any distributions under this Section 7.8 shall be made in a lump sum or in
installments as elected by the Participant in accordance with the terms of
Sections 7.1 and 7.2. In the absence of such a Participant election,
distributions shall be made in a lump sum to the Participant's Beneficiary,
as provided in Section 7.2(A).
7.9 COMMENCEMENT OF PAYMENTS; DEFERRAL OF PAYMENTS; MINIMUM
DISTRIBUTION REQUIREMENTS. The rules relating to commencement of payments,
deferral of payments and minimum distribution requirements are as follows:
(A) DATE PAYMENT TO COMMENCE. Payment under this Plan shall
commence no later than 60 days after the close of the Plan Year in which
occurs the latest of the following:
(1) The Participant's attainment of Normal
Retirement Age;
(2) The tenth anniversary of the date the
Participant commenced participation in the Plan; or
(3) The Participant's separation from service
with the Employer.
Notwithstanding the immediately preceding paragraph, if the
amount of payment required to otherwise commence on a date determined under
this Section 7.9(A) or under any other Section of the Plan cannot be
ascertained by such date or if the Administrative Committee is unable to
locate the Participant or Beneficiary after making reasonable efforts to do
so, a payment retroactive to such date may be made no later
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than 60 days after the later of (a) the earliest date on which the amount of
such payment can be ascertained under the Plan or (b) the earliest date on
which the Participant or Beneficiary is located.
Notwithstanding the foregoing, the failure of a Participant
and, if spousal consent is required, his Spouse to consent to a distribution
while a benefit is immediately distributable, shall be deemed to be an
election to defer commencement of payment of any benefit sufficient to
satisfy this Section.
(B) DEFERRAL OF PAYMENTS. If the Adoption Agreement so
provides, a Participant may irrevocably elect, subject to Section 7.9(C),
the deferral of the payment of benefits under Sections 7.3, 7.4, 7.5, and
7.7, by filing with the Administrative Committee, the Appropriate Form
signed by such Participant, describing the benefit and the date on which
payment of such benefit shall commence. Such Appropriate Form shall be
filed with the Administrative Committee no later than 30 days prior to such
Participant's separation from service with the Employer under Sections 7.3,
7.4, 7.5 or 7.7. No such election may be made if the exercise of such
election will cause the violation of the requirements of Section 7.13 or
Section 7.14. Moreover, no such election may defer payment of benefits
beyond the date specified in Section 7.9(C).
(C) MINIMUM DISTRIBUTION REQUIREMENTS.
(1) GENERAL RULES.
(a) Subject to Section 7.14 relating to
joint and survivor annuity requirements, the requirements of
this Section 7.9(C) shall apply to any distribution of a
Participant's interest and shall take precedence over any
inconsistent provisions of this Plan. Unless otherwise
specified, the provisions of this Section 7.9(C) apply to
calendar years beginning after December 31, 1984.
(b) All distributions required under
this Section 7.9(C) shall be determined and made in accordance
with the proposed Treasury regulations under section 401(a)(9)
of the Code, including the minimum distribution incidental
benefit requirement of Prop. Treas. Reg. Section
1.401(a)(9)-2.
(2) REQUIRED BEGINNING DATE. The entire interest
of a Participant must be distributed or begin to be distributed no
later than the Participant's "Required Beginning Date".
(3) LIMITS ON DISTRIBUTION PERIODS. As of the
first "Distribution Calendar Year", distributions, if not made in a
single sum, may only be made over one of the following periods (or a
combination thereof):
(a) The life of the Participant,
(b) The life of the Participant and a
"Designated Beneficiary",
(c) A period certain not extending
beyond the "Life Expectancy" of the Participant, or
(d) A period certain not extending
beyond the "Joint and Last Survivor Expectancy" of the
Participant and a "Designated Beneficiary".
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(4) 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":
(a) INDIVIDUAL ACCOUNT.
(i) If a "Participant's Benefit" is
to be distributed over (AA) 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 (BB) a period not extending beyond
the "Life Expectancy" of the "Designated
Beneficiary", the amount required to be distributed
for each calendar year, beginning with distributions
for the first "Distribution Calendar Year", must at
least equal the quotient obtained by dividing the
"Participant's Benefit" by the "Applicable Life
Expectancy".
(ii) For calendar years beginning
before January 1, 1989, if the Participant's Spouse
is not the "Designated Beneficiary", the method of
distribution selected must assure that at least 50
percent of the present value of the amount available
for distribution is paid within the "Life Expectancy"
of the Participant.
(iii) For calendar years beginning
after December 31, 1988, the amount to be distributed
each year, beginning with distributions for the first
"Distribution Calendar Year" shall not be less than
the quotient obtained by dividing the "Participant's
Benefit" by the lesser of (AA) the "Applicable Life
Expectancy" or (BB) if the Participant's Spouse is
not the "Designated Beneficiary", the applicable
divisor determined from the table set forth in Q&A-4
of Prop. Treas. Reg. Section 1.401(a)(9)-2.
Distributions after the death of the Participant
shall be distributed using the "Applicable Life
Expectancy" in Section 7.9(C)(4)(a)(i) above as the
relevant divisor without regard to Prop. Treas. Reg.
Section 1.401(a)(9)-2.
(iv) The minimum distribution
required for the Participant's first "Distribution
Calendar Year" must be made on or before the
Participant's "Required Beginning Date". The minimum
distribution for other calendar years, including the
minimum distribution for the "Distribution Calendar
Year" in which the Employee's "Required Beginning
Date" occurs, must be made on or before December 31
of that "Distribution Calendar Year".
(b) OTHER FORMS.
(i) If the "Participant's Benefit"
is distributed in the form of an annuity purchased
from an Insurer, distributions thereunder shall be
made in accordance with the requirements of section
401(a)(9) of the Code and the proposed Treasury
regulations thereunder.
(5) DEATH DISTRIBUTION PROVISIONS.
(a) DISTRIBUTION BEGINNING BEFORE DEATH.
If the Participant dies after distribution of his interest has
begun, the remaining portion of such interest shall continue
to be
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distributed at least as rapidly as under the method of
distribution being used prior to the Participant's death.
(b) DISTRIBUTION BEGINNING AFTER DEATH.
If the Participant dies before distribution of his interest
begins, distribution of the Participant's entire interest
shall be completed by December 31 of the calendar year
containing the fifth anniversary of the Participant's death
except to the extent that an election is made to receive
distributions in accordance with (i) or (ii) below:
(i) If any portion of the
Participant's interest is payable to a "Designated
Beneficiary", distributions may be made over the life
or over a period certain not greater than the "Life
Expectancy" of the "Designated Beneficiary"
commencing on or before December 31 of the calendar
year immediately following the calendar year in which
the Participant died;
(ii) If the "Designated
Beneficiary" is the Participant's Surviving Spouse,
the date distributions are required to begin in
accordance with (i) above shall not be earlier than
the later of (AA) December 31 of the calendar year
immediately following the calendar year in which the
Participant died and (BB) 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 7.9(C)(5)(b) by the time of his death, the
Participant's "Designated Beneficiary" must elect the method
of distribution no later than the earlier of (AA) December 31
of the calendar year in which distributions would be required
to begin under this Section, or (BB) 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.
(c) DEATH OF SURVIVING SPOUSE PRIOR TO
BENEFIT COMMENCEMENT. For purposes of Section 7.9(C)(5)(b)
above, if the Surviving Spouse dies after the Participant, but
before payments to such Spouse begin, the provisions of
Section 7.9(C)(5)(b), with the exception of Section
7.9(C)(5)(b)(ii), shall be applied as if the Surviving Spouse
were the Participant.
(d) TREATMENT OF AMOUNTS PAID TO
CHILDREN. For purposes of this Section 7.9(C)(5), 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 when the child reaches the age of majority.
(e) DEEMED BENEFIT COMMENCEMENT. For
the purposes of this Section 7.9(C)(5), distribution of a
Participant's interest is considered to begin on the
Participant's "Required Beginning Date" (or, if Section
7.9(C)(5)(c) above is applicable, the date distribution is
required to begin to the Surviving Spouse pursuant to Section
7.9(C)(5)(b) 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.
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(6) DEFINITIONS. For purposes of this Section
7.9(C), the following definitions apply:
(a) "APPLICABLE LIFE EXPECTANCY" shall
mean 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.
(b) "DESIGNATED BENEFICIARY" shall mean
the individual who is designated as the Beneficiary under the
Plan in accordance with section 401(a)(9) of the Code and the
Treasury regulations thereunder.
(c) "DISTRIBUTION CALENDAR YEAR" shall
mean 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
7.9(C)(5) above.
(d) "LIFE EXPECTANCY" shall mean the
life expectancy and "Joint and Last Survivor Expectancy" as
computed by use of the expected return multiples in Tables V
and VI of Treas. Reg. Section 1.72-9. Unless otherwise
elected by the Participant (or Spouse, in the case of
distributions described in Section 7.9(C)(5)(b)(ii) above) by
the time distributions are required to begin, "Life
Expectancies" shall be recalculated annually. Such election
shall be irrevocable as to the Participant (or Spouse) and
shall apply to all subsequent years. The "Life Expectancy" of
a nonspouse Beneficiary may not be recalculated.
(e) "PARTICIPANT'S BENEFIT" shall mean
the account balance as of the last Valuation Date in the
calendar year immediately preceding the "Distribution Calendar
Year" ("Valuation Calendar Year") increased by the amount of
any contributions or forfeitures allocated to the account
balance as of dates in the "Valuation Calendar Year" after the
Valuation Date and decreased by distributions made in the
"Valuation Calendar Year" after the Valuation Date. For
purposes of this Section 7.9(C)(6)(e), if any portion of the
minimum distribution for the first "Distribution Calendar
Year" is made in the second "Distribution Calendar Year" on or
before the "Required Beginning Date", the amount of the
minimum distribution made in the second "Distribution Calendar
Year" shall be treated as if it had been made in the
immediately preceding "Distribution Calendar Year".
(f) "REQUIRED BEGINNING DATE" shall
mean, with respect to any Participant, except as provided
below, the first day of April of the calendar year following
the calendar year in which the Participant attains age 70 1/2.
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Notwithstanding the foregoing the "Required
Beginning Date" of a Participant who attains age 70 1/2 before
January 1, 1988, shall be determined in accordance with (i) or
(ii) below:
(i) NON-FIVE-PERCENT OWNERS. The
"Required Beginning Date" of a Participant who is not
a five-percent owner is the first day of April of the
calendar year following the calendar year in which
the later of retirement or attainment of age 70 1/2
occurs.
(ii) FIVE-PERCENT OWNERS. The
"Required Beginning Date" of a Participant who is a
five-percent owner during any year beginning after
December 31, 1979, is the first day of April
following the later of:
(AA) The calendar year in which the
Participant attains age 70 1/2, or
(BB) The earlier of the calendar year
with or within which ends the Plan Year in
which the Participant becomes a five-percent
owner, or the calendar year in which the
Participant retires.
The "Required Beginning Date" of a Participant who is
not a five-percent owner who attains age 70 1/2
during 1988 and who has not retired as of January 1,
1989, is April 1, 1990.
A Participant is treated as a
five-percent owner for purposes of this Section if
such Participant is a five-percent owner as defined
in section 416(i) of the Code (determined in
accordance with section 416 but without regard to
whether the Plan is a Top-Heavy Plan) 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.
Once distributions have begun to a
five-percent owner under this Section, they must
continue to be distributed, even if the Participant
ceases to be a five-percent owner in a subsequent
year.
(7) TRANSITIONAL RULE.
(a) Notwithstanding the other
requirements of this Section 7.9(C) and subject to the
requirements of Section 7.14 relating to joint and survivor
annuity requirements, distribution on behalf of any Employee,
including a five-percent owner, may be made in accordance with
all of the following requirements (regardless of when such
distribution commences):
(i) The distribution by the Plan is
one which would not have disqualified such Plan under
section 401(a)(9) of the Code as in effect prior to
amendment by the Deficit Reduction Act of 1984.
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(ii) The distribution is in
accordance with a method of distribution designated
by the Employee whose interest in the Plan is being
distributed or, if the Employee is deceased, by a
Beneficiary of such Employee.
(iii) Such designation was in
writing, was signed by the Employee or the
Beneficiary, and was made before January 1, 1984.
(iv) The Employee had accrued a
benefit under the Plan as of December 31, 1983.
(v) The method of distribution
designated by the Employee or the Beneficiary
specifies the time at which 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.
(b) A distribution upon death will not
be covered by this transitional rule unless the information in
the designation contains the required information described
above with respect to the distributions to be made upon the
death of the Employee.
(c) For any distribution which commences
before January 1, 1984, but continues after December 31, 1983,
the Employee, or the Beneficiary, to whom such distribution is
being made, will be presumed to have designated the method of
distribution under which the distribution is being made if the
method of distribution was specified in writing and the
distribution satisfies the requirements in Sections
7.9(C)(7)(a)(i) and (v).
(d) If a designation is revoked, any
subsequent distribution must satisfy the requirements of
section 401(a)(9) of the Code and the proposed Treasury
regulations thereunder. If a designation is revoked
subsequent to the date distributions are required to begin,
the Trust must distribute, by the end of the calendar year
following the calendar year in which the revocation occurs,
the total amount not yet distributed which would have been
required to have been distributed to satisfy section 401(a)(9)
of the Code and the proposed Treasury regulations thereunder,
but for the election under section 242(b)(2) of the Tax Equity
and Fiscal Responsibility Act of 1982. For calendar years
beginning after December 31, 1988, such distributions must
meet the minimum distribution incidental benefit requirements
in Prop. Treas. Reg. Section 1.401(a)(9)-2. Any changes in
the designation will be considered to be a revocation of the
designation. However, the mere substitution or addition of
another Beneficiary (one not named in the designation) under
the designation will not be considered to be a revocation of
the designation, so long as such substitution or addition does
not alter the period over which distributions are to be made
under the designation, directly or indirectly (for example, by
altering the relevant measuring life). In the case in which
an amount is transferred or rolled over from one plan to
another plan, the rules in Q&A J-2 and Q&A J-3 of Prop. Treas.
Reg. Section 1.401(a)(9)-1 shall apply.
7.10 WITHDRAWALS DURING EMPLOYMENT. This Section 7.10, other than
Section 7.10(B), shall apply to the Plan only if the Plan, as adopted by the
Employer, is a profit-sharing or profit-sharing 401(k) plan. Moreover,
withdrawals by a Participant of his Vested Accrued Benefit while such
Participant is employed by the Employer shall be permitted only if the
applicable Adoption Agreement so provides and then only in accordance with the
following rules:
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(A) PARTICIPANT ACCOUNTS. A Participant may elect to
withdraw, as of any Valuation Date in the Plan Year, but not more frequently
than once each Plan Year, any portion or all of the amount then credited to
the Participant's Participant Account (other than the portion attributable
to required Participant Contributions and to Participant Contributions which
are matched by the Employer). Such withdrawal election shall be made at
least 30 days prior to the effective date of the withdrawal on the
Appropriate Form furnished by the Administrative Committee for such purpose.
(B) QVEC ACCOUNTS. Subject to the joint and survivor
annuity requirements of Section 7.14 (if applicable), a Participant may
elect, subject to Section 7.12, to withdraw, as of any Valuation Date in the
Plan Year, but not more frequently than once each Plan Year, any portion or
all of the amount then credited to the Participant's QVEC Account. Such
withdrawal election shall be made at least 30 days prior to the effective
date of the withdrawal on the Appropriate Form furnished by the
Administrative Committee for such purposes.
(C) ROLLOVER ACCOUNTS. A Participant may elect to
withdraw, as of any Valuation Date in the Plan Year, but not more frequently
than once each Plan Year, any portion or all of the amount then credited to
the Participant's Rollover Account. Such withdrawal election shall be made
at least 30 days prior to the effective date of the withdrawal on the
Appropriate Form furnished by the Administrative Committee for such purpose.
(D) OTHER ACCOUNTS.
(1) AFTER ATTAINMENT OF AGE 59 1/2. A
Participant who is age 59 1/2 or older may elect to withdraw, as of
any Valuation Date in the Plan Year, but not more frequently than once
each Plan Year, any portion or all of such Participant's Vested
Accrued Benefit. Such withdrawal election shall be made at least 30
days prior to the effective date of the withdrawal on the Appropriate
Form furnished by the Administrative Committee for such purpose.
(2) BEFORE ATTAINMENT OF AGE 59 1/2. Except as
provided in Section 7.10(D)(3), Section 7.10(D)(4) or Section
7.10(D)(5), no withdrawals of such Participant's Accrued Benefit shall
be permitted while such Participant is employed by the Employer if the
Participant has not attained age 59 1/2.
(3) HARDSHIP WITHDRAWALS. A Participant who
incurs a hardship may elect to withdraw, as of any Valuation Date in
the Plan Year, but not more frequently than once each Plan Year, any
portion or all of the amount then credited to the Participant's
Elective Deferral Account which is attributable to Elective Deferral
Contributions (and of income allocable thereto credited to such
Elective Deferral Account as of the end of the last Plan Year ending
before July 1, 1989), any portion or all of the vested amount then
credited to the Participant's Employer Account, any portion or all of
the vested amount then credited to the Participant's Matching Account
and any portion or all of the Participant's Participant, Rollover and
Transfer Accounts, but a Participant may not elect to withdraw by
reason of hardship, any amount attributable to Qualified Nonelective
Contributions or Qualified Matching Contributions. For purposes of
this Section 7.10(D)(3), the Administrative Committee shall determine
that a hardship has occurred only if the distribution both is made on
account of an immediate and heavy financial need of the Participant
and is necessary to satisfy such financial need in accordance with the
following standards:
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(i) IMMEDIATE AND HEAVY FINANCIAL NEED.
(AA) IN GENERAL. The determination of
whether a Participant has an immediate and heavy
financial need is to be made on the basis of all
relevant facts and circumstances. A determination of
an immediate and heavy financial need will generally
be made by the Administrative Committee if the
inability to satisfy the financial need would have a
severe adverse effect upon the health, livelihood or
well-being of a Participant or of a member of the
Participant's immediate family. A financial need
shall not fail to qualify as immediate and heavy
merely because such need was reasonably foreseeable
or voluntarily incurred by the Participant.
(BB) DEEMED IMMEDIATE AND HEAVY
FINANCIAL NEED. A distribution will be deemed to be
made on account of an immediate and heavy financial
need of the Participant if the distribution is on
account of:
(AAA) Expenses incurred or necessary
for medical care described in section 213(d)
of the Code of the Participant, the
Participant's Spouse, or any dependents of
the Participant (as defined in section 152 of
the Code);
(BBB) Purchase (excluding mortgage
payments) of a principal residence for the
Participant;
(CCC) Payment of tuition and related
educational fees for the next 12 months of
post-secondary education for the Participant,
his Spouse, children, or dependents; or
(DDD) The need to prevent the eviction
of the Participant from his principal
residence or foreclosure on the mortgage of
the Participant's principal residence.
(ii) DISTRIBUTION NECESSARY TO SATISFY
FINANCIAL NEED.
(AA) IN GENERAL. A distribution will
be considered as necessary to satisfy an immediate
and heavy financial need of a Participant only if:
(AAA) The Participant has obtained all
distributions, other than hardship
distributions, and all nontaxable loans under
all plans maintained by the Employer;
(BBB) All plans (within the meaning of
Treas. Reg. Section 1.401(k)-
1(d)(2)(iv)(B)(4)) maintained by the Employer
provide that the Participant's Elective
Deferrals (and Employee Contributions) will
be suspended for 12 months after the receipt
of the hardship distribution;
(CCC) The distribution is not in
excess of the amount of an immediate and
heavy financial need (including amounts
necessary to pay any
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federal, state or local income taxes or
penalties reasonably anticipated to result
from the distribution); and
(DDD) All plans maintained by the
Employer provide that the Participant may not
make Elective Deferrals for the Participant'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 Participant's Elective
Deferrals for the taxable year of the
hardship distribution.
Such withdrawal election shall be made at least 30 days prior to the
effective date of the withdrawal on the Appropriate Form furnished by
the Administrative Committee for such purpose.
(4) OTHER LIMITATIONS ON DISTRIBUTIONS.
(i) GENERAL RULES. Notwithstanding any
other provision in the Plan, no Elective Deferral, Qualified
Nonelective Contribution or Qualified Matching Contribution
and income allocated to each shall be distributable earlier
than upon one of the following events:
(AA) The Participant's retirement,
death, disability or separation from service;
(BB) The termination of the Plan
without the maintenance or establishment of another
Defined Contribution Plan (other than an employee
stock ownership plan as defined in section 4975(e) of
the Code or section 409 of the Code) or a simplified
employee pension plan as defined in section 408(k) of
the Code;
(CC) The date of the sale or other
disposition by a corporate Employer to an unrelated
corporation of substantially all of the assets
(within the meaning of section 409(d)(2) of the Code)
used by such Employer in a trade or business of such
Employer with respect to a Participant who continues
employment with the corporation acquiring such
assets. The sale of 85 percent of the assets used in
a trade or business will be deemed a sale of
"substantially all" the assets used in such trade or
business;
(DD) The date of the sale or other
disposition by a corporate Employer of such
Employer's interest in a subsidiary (within the
meaning of section 409(d)(3) of the Code) to an
unrelated entity. This Section 7.10(D)(4)(i)(DD)
applies only to a Participant who continues
employment with such subsidiary;
(EE) The Participant's attainment of
age 59 1/2; or
(FF) In the case of distributions of
Elective Deferrals (and of income allocable thereto
credited to a Participant's account as of December
31, 1988) but not of amounts treated as Elective
Deferrals (and of income allocable thereto), the
Participant's hardship.
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(ii) OTHER RULES.
(AA) ESTABLISHMENT OF PLANS. For
purposes of Section 7.10(D)(4)(i)(BB), the
establishment of a plan means the existence at the
time the plan (including this Plan) with the cash or
deferred arrangement is terminated or the
establishment within the period ending 12 months
after distribution of all assets from the arrangement
of any other Defined Contribution Plan (other than an
employee stock ownership plan as defined in section
4975(e)(7) of the Code) maintained by the Employer.
A plan maintained by an unrelated employer (i.e., an
employer other than the employer maintaining the
terminating plan and other than an employer related
at the time of plan termination to the employer
maintaining the terminating plan within the meaning
of section 414(b), (c), (m), and (o) of the Code)
will be treated as the establishment of a plan only
if, as of the date of termination, the Employer knows
or has reason to know that such unrelated employer
will become related to the Employer.
(BB) LIMITATIONS APPLY AFTER TRANSFER.
The limitations of Section 7.10(D)(4) continue to
apply to amounts attributable to Elective Deferrals,
Qualified Nonelective Contributions and Qualified
Matching Contributions and income allocated to each
even if such amounts are transferred to another
qualified plan of any employer.
(CC) OTHER BENEFITS NOT CONTINGENT
UPON ELECTIVE DEFERRALS. For Plan Years beginning
after December 31, 1988, no other Employer benefit
may be conditioned (other than Matching or Qualified
Matching Contributions) (directly or indirectly)
within the meaning of section 401(k) of the Code and
the Treasury regulations issued thereunder upon the
Employee's electing to make or not to make Elective
Deferrals under the arrangement.
(DD) LUMP SUM DISTRIBUTION REQUIRED.
An event shall not be treated as described in Section
7.10((D)(4)(i)(BB), (CC) or (DD) with respect to any
Participant unless, with respect to distributions
after March 31, 1988, the Participant receives a lump
sum distribution within the meaning of section
401(k)(10)(B)(ii) of the Code by reason of the event.
(EE) TRANSFEROR CORPORATION MUST
MAINTAIN PLAN. An event shall not be treated as
described in Section 7.10(D)(4)(i)(CC) or (DD) unless
the transferor corporation continues to maintain the
plan after the disposition.
(FF) SUSPENSION OF ELECTIVE DEFERRALS
AND EMPLOYEE CONTRIBUTIONS. A Participant's Elective
Deferrals and Employee Contributions shall be
suspended for a period of 12 months following the
receipt of a hardship distribution. Moreover, the
Participant shall not make Elective Deferrals for his
taxable year immediately following the taxable year
of the distribution in excess of the applicable limit
under section 402(g) of the Code for such taxable
year less the amount of such Participant's Elective
Deferrals for the taxable year of the distribution.
(GG) CONSENT REQUIREMENTS. All
distributions that may be made pursuant to one or
more of the foregoing distributable events in Section
7.10(D)(4)(i)
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are subject to the spousal and Participant consent
requirements (if applicable) contained in sections
401(a)(11) and 417 of the Code.
(5) OTHER IN-SERVICE WITHDRAWALS BEFORE AGE 59-1/2.
If the Adoption Agreement so provides, a Participant may withdraw
during employment, prior to attaining age 59 1/2, his Vested Accrued
Benefit attributable to Employer Contributions, Participant
Contributions and Matching Contributions but not to Qualified
Nonelective Contributions or Qualified Matching Contributions or the
income allocable thereto after such Participant completes five or more
Years of Service for Benefit Accrual.
(6) DETERMINATION OF VESTED INTEREST IN CASE OF
CERTAIN WITHDRAWALS. No forfeitures shall occur solely as a result of
an Employee's withdrawal of Employee Contributions. In the event a
Participant makes a withdrawal under the Plan and his interest in the
Plan is not fully vested, such Participant's vested interest in the
portion of his Accrued Benefit remaining in the Plan shall be
determined in accordance with the rules of Section 7.6(C)(1)(a)(ii).
(7) DISTRIBUTIONS UPON PLAN TERMINATION. Subject to
Section 7.10(D)(4), the balances of Participants' Accounts shall be
distributed to Participants or their Beneficiaries as soon as
administratively feasible after the termination of the Plan.
(8) DISTRIBUTIONS UPON SALE OF ASSETS. Subject to
Section 7.10(D)(4), the balances of Participants' Accounts shall be
distributed to Participants as soon as administratively feasible after
the disposition, to an entity that is not a related entity, of
substantially all of the assets (within the meaning of section
409(d)(2) of the Code) used by the Employer in the trade or business
in which the Participant is employed, but only if the Participant
continues employment with the corporation acquiring such assets.
(9) DISTRIBUTION UPON SALE OF SUBSIDIARY. Subject
to Section 7.10(D)(4), the balances of Participants' Accounts shall be
distributed as soon as administratively feasible after the
disposition, to an entity that is not a related entity, of an
incorporated Employer's interest in a subsidiary (within the meaning
of section 409(d)(3) of the Code) to Participants who continue
employment with such subsidiary.
7.11 LOANS. The rules relating to loans are as follows:
(A) LIMITATIONS. If the Adoption Agreement so provides,
upon the filing of an application with the Administrative Committee by a
Participant or Beneficiary but only if the Beneficiary is a "party in
interest" with respect to the Plan (within the meaning of section 3(14) of
ERISA) on the Appropriate Form, the Administrative Committee shall, within
90 days from the date of receipt of such application, direct the Trustee to
make a loan or loans to such Participant or Beneficiary, provided such loan
or loans:
(1) Are available to all such Participants and
Beneficiaries on a reasonably equivalent basis;
(2) Are not made available to Highly Compensated
Employees and their Beneficiaries, in an amount greater than the
amount made available to other Employees and their Beneficiaries;
(3) Bear a reasonable rate of interest within the
meaning of 29 CFR Section 2550.408b-1;
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(4) Are adequately secured within the meaning to
29 CFR Section 2550.408b-1;
(5) Do not exceed (when added to the outstanding
balance of all other loans to the Participant or Beneficiary) the
lesser of:
(a) $50,000 (reduced by the excess (if any)
of (i) the highest outstanding balance of loans from the Plan
during the one-year period ending on the day before the date
on which such loan was made, over (ii) the outstanding balance
of loans from the Plan on the date on which such loan was
made), or
(b) One-half of the present value of the
Participant's Vested Accrued Benefit under the Plan (but, if
the Adoption Agreement so provides, not less than the lesser
of (i) $10,000 or (ii) the Participant's Vested Accrued
Benefit);
(6) Are repayable, except as otherwise provided
in Section 7.11(D), by their terms within five years from the date of
the loans;
(7) Shall not be made to any Owner-Employee or
shareholder-employee (for purposes of this requirement, a
shareholder-employee means an employee or officer of an electing small
business (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 that corporation more than five percent of
the outstanding stock of the corporation);
(8) Require amortization (of both principal and
interest) in level payments made not less frequently than quarterly
over the term of the loan;
(9) If Section 7.14 is applicable and if the
Participant's Vested Accrued Benefit is to be used as security for
part or all of the loan and only in such cases, shall not be made
unless the Participant obtains the consent of his Spouse, if any, to
the use of the Participant's Vested Accrued Benefit as security for
the loan; such 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; such consent must be in writing, must acknowledge
the effect of the loan, and must be witnessed by a Plan representative
or notary public; such consent shall thereafter be binding with
respect to the consenting Spouse or any subsequent Spouse with respect
to that loan; a new consent shall be required if the Vested Accrued
Benefit is used for renegotiation, extension, renewal, or other
revision of the loan; and
(10) Comply with any other limitations on loans
specified in the Adoption Agreement.
In the event of default, if the security for the loan
is the Participant's Vested Accrued Benefit, foreclosure on the note and
attachment of security shall not occur until a distributable event occurs in
the Plan.
For purposes of this Section 7.11, the rules of section 414(b), (c),
(m) and (o) of the Code shall apply and all plans of the Employer (determined
after the application of section 414(b), (c), (m) and (o) of the Code) shall be
treated as one plan.
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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 by the Plan, shall be treated as a loan under this Section
7.11.
If a valid spousal consent is required and has been obtained in
accordance with Section 7.11(A)(9) then, notwithstanding any other provision of
this Plan, the portion of the Participant's Vested Accrued Benefit used as a
security interest held by the Plan by reason of a loan outstanding to the
Participant shall be taken into account for purposes of determining the amount
of the Accrued Benefit payable at the time of death or distribution, but only
if the reduction is used as repayment of the loan. If less than 100 percent of
the Participant's Vested Accrued Benefit (determined without regard to the
preceding sentence) is payable to the Surviving Spouse, then the Accrued
Benefit shall be adjusted by first reducing the Vested Accrued Benefit by the
amount of the security used as repayment of the loan, and then determining the
benefit payable to the Surviving Spouse.
The Administrative Committee, provided the above requirements are met,
shall grant such request within 90 days following such request. In such event
the Administrative Committee shall be responsible for complying with any legal
requirements affecting said loan, such as Federal Reserve regulations.
(B) INTEREST. All such loans shall bear a reasonable
rate of interest, which shall, in accordance with 29 CFR Section
2550.408b-1, provide the Plan with a return commensurate with the interest
rates charged by persons engaged in the business of lending money for loans
which would be made in similar circumstances. Such rate of interest shall
be determined in accordance with the provisions of the Adoption Agreement.
Every loan applicant shall receive a clear statement of the charges involved
in each loan transaction. This statement shall include the dollar amount
and the annual interest rate of the finance charge.
(C) REPAYMENT-COLLECTION. Any such loan or loans shall
be repaid by the Participant or Beneficiary within the period certain
requested by the Participant or Beneficiary but not to exceed, except in the
case of loans subject to Section 7.11(D), a period of five years from the
date the loan or loans are made and such loan or loans shall by their terms
require repayment within such period. The loan or loans shall be evidenced
by a promissory note, shall be secured by payroll deduction if the
Participant is in the active service of the Employer and by such collateral
as shall be specified in the Adoption Agreement. If the Participant's
Vested Accrued Benefit is specified in the Adoption Agreement as collateral
for a loan, no more than 50 percent of the present value of such Vested
Accrued Benefit may be so used. In the event the Participant or Beneficiary
does not repay the loan within the period certain, the Trustee shall,
subject to the spousal consent requirements of Section 7.11(A)(9) (if
applicable), deduct the total amount of such loan or loans or any portion
thereof, if the collateral for the loan is the Participant's Vested Accrued
Benefit, from that portion (if any) of the Vested Accrued Benefit which
serves as collateral for the loan but only when a distributable event occurs
under the Plan and, if collateral other than the Participant's Vested
Accrued Benefit secures such loan, from such other collateral at the time of
the default. In the event the amount of any such payment, distribution or
collateral is insufficient to repay the remaining balance on the loan or
loans including interest, the Participant or Beneficiary shall be liable
for, and continue to make, payments on any balance still due from such
Participant or Beneficiary. Subject to the terms of the Plan, the
Participant or Beneficiary shall repay the loan or loans by payroll
deduction or in installments in such manner as shall comply with Section
7.11(A).
(D) EXCEPTION FOR HOME LOANS. Section 7.11(A)(6) shall
not apply to any loan used to acquire any dwelling unit which within a
reasonable time is to be used (determined at the time the loan is made) as
the principal residence of the Participant.
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(E) LOANS - INDIVIDUAL INVESTMENTS. Except as provided
in this paragraph, loans shall be treated as general investments of the
Trust Fund. However, if the Adoption Agreement provides for Participant
directed investments pursuant to Section 6.1(B) or if the Adoption Agreement
provides that loans are to be treated as investments of the Participant's or
Beneficiary's accounts only, until a loan to a Participant or Beneficiary is
repaid, the outstanding balance of the loan shall be treated as an
investment by such Participant or Beneficiary for his accounts only and the
interest paid by such Participant or Beneficiary shall be credited to the
accounts, as applicable, of such Participant or Beneficiary. Such
Participant's or Beneficiary's accounts shall not share in any other
earnings of the Plan with respect to the amount of the loan. The amount of
each repayment shall be invested in accordance with the regular investment
provisions selected by the Employer in the Adoption Agreement applicable to
such Employer.
7.12 QVEC WITHDRAWALS. Except in the case of the Participant's
death or disability (as defined in section 72(m)(7) of the Code) or attainment
of age 59 1/2, before distributing an amount from a Participant's QVEC Account,
the Employer shall receive from such Participant a declaration of the
Participant's intention as to the disposition of the amount distributed. The
Participant shall execute such forms as the Employer may require with respect
to the Participant's liability for Federal income tax which may result from the
distribution of amounts from such Participant's QVEC Account.
7.13 INCIDENTAL BENEFIT RULE. This provision is contained in
Section 7.9(C)(1)(b).
7.14 JOINT AND SURVIVOR ANNUITY REQUIREMENTS. This Section 7.14
shall apply only if the Plan, as adopted by the Employer, is a money purchase
plan.
(A) APPLICATION. The provisions of this Section 7.14
shall apply to any Participant in the Plan if the Plan, as adopted by the
Employer, is a money purchase plan and the Participant is one who is
credited with at least one Hour of Service with the Employer on or after
August 23, 1984, and such other Participants as provided in Section 7.14(G).
(B) QUALIFIED JOINT AND SURVIVOR ANNUITY. Unless an
optional form of benefit under Section 7.14(H) 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" shall 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 under Section 7.14(H) 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" shall mean 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.
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A Participant who will not yet attain age 35 as of
the end of any current Plan Year may make a special qualified election
("Pre-age 35 Waiver") 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 7.14(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.
(2) "EARLIEST RETIREMENT AGE" shall mean the
earliest date on which, under the plan, the Participant could elect to
receive retirement benefits.
(3) "QUALIFIED ELECTION" shall mean 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 Spouses'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 7.14(E) below.
(4) "QUALIFIED JOINT AND SURVIVOR ANNUITY" shall
mean an immediate annuity for the life of the Participant with a
survivor annuity for the life of the Spouse which is not less than 50
percent and not more than 100 percent of the amount of the annuity
which is payable during the joint lives of the Participant and the
Spouse and which is the amount of benefit which can be purchased with
the Participant's "Vested Account Balance". The percentage of the
survivor annuity under the Plan shall be 50 percent.
(5) "ANNUITY STARTING DATE" shall mean the first
day of the first period for which an amount is paid as an annuity or
any other form.
(6) "VESTED ACCOUNT BALANCE" shall mean the
aggregate value of the Participant's vested account balances derived
from Employer and Employee contributions (including rollovers and
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direct transfers), whether vested before or upon death, including the
proceeds of insurance contracts, if any, on the Participant's life.
The provisions of this Section 7.14 shall apply to a Participant who
is vested in amounts attributable to Employer contributions, Employee
contributions (or both) at the time of death or distribution.
(E) NOTICE REQUIREMENTS.
(1) In the case of a "Qualified Joint and
Survivor Annuity", the Plan Administrator shall no less than 30 days
and no more than 90 days prior to the "Annuity Starting Date" provide
to each Participant a written explanation of: (a) the terms and
conditions of a "Qualified Joint and Survivor Annuity"; (b) the
Participant's right to make and the effect of an election to waive the
"Qualified Joint and Survivor Annuity" form of benefit; (c) the rights
of a Participant's Spouse; and (d) the right to make, and the effect
of, a revocation of a previous election to waive the "Qualified Joint
and Survivor Annuity".
(2) In the case of a qualified preretirement
survivor annuity as described in Section 7.14(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 7.14(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 7.14(C) ceases to apply to the Participant; (d) a reasonable
period ending after this Section 7.14 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 7.14(E), the respective notices prescribed by this
Section 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 7.14(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.
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(F) SAFE HARBOR RULES.
(1) This Section 7.14(F) shall apply to a
Participant in a profit-sharing plan, and to any distribution made on
or after the first day of the first Plan Year beginning after December
31, 1988, from or under a separate account attributable solely to
accumulated deductible employee contributions, as defined in section
72(o)(5)(B) of the Code, and maintained on behalf of a participant in
a money purchase pension plan (including a target benefit plan), if
the following conditions are satisfied:
(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 "Vested 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 7.14(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 (other than, effective January 1, 1993,
trustee-to-trustee transfers described in Section 3.9(B)). If
this Section 7.14(F) is operative, then the provisions of this
Section 7.14, other than Section 7.14(G), shall be
inoperative.
(2) The Participant may waive the spousal death
benefit described in this Section 7.14(F) at any time provided that no
such waiver shall be effective unless it satisfies the conditions of
Section 7.14(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 7.14(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 7.14(D)(6).
(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 provisions of this Section 7.14 must be
given the opportunity to elect to have the prior provisions of this
Section 7.14 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 ten Years of Service for Vesting when he separated from service.
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(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
7.14(G)(4).
(3) The respective opportunities to elect (as
described in Sections 7.14(G)(1) and (2) above) must be afforded to
the appropriate Participants during the period commencing on August
23, 1984, and ending on the date benefits would otherwise commence to
said Participants.
(4) Any Participant who has elected pursuant to
Section 7.14(G)(2) and any Participant who does not elect under
Section 7.14(G)(1) or who meets the requirements of Section 7.14(G)(1)
except that such Participant does not have at least ten Years of
Service for Vesting when he separates from service, shall have his
benefits distributed in accordance with all of the following
requirements if benefits would have been payable in the form of a life
annuity:
(a) AUTOMATIC JOINT AND SURVIVOR
ANNUITY. If benefits in the form of a life annuity become
payable to a married Participant who:
(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 shall be received under this Plan in the
form of a "Qualified Joint and Survivor Annuity", unless the
Participant has elected otherwise during the election period.
The election period must begin at least six months before the
Participant attains "Qualified Early Retirement Age" and end
not more than 90 days before the commencement of benefits.
Any election hereunder shall 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" shall be given the opportunity to elect,
during the election period, to have a survivor annuity payable
on death. If the Participant elects the survivor annuity,
payments under such annuity must not be less than the payments
which would have been made to the Spouse under the "Qualified
Joint and Survivor Annuity" if the Participant had retired on
the day before his death. Any election under this provision
shall 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",
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or (2) the date on which participation begins, and ends on the
date the Participant terminates employment.
(c) DEFINITIONS. For purposes of this
Section 7.14(G)(4):
(1) "QUALIFIED EARLY RETIREMENT
AGE" is the latest of:
(i) The earliest date,
under the Plan, on which the Participant may
elect to receive retirement benefits,
(ii) The first day of the
120th month beginning before the Participant
reaches Normal Retirement Age, or
(iii) 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 7.14(D)(4).
(H) OPTIONAL FORMS OF BENEFIT. The only optional forms
of benefit under the Plan are the forms of benefit provided under Section
7.1(B).
7.15 WAIVER OF 30-DAY NOTICE REQUIREMENTS FOR CERTAIN
DISTRIBUTIONS. If a distribution is one to which sections 401(a)(11) and 417
of the Code do not apply, such distribution may commence less than 30 days
after the notice required under Treas. Reg. Section 1.411(a)-11(c) 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.
ARTICLE VIII
NONALIENATION OF BENEFITS
8.1 BENEFITS NOT ALIENABLE. The right of any Participant or
Beneficiary to any benefit payment under the Plan shall not be subject to
attachment, execution, garnishment, any voluntary or involuntary alienation or
assignment or to any other legal or equitable process. 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 or any domestic relations order entered before January 1, 1985.
8.2 SPECIAL PROVISION WITH RESPECT TO QUALIFIED DOMESTIC RELATIONS
ORDERS. If the Adoption Agreement so provides and if the Qualified Domestic
Relations Order so provides:
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(A) Plan assets allocated to an alternate payee shall be
placed in a separate account established for such alternate payee and such
alternate payee shall be entitled, with respect to such separate account, to
all the rights including but not limited to, the investment direction
rights, if any, of a Participant under the Plan; and
(B) Distribution of the vested amount in such separate
account shall be made to such alternate payee at such time as the Qualified
Domestic Relations Order provides, even if such date precedes the date on
which a Participant is entitled to payment under the Plan, but such
distribution shall only be made in one lump sum payment if made prior to the
date the Participant would otherwise be first entitled to receive payment.
ARTICLE IX
THE ADMINISTRATIVE COMMITTEE
9.1 STRUCTURE. The Employer shall appoint an Administrative
Committee consisting of one or more persons to administer the Plan. The member
or the members of the Administrative Committee, if in the full-time employ of
the Employer, shall serve without additional compensation and at the pleasure
of the Employer. The Employer may, in its sole discretion, discharge or remove
any member from the Administrative Committee at any time. Any member may
resign by delivering his written resignation to the Employer and such
resignation shall become effective at delivery or at any later date specified
therein. In the event of the death, discharge, resignation or removal of any
member of the Administrative Committee, the Employer may appoint a successor.
The Employer shall notify the Trustee of the appointment of the member or
members of the Administrative Committee and of any successor member or members
thereto.
9.2 ADMINISTRATIVE COMMITTEE ACTION. On all matters within the
jurisdiction of the Administrative Committee the decision of a majority of the
members of the Administrative Committee shall govern and control. The
Administrative Committee may take action either at a meeting or in writing
without a meeting, provided that in the latter instance all members of the
Administrative Committee shall have been advised of the action contemplated and
that the written instrument evidencing the action shall be signed by a majority
of the members. If there is more than one member, the Employer shall appoint a
chairman. If there is more than one member, the Administrative Committee may
appoint, either from among its members or otherwise, a secretary who shall keep
a record of all meetings and actions taken by the Administrative Committee.
Either the Chairman or any member of the Administrative Committee designated by
the Chairman shall execute any certificate, instrument or other written
direction on behalf of the Administrative Committee.
9.3 RESPONSIBILITIES. The Administrative Committee shall have
sole responsibility and discretion for administration of the Plan, and shall
supervise and control the operation of the Plan in accordance with its terms.
The Administrative Committee shall have the responsibility, the discretion, the
power and the authority to do all things necessary to accomplish that purpose,
including, but not limited to, the responsibility, discretion, power and
authority to do the following:
(A) To construe and interpret the terms and provisions of
the Plan including, but not limited to, disputed or doubtful terms;
(B) To adopt such rules and regulations under the Plan as
it may consider desirable for the administration of the Plan;
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(C) To determine all questions of eligibility for
participation under the Plan;
(D) To determine all questions concerning the amount,
time and manner of payment of benefits under the Plan;
(E) To prescribe procedures to be followed by Employees,
Participants, and Beneficiaries under the Plan;
(F) To prepare and distribute appropriate information
concerning the Plan;
(G) To issue directions to the Trustee concerning all
benefits which are to be paid from the Trust pursuant to the Plan;
(H) To bring suit in a court of competent jurisdiction,
or to take any other action necessary to ascertain the proper actions to be
taken in the event that a reasonable interpretation of applicable law
precludes the Administrative Committee from satisfying its requirements
under this Plan or the Trust;
(I) To establish a funding policy and method to carry out
the Plan objectives in light of the short- and long-run financial needs of
the Plan and to communicate such policy and method to the Trustee;
(J) To keep such records, make such reports (including,
but not limited to, reports to Participants and the Internal Revenue Service
concerning Qualified Voluntary Employee Contributions, as may be required by
Treasury regulations) and do such other acts as it deems appropriate in
order to comply with ERISA and government regulations thereunder; and
(K) To do such other acts as may be necessary and/or
desirable in order to administer the Plan.
To the maximum extent permitted by law, the Administrative Committee's
determinations on all such matters shall be final and binding upon the
Employer, Participants, other employees, Beneficiaries and all other
parties.
9.4 CONTRACTING FOR SERVICE. The Administrative Committee may
contract for legal, accounting, clerical and other services necessary to carry
out its responsibilities under the Plan.
9.5 EXPENSES OF ADMINISTRATIVE COMMITTEE. Unless paid by the
Employer, any expenses incurred in administering the Plan, including but not
limited to, expenses incurred by the Administrative Committee and Trustee's
fees, shall be deducted from the Accounts to which such expenses relate or
proportionately from all Accounts, if such expenses do not relate to any
specific Accounts.
ARTICLE X
CLAIMS PROCEDURE
10.1 CLAIMS FOR BENEFITS. All claims for benefits under the Plan
shall be made in writing and shall be signed by the applicant. Claims shall be
submitted to a representative designated by the Administrative Committee and
hereinafter referred to as the "Claims Coordinator".
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Each claim hereunder shall be acted on and approved or
disapproved by the Claims Coordinator within 60 days following the receipt by
the Claims Coordinator of the information necessary to process the claim.
In the event the Claims Coordinator denies a claim for
benefits, in whole or in part, the Claims Coordinator shall notify the
applicant in writing of the denial of the claim and notify such applicant of
his right to a review of the Claims Coordinator's decision by the
Administrative Committee. Such notice by the Claims Coordinator shall also set
forth, in a manner calculated to be understood by the applicant, the specific
reason for such denial, the specific Plan provisions on which the denial is
based, a description of any additional material or information necessary to
perfect the claim, with an explanation of why such material or information is
necessary, and an explanation of the Plan's claim review procedure as set forth
in this Article X.
If no action is taken by the Claims Coordinator on an
applicant's claim within 60 days after receipt by the Claim Coordinator, such
application shall be deemed to be denied for purposes of the following appeals
procedure.
10.2 APPEALS PROCEDURE. Any applicant whose claim for benefits is
denied in whole or in part (such applicant being hereinafter referred to as the
"Claimant") may appeal from such denial to the Administrative Committee for a
review of the decision by the entire Administrative Committee. Such appeal
must be made within six months after the Claimant has received written notice
of the denial as provided above in Section 10.1. An appeal must be submitted
in writing within such period and must:
(A) Request a review by the entire Administrative
Committee of the claim for benefits under the Plan;
(B) Set forth all of the grounds upon which the
Claimant's request for review is based and any facts in support thereof; and
(C) Set forth any issues or comments which the Claimant
deems pertinent to the appeal.
The Administrative Committee shall regularly review appeals by
Claimants. The Administrative Committee shall act upon each appeal within 60
days after receipt thereof unless special circumstances require an extension of
the time for processing the Claimant's request for review. If such an
extension of time for processing is required, written notice of the extension
shall be forwarded to the Claimant prior to the commencement of the extension.
In no event shall such extension exceed a period of 120 days after the request
for review is received by the Administrative Committee.
The Administrative Committee shall make a full and fair review
of each appeal and any written materials submitted by the Claimant and/or the
Employer in connection therewith. The Administrative Committee may require the
Claimant and/or the Employer to submit such additional facts, documents or
other evidence as the Administrative Committee in its discretion deems
necessary or advisable in making its review. The Claimant shall be given the
opportunity to review pertinent documents or materials upon submission of a
written request to the Administrative Committee, provided the Administrative
Committee finds the requested documents or materials are pertinent to the
appeal.
On the basis of its review, the Administrative Committee shall
make an independent determination of the Claimant's eligibility for benefits
under the Plan. The decision of the Administrative Committee on any claim for
benefits shall be final and conclusive upon all parties thereto.
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In the event the Administrative Committee denies an appeal, in
whole or in part, the Administrative Committee shall give written notice of the
decision to the Claimant, which notice shall set forth, in a manner calculated
to be understood by the Claimant, the specific reasons for such denial and
which shall make specific reference to the pertinent Plan provisions on which
the Administrative Committee's decision was based.
It is intended that the claims procedure of this Plan be
administered in accordance with the claims procedure regulations of the
Department of Labor set forth in 29 CFR Section 2560.503-1.
ARTICLE XI
THE TRUSTEE
11.1 ACCEPTANCE OF TRUST. The Trustee hereby accepts the Trust
herein expressed, and agrees to carry out the provisions hereof on its part to
be performed.
11.2 RESIGNATION OF TRUSTEE. Any Trustee may resign his duties
hereunder by delivering a written resignation to the Employer. Such
resignation shall take effect on the date provided therein, but not before the
sixtieth day after delivery thereof unless, prior to such sixtieth day, a
successor Trustee shall have been appointed and shall have accepted such
appointment, or unless the Employer shall otherwise consent to such earlier
resignation. If, within 60 days after notice of resignation shall have been
given under the provisions of this Section 11.2, a successor Trustee shall not
have been appointed by the Employer, the resigning Trustee or the Employer, as
appropriate, may apply to any court of competent jurisdiction for the
appointment of a successor Trustee.
11.3 REMOVAL OF TRUSTEE. Any Trustee may be removed by the
Employer at any time, upon notice to the Trustee. Such removal shall be
effected by delivering to the Trustee a notice from the Employer removing the
Trustee, and may include notification to the Trustee of the appointment of a
successor Trustee in the manner hereinafter set forth in Section 11.5. Such
notice of removal shall be effective on the date specified therein, but not
before the actual date of such notice.
11.4 APPOINTMENT OF SUCCESSOR TRUSTEE UPON OCCURRENCE OF CERTAIN
EVENTS. In the event of the death or resignation of a Trustee or the inability
of a Trustee to serve as such after the Employer or any successor thereto shall
have gone out of business or ceased to exist, or been dissolved, a successor
Trustee shall be appointed by election of a majority of the Participants under
the Plan who were Employees of the Employer at the time the Employer or
successor thereto went out of business or ceased to exist, or was dissolved, as
the case may be. Such successor Trustee shall have the same powers as are
granted to successor Trustees under Section 11.5.
11.5 SUCCESSOR TRUSTEE. In the event of the death, resignation or
removal of a Trustee or Trustees hereunder, one or more successor Trustees
shall be appointed by the Employer, and such successor Trustee, upon accepting
such appointment by an instrument in writing delivered to the Employer, shall
become vested with the same powers, duties, privileges and immunities as if it
had originally been named in this Plan as Trustee.
11.6 MEETINGS AND ACTIONS OF TRUSTEE. In the event there is more
than one Trustee, the Trustee shall hold meetings upon such notice (which may
be waived), at such place or places and at such times as it may from
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time to time determine and shall act by majority vote of all the Trustees. Any
one or more Trustees designated by a majority vote of all the Trustees may
execute any certificate, instrument or other written document on behalf of all
the Trustees.
11.7 COMPENSATION. No fee or compensation shall be paid to the
Trustee for its services as such if such Trustee is an Employee of, or is
otherwise compensated by, the Employer and, if not, such Trustee shall receive
such reasonable compensation as may be agreed to by the Employer and such
Trustee.
11.8 TRUSTEE'S LIABILITY. In the exercise of its powers and the
performance of its duties as Trustee under the Plan, the Trustee shall act
solely in the interest of the Participants and their Beneficiaries and in
accordance with the provisions of Article XIV. The Trustee, however, shall not
be liable for any mistake in judgment or other action taken in good faith, or
for loss unless resulting from a breach of any of the responsibilities,
obligations or duties imposed upon the Trustee by the Plan or by Title I of
ERISA.
11.9 GENERAL POWERS. Subject to the provisions and limitations
herein expressly set forth, the Trustee shall have the duty and authority to do
and perform any and all acts and things which, in its judgment, shall be
necessary and/or reasonable to carry out the purposes of the Plan and Trust.
No enumeration of specific powers herein made shall be construed as a
limitation upon the foregoing general powers.
11.10 PAYMENTS TO TRUSTEE. All Participant, Matching, Elective
Deferral, Employer, Rollover, Qualified Matching, Qualified Nonelective, and
Qualified Voluntary Employee Contributions and direct transfers shall be paid
to the Trustee as provided in Article III. The Trustee shall be responsible
only for such funds as shall be accepted and received by it from the Employer.
The Trustee shall not be responsible for the collection of any contributions to
the Plan, or for the acceptance of any contribution in property other than cash
except as otherwise provided under Sections 3.9 and 3.10.
11.11 INVESTMENT OF TRUST FUND. Except to the extent that any Trust
assets have been committed by the Employer to the management of an Investment
Manager and subject to the Participant's right to direct the investment of his
Employer and/or Matching and/or Elective Deferral and/or Participant and/or
Rollover and/or Transfer and/or QVEC Accounts and/or Qualified Matching
Contribution and/or Qualified Nonelective Contribution accounts and subject to
the requirements of Article XIV, the Trustee shall invest and reinvest the
principal and income of the Employer, Matching, Elective Deferral, Participant,
Rollover, Transfer, and QVEC Accounts and Qualified Matching Contribution and
Qualified Nonelective Contribution accounts as provided in Article VI. No part
of the Trust Fund shall be invested in Employer real property. Except to the
extent provided in the Adoption Agreement, no part of the Trust Fund shall be
invested in Employer Securities. Notwithstanding the preceding sentence, no
portion of Participant, Matching, Elective Deferral, Rollover, Qualified
Matching, Qualified Nonelective, or Qualified Voluntary Employee Contributions
or direct transfers shall be invested in Employer Securities (unless in
compliance with applicable Federal and state securities laws); moreover, no
portion of Employer Contributions shall be invested in Employer Securities if
such Employer Contributions are subject to the investment direction of the
Participants (unless in compliance with Federal and state securities laws). In
any event, investment in Employer Securities shall be limited to investment in
Qualifying Employer Securities. Notwithstanding the above, in no event may the
Plan, if it is a money purchase plan with respect to the adopting Employer,
invest in Qualifying Employer Securities in excess of the ten percent limit
described in Section 6.1(A)(14) above.
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11.12 ACCOUNTS, REPORTS AND GOVERNMENTAL FILINGS. Rules relating to
certain accounting and reporting requirements are as follows:
(A) ACCOUNTS AND REPORTS. The Trustee shall keep
accounts and detailed records of all receipts, investments, disbursements
and other transactions required to be performed hereunder. The Trustee
shall prepare a written report reflecting the receipts, disbursements and
other transactions effected by it during the Plan Year (or period ending
with its resignation or removal) and the fair market value of the assets in
each Participant's Employer, Matching, Elective Deferral, Participant,
Rollover, Transfer, and QVEC Accounts and Qualified Matching Contribution
and Qualified Nonelective Contribution accounts as of the Valuation Date in
accordance with Section 5.3. Such report shall be filed with the
Administrative Committee within 60 days following such Valuation Date (or
following the Trustee's resignation or removal pursuant to Section 11.2 or
11.3). The Trustee shall not be obligated to take any action on any
individual account except upon the written instructions forwarded by the
Administrative Committee and shall have no obligation to inquire into the
propriety of any such written instructions and shall be fully protected in
acting in accordance with such written instructions.
(B) GOVERNMENTAL FILINGS BY TRUSTEE. The Trustee shall
keep such records, make such reports and file such returns and other
information as may be required of the Trustee with respect to the Trust
under the Code, ERISA and the regulations issued or forms adopted
thereunder. The Trustee shall make such of its records as may pertain
solely to a particular Participant available to such Participant, upon
request, for examination by such Participant.
(C) GOVERNMENTAL FILINGS BY ADMINISTRATIVE COMMITTEE.
The Administrative Committee shall be solely responsible for the filing of
any reports or information required, with respect to the Plan, under the
Code, ERISA or any other Federal or State law and regulations issued or
forms adopted thereunder.
11.13 INFORMATION TO TRUSTEE. The Administrative Committee shall
furnish to the Trustee any information required by the Plan. The Trustee shall
be fully protected in relying upon such information.
11.14 BENEFIT PAYMENTS. The Trustee shall make or, in the case of
Insurance Contracts, cause to be made all benefit payments under the Plan upon
written instructions of the Administrative Committee. The Trustee shall not be
liable for following proper Administrative Committee directions which are in
accordance with the terms of the Plan.
11.15 TRUST ASSETS. The Trust Fund shall consist of all amounts
contributed by, or on behalf of, Participants under the Plan, and the earnings
and appreciation thereon, less depreciation and payments made by the Trustee
under the Plan.
11.16 PARTICIPANTS EXCLUSIVELY TO BENEFIT. Except as provided in
Section 3.7, Trust Fund assets shall be held by the Trustee for the exclusive
purpose of providing benefits to Participants under the Plan and their
Beneficiaries and defraying reasonable expenses of administering the Plan.
11.17 EMPLOYMENT OF COUNSEL, AGENTS, ETC. The Trustee, upon notice
to the Administrative Committee, may employ such counsel, accountants and
agents and such clerical and other help as it may deem necessary in carrying
out the Trust, and pay the fees, charges and cost of the same from the Trust
Fund as an expense of the Plan, unless the Employer shall pay the same.
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11.18 COMPROMISE OF CLAIMS. The Trustee, upon notice to the
Administrative Committee, may compromise, arbitrate, or settle any suit or
legal proceeding, claim, debt, damage or undertaking due or owing from, or to,
the Trust Fund.
11.19 SUITS. The Trustee is authorized, upon notice to the
Administrative Committee, to sue or to defend any suit or legal proceedings by
or against the Trust. In the case of any suit or proceeding regarding this
Plan and Trust Agreement, to which the Trustee may be a party, said Trustee
shall have a lien upon the Trust Fund for any and all costs, attorneys' fees
(whether such attorneys shall be regularly retained or specifically employed by
the said Trustee), and for other expenses which it may incur or become liable
for on account thereof, or on account of any other legal expense incurred in
the administration of this Trust, and it shall be entitled to reimburse itself
for any of said expenses out of the Trust Fund.
11.20 EXECUTION OF DOCUMENTS. The Trustee shall have the power to
make, execute, acknowledge and deliver any and all documents, agreements,
insurance policies, annuity contracts and, without limitation by the foregoing,
any and all other instruments that may be necessary or appropriate to carry out
the powers herein granted.
11.21 NO DISCRIMINATION. The Trustee shall not take any action
which would result in benefiting one Participant or group of Participants at
the expense of another, or in discrimination as between Participants similarly
situated, or by the application of different rules to substantially similar
sets of facts.
11.22 DECISION OF TRUSTEE. The decision of the Trustee in matters
within its jurisdiction shall be final, binding and conclusive upon the
Administrative Committee and upon each Employee, Participant, Beneficiary and
every other person or party interested or concerned.
11.23 FUNDING POLICY. From time to time the Administrative
Committee shall communicate to the Trustee in writing the current funding
policy and methods that have been established, pursuant to Section 9.3(I) by
the Administrative Committee to carry out the objectives of the Plan.
ARTICLE XII
THE INSURER
12.1 INSURER'S LIABILITY. The Insurer shall not be deemed to be a
party to this Plan, nor shall it be responsible for the validity of this Plan,
or for the completion and/or submission of any returns or reports required to
be filed by the Trustee, the Employer or the Administrative Committee under the
provisions of the Code or ERISA. The Insurer shall, however, furnish to the
Trustee, upon request of the Trustee, such information as it may require with
respect to the Insurance Contracts to enable the Trustee to complete the annual
or more frequent valuation of Plan assets required by Section 5.3 and to file
such reports as may be required by ERISA and the Code.
12.2 INFORMATION TO INSURER. The Trustee shall furnish to the
Insurer such information as may be required by the Insurer to maintain
Insurance Contracts hereunder. The Insurer shall be fully protected in relying
upon such information.
12.3 BENEFIT PAYMENTS. The Insurer shall make all benefit payments
by it under the Plan only upon written instructions of the Trustee. The
Insurer shall not be liable for following such written instructions.
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12.4 ANNUITIES MUST BE NONTRANSFERABLE. Any annuity contract
distributed herefrom must be nontransferable.
12.5 CONFLICTS. The terms of any annuity contract purchased and
distributed by the Plan to a Participant or Spouse shall comply with the
requirements of this Plan.
12.6 DISTRIBUTION OF INSURANCE CONTRACTS. Subject to Section 7.14,
relating to joint and survivor annuity requirements, the Insurance Contracts on
a Participant's life shall be converted to cash or an annuity or distributed to
the Participant upon commencement of benefits.
12.7 CONFLICT WITH INSURANCE CONTRACTS. The Trustee shall apply
for and shall be the owner of any Insurance Contract purchased under the terms
of this Plan. The Insurance Contract(s) must provide that proceeds will be
payable to the Trustee; however, the Trustee shall be required to pay over all
proceeds of the Insurance Contract(s) to the Participant's designated
Beneficiary in accordance with the distribution provisions of this Plan. The
Spouse of a married Participant and otherwise the Participant's Beneficiary
shall be the designated Beneficiary of the proceeds in all circumstances unless
the Plan, as adopted by the Employer, is a money purchase plan and a qualified
election has been made in accordance with Section 7.14 relating to joint and
survivor annuity requirements, if applicable. Under no circumstances shall the
Trust retain any part of the proceeds. In the event of any conflict between
the terms of this Plan and the terms of any Insurance Contract purchased
hereunder, the Plan provisions shall control.
12.8 DIVIDENDS OR CREDITS. Any dividends or credits earned on
Insurance Contracts shall be allocated to the Participant's account derived
from Employer contributions for whose benefit the Insurance Contract is held.
ARTICLE XIII
THE INVESTMENT MANAGER
13.1 APPOINTMENT. The Employer may appoint one or more Investment
Managers, which shall serve at the pleasure of the Employer, to manage, control
and invest any or all of the assets held by the Trustee in the Trust. Any
Investment Manager, so appointed, shall signify in writing to the Employer that
it accepts the appointment and acknowledges its status as a Fiduciary.
13.2 RESPONSIBILITY. Subject only to the funding procedures
established by the Administrative Committee, such Investment Manager shall have
full responsibility, power and authority to manage and invest the assets held
by the Trustee in the Trust committed to it.
13.3 ACT IN INTEREST OF PARTICIPANTS. In carrying out its
responsibilities, the Investment Manager shall act solely in the interest of
the Participants and their Beneficiaries and in accordance with the provisions
of Article XIV.
13.4 DIRECTIONS FROM INVESTMENT MANAGER. Whenever the Trustee must
or may act upon the direction or approval of the Investment Manager, the
Trustee may act upon a written communication or oral communication followed by
a written communication signed by the representative of the Investment Manager,
as previously agreed upon in writing by the Trustee and the Investment Manager.
Until otherwise notified in
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writing by the proper officers of the Investment Manager, the Trustee shall be
fully protected in relying upon the last such direction or directions received
by it from the Investment Manager.
ARTICLE XIV
FIDUCIARY RESPONSIBILITY
14.1 FIDUCIARY DUTIES. A Fiduciary, as defined in Section 1.37,
shall discharge its duties with respect to the Plan and Trust in the interest
of the Participants and their Beneficiaries:
(A) For the exclusive purpose of:
(1) Providing benefits to Participants and their
Beneficiaries; and
(2) Defraying reasonable expenses of
administering the Plan and Trust;
(B) 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;
(C) Except for any Trust assets committed to investment
by a Participant, by diversifying the investments of the Plan and Trust so
as to minimize the risk of large losses, unless under the circumstances it
is clearly prudent not to do so; and
(D) In accordance with the documents and instruments
governing the Plan and Trust insofar as they are consistent with the
provisions of ERISA.
14.2 ALLOCATION OF RESPONSIBILITY. Authority and responsibility
for management of the Plan and Trust shall be allocated among the following
persons:
(A) The Employer shall have sole responsibility for the
appointment and removal of the Administrative Committee described in Article
IX, of the Trustee described in Article XI and of any Investment Manager
described in Article XIII. To the extent that it is carrying out this
responsibility, the Employer shall be a "named Fiduciary" of the Plan;
(B) The Administrative Committee shall have sole
responsibility for the administration of the Plan, as set forth in Article
IX. To the extent that it is carrying out this responsibility, the
Administrative Committee shall be a "named Fiduciary" of the Plan;
(C) The Trustee shall have sole responsibility for the
management and control of the Trust assets, except to the extent such assets
have been committed to investment by a Participant or by any Investment
Manager. To the extent it is carrying out this responsibility, the Trustee
shall be a "named Fiduciary" of the Plan;
(D) Any Investment Manager appointed under Article XIII
to manage and invest Trust assets shall have sole responsibility for the
investment and management of Trust assets held by the Trustee in the Trust
which have been committed to such Investment Manager, subject only to the
funding procedures
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established by the Administrative Committee. To the extent it is carrying
out this responsibility, an Investment Manager shall be a Fiduciary of the
Plan; and
(E) The Participants shall have sole responsibility for
the investment of the assets in their Employer, Matching, Elective Deferral,
Participant, Rollover, Transfer and/or QVEC Accounts and/or Qualified
Matching Contribution and/or Qualified Nonelective Contribution accounts in
the event the Employer indicates in the Adoption Agreement applicable to
such Employer that the Participants have the power to direct investment of
Employer, Matching, Elective Deferral, Participant, Rollover, Transfer
and/or QVEC Accounts and/or Qualified Matching Contribution and/or Qualified
Nonelective Contribution accounts.
14.3 EXCLUSIVE RESPONSIBILITY. It is the purpose of this Plan and
Trust Agreement to allocate to each of the Fiduciaries identified in Section
14.2 exclusive responsibility for prudent execution of the functions assigned
to him (or to the entity of which he is a member) and no responsibility for
execution of functions assigned to others. Whenever one such Fiduciary is
required by the Plan and Trust Agreement to follow the directions of another
such Fiduciary, the two Fiduciaries shall not be deemed to have been assigned a
shared responsibility, but the Fiduciary giving the directions shall have sole
responsibility for the functions assigned to him, including issuing such
directions, and the Fiduciary receiving the directions shall have sole
responsibility for the functions assigned to him, including following such
directions insofar as they are, on their face, proper under this Plan and Trust
Agreement and under applicable law.
14.4 TRANSFER OR MAINTENANCE OF INDICIA OF OWNERSHIP OF PLAN ASSETS
OUTSIDE UNITED STATES PROHIBITED. Except as authorized by the Secretary of
Labor by regulation, no Fiduciary shall maintain the indicia of ownership of
any assets of the Plan or Trust outside the jurisdiction of the district courts
of the United States.
14.5 LIABILITY OF FIDUCIARY FOR BREACH OF CO-FIDUCIARY. A
Fiduciary with respect to the Plan or Trust shall not be liable for a breach of
Fiduciary responsibility of another Fiduciary with respect to the Plan or Trust
except under the following circumstances:
(A) He or it participates knowingly in, or knowingly
undertakes to conceal, an act or omission of such other Fiduciary, knowing
such act or omission is a breach;
(B) By his or its failure to properly discharge his or
its own Fiduciary responsibilities, he or it has enabled such other
Fiduciary to commit a breach; or
(C) He or it has knowledge of a breach by such other
Fiduciary, unless he or it makes reasonable efforts under the circumstances
to remedy the breach.
14.6 PROHIBITED TRANSACTIONS. The rules relating to prohibited
transactions are as follows:
(A) Unless otherwise exempted by the Secretary of Labor,
a Fiduciary with respect to the Plan or Trust shall not cause the Plan or
Trust to engage in a transaction if he or it knows, or should know, that
such transaction constitutes a direct or indirect:
(1) Sale or exchange, or leasing, of any property
between the Plan or Trust and a party in interest or a disqualified
person;
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(2) Lending of money or other extension of credit
between the Plan or Trust and a party in interest or a disqualified
person;
(3) Furnishing of goods, services, or facilities
between the Plan or Trust and a party in interest or a disqualified
person; or
(4) Transfer to, or use by or for the benefit of,
a party in interest or a disqualified person, of any assets of the
Plan or Trust.
(B) Unless otherwise exempted by the Secretary of Labor,
a Fiduciary with respect to the Plan or Trust shall not:
(1) Deal with the assets of the Plan or Trust in
his or its own interest or for his or its own account;
(2) In his or its individual or any other
capacity, act in any transaction involving the Plan or Trust on behalf
of a party (or represent a party) whose interests are adverse to the
interests of the Plan or Trust or the interests of the Participants or
their Beneficiaries; or
(3) Receive any consideration for his or its own
personal account from any party dealing with the Plan or Trust in
connection with a transaction involving the assets of the Plan or
Trust.
(C) Notwithstanding anything to the contrary set forth in
this Section 14.6, a Fiduciary shall be entitled to:
(1) Receive any benefit to which the Fiduciary
may be entitled as a Participant or Beneficiary in the Plan or Trust,
so long as the benefit is computed and paid on a basis which is
consistent with the terms of the Plan and Trust as applied to all
Participants and their Beneficiaries;
(2) Receive any reasonable compensation for
services rendered, except that no person so serving who already
receives full-time pay from the Employer and/or Controlled Group
member, from an employee organization whose employees are Participants
in the Plan, or from an association of employers whose employees are
Participants in the Plan, shall receive compensation from the Plan or
Trust, except for reimbursement of expenses properly and actually
incurred;
(3) Receive reimbursement of expenses properly
and actually incurred in the performance of his or its duties with the
Plan and Trust;
(4) Serve as a Fiduciary in addition to being an
officer, employee, agent, or other representative of a party in
interest or disqualified person;
(5) Make loans to a party in interest or a
disqualified person who is a Participant or Beneficiary of the Plan
under Section 7.11, provided such loans are made in accordance with
the specific provisions of Section 7.11; and
(6) To the extent the Plan and applicable
Adoption Agreement so provide, acquire or sell Qualifying Employer
Securities if:
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(a) Such acquisition or sale is for
adequate consideration (as such term is defined in section
3(18) of ERISA); and
(b) No commission is charged with
respect to such acquisition or sale.
(D) For purposes of this Article XIV, the words "party in
interest" or "disqualified person" mean:
(1) Any Fiduciary, counsel or employee of the
Plan or Trust;
(2) A person providing services to the Plan or
Trust;
(3) The Employer;
(4) An employee organization any of whose members
are covered by the Plan;
(5) An owner, direct or indirect, of 50 percent
or more of:
(a) The combined voting power of all
classes of stock entitled to vote or the total value of shares
of all classes of stock of a corporation,
(b) The capital interest or the profits
interest of a partnership, or
(c) The beneficial interest of a trust
or unincorporated enterprise,
which is an employer or employee organization described in Section
14.6(D)(3) or (4);
(6) A spouse, ancestor, lineal descendant, or
spouse of a lineal descendant of any individual described in Section
14.6(D)(1), (2), (3) or (5);
(7) A corporation, partnership, or trust or
estate of which (or in which) 50 percent or more of:
(a) The combined voting power of all
classes of stock entitled to vote or the total value of shares
of all classes of stock of such corporation,
(b) The capital interest or profits
interest of such partnership, or
(c) The beneficial interest of such
trust or estate,
is owned directly or indirectly, or held by, persons described in
Section 14.6(D)(1), (2), (3), (4) or (5);
(8) An employee, officer, director (or an
individual having powers or responsibilities similar to those of
officers or directors), or a ten percent or more shareholder, directly
or indirectly, of a person described in Section 14.6(D)(2), (3), (4),
(5) or (7), or of the Plan or Trust; or
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(9) A ten percent or more (directly or indirectly
in capital or profits) partner or joint venturer of a person described
in Section 14.6(D)(2), (3), (4), (5) or (7).
ARTICLE XV
PLAN AMENDMENT
15.1 AMENDMENT. The rules relating to the amendment of the Plan
and Trust Agreement are as follows:
(A) SPONSORING ORGANIZATION'S POWER TO AMEND. The
Sponsoring Organization may amend any part of the Plan at any time with
respect to all Adopting Employers. Such amendment shall be applicable to
all Employers that have adopted the Plan and each such Employer shall be
deemed to have adopted such amendment as of the date of the notification
letter from the Internal Revenue Service which relates to such amendment.
This provision shall be interpreted in accordance with section 6.01(1) of
Rev. Proc. 89-13. The Sponsoring Organization shall notify each Adopting
Employer of any such amendment.
(B) AMENDMENT BY ADOPTING EMPLOYER. 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 the DRINKER BIDDLE & REATH REGIONAL
PROTOTYPE DEFINED CONTRIBUTION PLAN and will be considered to have an
individually designed plan.
(C) REV. PROC. 92-41 - DEEMED AMENDMENT OF ADOPTING
EMPLOYERS' PLANS. The changes made by this amendment and restatement of the
Plan and Trust Agreement, pursuant to Rev. Proc. 92-41, shall be deemed
adopted by each Adopting Employer on the date the notification letter is
issued by the District Office of the Internal Revenue Service with respect
to this amendment and restatement without further action on the part of the
Adopting Employer. However, each such Adopting Employer must send a notice
not earlier that six days, if by mail (nine days if by posting or in person)
and not more than 20 days, if by mail (23 days if by posting or in person)
from the date of the Internal Revenue Service notification letter to all
interested parties in accordance with Part II of Rev. Proc. 92-6 informing
such interested parties that the Plan and Trust Agreement have been amended.
The Adopting Employer may also change its Adoption Agreement with respect to
the amendments described in section 5.05 of Rev. Proc. 92-41 without
resubmission of such Adopting Employer's Plan to the Internal Revenue
Service. Any other changes made by the Adopting Employer will require
resubmission of such Adopting Employer's Plan to the Internal Revenue
Service for a determination as to the continuing qualification under section
401(a) of the Code of the Adopting Employer's Plan as thus amended.
15.2 LIMITATIONS UPON AMENDMENT. Notwithstanding the above, no
amendment shall be made which shall cause or permit:
(A) Any part of the assets of the Trust under the Plan to
be diverted to purposes other than for the exclusive benefit of Participants
or their Beneficiaries;
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(B) Any part of such assets to revert to, or become the
property of, the Employer;
(C) Any Participant or his Beneficiary to be deprived of
any benefit to which he was entitled under the Plan by reason of
contributions made by the Employer or Participant prior to such amendment,
unless such amendment is necessary either to conform the Plan to, or satisfy
the conditions of, any law, governmental regulation or ruling, or to permit
the Plan to meet the requirements of the Code, or ERISA;
(D) The account balance of a Participant to be decreased
or, effective for Plan amendments made after July 30, 1984, an optional form
of distribution to be restricted or eliminated with respect to any benefits
accrued prior to such amendment; notwithstanding the preceding clause, a
Participant's account balance may be reduced to the extent permitted under
section 412(c)(8) of the Code; for purposes of this provision, a Plan
amendment which has the effect of decreasing a Participant's account balance
or eliminating an optional form of benefit, with respect to benefits
attributable to service before the amendment, shall be treated as reducing
an accrued benefit;
(E) Any responsibilities of the Trustee under this Plan
and Trust Agreement to be increased without its prior written consent;
(F) In the event the vesting schedule of the Plan is
amended in the case of an Employee who is a Participant on (1) the date the
amendment is adopted, or (2) the date the amendment is effective, if later,
the nonforfeitable percentage (determined as of the date specified in (1) or
(2)) of such Employee's right to his Accrued Benefit derived from Employer
contributions to be less than his percentage computed under the Plan without
regard to such amendment; or
(G) The computation of a Participant's nonforfeitable
right to his Accrued Benefit derived from Employer contributions to be
affected by the amendment of the Plan's vesting schedule or to be directly
or indirectly affected by any other Plan amendment or by a deemed amendment
resulting from an automatic change to or from a top-heavy vesting schedule
unless a Participant with three or more Years of Service for Vesting is
permitted to elect, within 60 days after the latest of (1) the date the
amendment is adopted, (2) the date the amendment becomes effective, or (3)
the date written notification of such amendment is issued to the Participant
by an Employer or by the Administrative Committee, to have his
nonforfeitable percentage computed under the Plan without regard to such
amendment, provided, however, that no election shall be given to any
Participant whose nonforfeitable percentage under the Plan as amended cannot
at any time be less than such percentage determined without regard to such
amendment. For Participants who do not have at least one Hour of Service in
any Plan Year beginning after December 31, 1988, the preceding sentence
shall be applied by substituting "five Years of Service for Vesting" for
"three Years of Service for Vesting" where such language appears.
15.3 RIGHTS OF TRUSTEE UPON AMENDMENT. No amendment may be made to
the Plan and Trust Agreement which affects the rights, duties or
responsibilities of the Trustee without its prior written consent. A certified
copy of any amendment shall be delivered to the Trustee by the Employer.
15.4 SIGNIFICANT REDUCTION IN RATE OF FUTURE BENEFIT ACCRUALS.
This Section 15.4 shall only apply if the Plan, as adopted by the Employer, is
a money purchase plan. In such event the Plan may not be amended so as to
provide for a significant reduction in the rate of future benefit accruals,
unless, after adoption of the Plan amendment and not less than 15 days before
the effective date of the Plan amendment, the Administrative Committee, as Plan
administrator, provides a written notice, setting forth the Plan amendment and
its effective date, to:
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(A) Each Participant in the Plan;
(B) Each Beneficiary who is an alternate payee (within
the meaning of section 206(d)(3)(K) of ERISA) under an applicable Qualified
Domestic Relations Order; and
(C) Each employee organization representing Participants
in the Plan, except that such notice shall instead be provided to a person
designated in writing to receive such notice on behalf of any person
referred to in Section 15.4(A), (B) or (C).
This Section 15.4 is to be administered in accordance with the provisions of
section 204(h) of ERISA. This provision also applies upon termination of the
Plan.
ARTICLE XVI
PLAN TERMINATION
16.1 RIGHT TO DISCONTINUE CONTRIBUTIONS AND/OR TO TERMINATE PLAN
AND TRUST. The Employer has established the Plan with the intention and
expectation that from year to year it will be able to make its contributions as
herein provided. However, the Employer realizes that circumstances not now
foreseen or circumstances beyond its control may make it either impossible or
inadvisable to continue to make its contributions as herein provided. In such
event, the Employer shall have the power, subject to Section 15.4 in the case
the Plan is a money purchase plan, to discontinue contributions to the Plan and
Trust or to terminate the Plan and/or Trust by an appropriate resolution or, in
the case of non-corporate Employers, by other action, which shall specify the
date of termination. A certified copy of such resolution or other action shall
be delivered to the Administrative Committee and the Trustee.
16.2 TERMINATION OF PLAN ON HAPPENING OF CERTAIN EVENTS. The Plan
herein shall automatically terminate upon the happening of any of the following
events:
(A) Discontinuance or liquidation of the Employer's
business; or
(B) The merger or consolidation of the Employer with any
other corporation or business organization, or the sale or transfer by the
Employer of substantially all of its assets to any corporation or business
organization, if the successor corporation or business organization shall
fail to adopt this Plan within 90 days from the effective date of such
consolidation, merger or sale or transfer of assets. If such successor
corporation or business organization shall adopt this Plan, within 90 days
from the effective date of such consolidation, merger or sale or transfer of
assets, such successor corporation or business organization shall be deemed
to succeed to the position of the Employer under this Plan.
16.3 CONTINUANCE OF TRUST AFTER COMPLETE DISCONTINUANCE OF
CONTRIBUTIONS TO PLAN. Upon complete discontinuance of contributions to the
Plan, the rights of affected Employees under the Plan and Trust shall become
fully vested and nonforfeitable, notwithstanding any other provisions of the
Plan, but in all other respects the Plan and Trust shall continue in effect,
and be administered in accordance with the provisions of the Plan and Trust
Agreement.
16.4 DISTRIBUTION OF TRUST ASSETS. Upon termination or partial
termination of the Plan, notwithstanding any other provisions of the Plan, the
rights under the Plan and Trust of the affected Employees
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or, in the case of a partial termination, of the affected Employees in the
terminated portion of the Plan, shall become vested and nonforfeitable. The
Trustee, at the direction of the Administrative Committee, shall make payment
of such amounts in accordance with Section 7.1, no later than the time
prescribed for the commencement of such payments provided in Section 7.9. Upon
final termination of the Trust, at such time as shall be determined by the
Employer after notification to the Administrative Committee, the Administrative
Committee shall direct the Trustee to liquidate the assets held in Employer,
Matching, Elective Deferral, Participant, Rollover, Transfer and QVEC Accounts
and Qualified Matching Contribution and Qualified Nonelective Contribution
accounts and, after payment of all expenses and proportional adjustment of each
Employer, Matching, Elective Deferral, Participant, Rollover, Transfer and QVEC
Account and Qualified Matching Contribution and Qualified Nonelective
Contribution account to reflect income or losses to the date of termination, to
distribute, subject to the requirements of Section 7.14, if applicable, the
balance of each Participant's Accrued Benefit to each Participant, retired
Participant, or, if appropriate, to the Participant's Beneficiary.
16.5 DISTRIBUTEES WHOSE WHEREABOUTS ARE UNKNOWN. In the case of
any distributee described herein at the time of distribution upon termination
of the Plan or Trust whose whereabouts are unknown, the Administrative
Committee shall notify such individual at the last known address by certified
mail with return receipt requested advising such individual of the right to
such a benefit. If the distributee cannot be located in this manner, the
Trustee shall establish a custodial account for such individual's benefit in a
Federally insured bank, savings and loan association or credit union in which
the individual's account balance shall be deposited. Upon the distribution of
all Plan assets, the Trustee shall be discharged from all obligations under the
Plan and Trust and no Participant or Beneficiary shall have any further rights
or claims thereunder.
ARTICLE XVII
SUCCESSOR EMPLOYER AND MERGER
OR CONSOLIDATION OF PLAN
17.1 SUCCESSOR TO EMPLOYER UNDER PLAN AND TRUST. Subject to the
limitations described in Section 17.2, this Plan and Trust may be adopted by
any successor corporation or other business organization upon the merger or
consolidation of the Employer with such corporation or other business
organization, or upon the sale by the Employer of substantially all its assets
to such corporation or business organization, if such successor corporation or
other business organization:
(A) Adopts this Plan and Trust effective upon the date of
such merger, consolidation or sale of assets, and
(B) Agrees to continue and maintain this Plan and Trust.
Upon the adoption of the Plan and Trust Agreement by the
successor, such successor shall have all the powers, duties and
responsibilities of the Employer under the Plan and Trust Agreement.
17.2 MERGER OR CONSOLIDATION. In the event of any merger or
consolidation of the Plan with, or transfer, in whole or in part, of the assets
and liabilities of the Trust to another trust held under any other plan of
deferred compensation maintained or to be established for the benefit of all or
some of the Participants of this Plan, the assets of the Trust applicable to
such Participants shall be transferred to the other trust only if:
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(A) Each Participant would (if either this Plan or the
other plan then terminated) receive a benefit immediately after the merger,
consolidation or transfer which is equal to, or greater than, the benefit he
would have been entitled to receive immediately before the merger,
consolidation or transfer (if this Plan had then terminated); and
(B) Resolutions of the Board of Directors or other
governing entity of the Employer under this Plan, and of any new or
successor employer of the affected Participants, shall authorize such
transfer of assets; and, in the case of the new or successor employer of the
affected Participants, its resolutions shall include an assumption of
liabilities with respect to such Participant's inclusion in the new
employer's plan; and
(C) Such other plan and trust are qualified under
sections 401(a) and 501(a) of the Code.
ARTICLE XVIII
MISCELLANEOUS
18.1 NO RIGHT TO EMPLOYMENT. Participation in the Plan shall not
be deemed to be consideration for, or an inducement to, or a condition of the
employment of any Employee. Nothing contained in this Plan shall be deemed to
give any Participant the right to be retained in the employment of the
Employer, nor shall any Participant, retired Participant, deceased Participant,
disabled Participant, or terminated Participant have any right to any payment,
except as such payment may be provided under the terms of the Plan and then
only to the extent that assets are available under the Plan.
18.2 GENDER AND NUMBER. Whenever any words are used herein in any
specific gender, they shall be construed as though they were also used in any
other applicable gender. The singular form, whenever used herein, shall mean
or include the plural form where applicable.
18.3 BONDING. Except as provided in section 412 of ERISA with
respect to certain banks and other financial institutions, every Fiduciary of
the Plan and every person who handles funds or other property of the Plan shall
be bonded as provided in such section 412. The amount of such bond shall be
fixed at the beginning of each Plan Year and shall not be less than ten percent
of the amount of funds handled. In no case shall the bond be less than $l,000
nor more than $500,000, except as otherwise prescribed by the Secretary of
Labor, after due notice and opportunity for hearing to all interested parties.
18.4 AGENT FOR SERVICE OF LEGAL PROCESS. The name and address of
the person designated for the service of legal process with respect to the Plan
shall be indicated in the Adoption Agreement.
18.5 HEADINGS. The headings are for reference only. In the event
of a conflict between a heading and the content of an Article or Section, the
content of the Article or Section shall control.
18.6 UNCLAIMED BENEFITS. Except as otherwise provided in Section
16.5, any benefits payable to a Participant or Beneficiary which are not
claimed for a period of five years from the date of entitlement as determined
by the Administrative Committee and following a diligent effort to locate such
Participant or Beneficiary and with the approval of the Administrative
Committee, shall be forfeited and applied in accordance with the terms of
Section 5.5; provided, however, that such forfeited benefits shall be
reinstated if a claim for such forfeited benefits is made by the Participant or
Beneficiary.
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18.7 REPORTS FURNISHED TO PARTICIPANTS. The Administrative
Committee shall furnish to each Participant, and to each Beneficiary receiving
benefits under the Plan, within the time limits specified in the Code and
ERISA, each of the following:
(A) A Summary Plan Description and periodic revisions;
(B) Notification of amendments to the Plan;
(C) A Summary Annual Report which summarizes the Annual
Report filed with the Department of Labor;
(D) An annual status report of his Plan Accounts;
(E) A notice regarding a qualifying rollover
distribution, as prescribed in section 402(f) of the Code; and
(F) Any other reports, documents or information required
by the Code, ERISA or the regulations thereunder.
18.8 REPORTS AVAILABLE TO PARTICIPANT AND BENEFICIARIES. The
Administrative Committee shall make copies of the following documents available
at the principal office of the Employer and at such other locations as may be
required by ERISA for examination by any Participant or Beneficiary:
(A) The Plan and Trust Agreement;
(B) The Summary Plan Description;
(C) The latest Annual Report; and
(D) Any other documents required by the Code, ERISA or
the regulations thereunder.
18.9 REPORTS UPON REQUEST. The Administrative Committee shall
furnish to any Participant or Beneficiary who so requests in writing, once
during any twelve-month period, a statement indicating, on the basis of the
latest available information:
(A) The total benefits accrued; and
(B) The nonforfeitable benefits, if any, which have
accrued, or the earliest date on which benefits will become nonforfeitable.
The Administrative Committee shall also furnish to any Participant or
Beneficiary who so requests in writing, at a reasonable charge as prescribed by
regulation of the Secretary of Labor, any document referred to in Section 18.8.
18.10 CONTROLLED GROUP EMPLOYEES. Except as otherwise provided in
Section 3.8(F), all employees of all corporations, trades or businesses which
are members of a Controlled Group shall be treated as employed by a single
employer.
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18.11 CONSTRUCTION. Construction and administration of this Plan
and Trust Agreement shall be governed by ERISA and other applicable Federal law
and, to the extent not governed by Federal law, by the law of the State in
which the Trustee, if a corporate Trustee, maintains its principal place of
business or, if there is no corporate Trustee, by the law of the State in which
the Employer maintains its principal place of business.
18.12 INSURANCE AND INDEMNIFICATION FOR LIABILITY. The rules
relating to the insurance and indemnification for liability are as follows:
(A) INSURANCE. The Employer may, in its discretion,
obtain, pay for, and keep current a policy or policies of insurance,
insuring members of the Administrative Committee, the Trustee (if an
employee) and other employees to whom any Fiduciary responsibility with
respect to administration of the Plan and/or investment of Plan assets has
been delegated against any and all liabilities, costs and expenses incurred
by such persons as a result of any act, or omission to act, in connection
with the performance of their duties, responsibilities and obligations under
the Plan and any applicable Federal or state law.
(B) INDEMNITY. If the Employer does not obtain, pay for,
and keep current the type of insurance policy or policies referred to in
Section 18.12(A) above, or if such insurance is provided but any of the
members of the Administrative Committee, the Trustee (if an employee) or
other employees referred to in Section 18.12(A) above incur any costs or
expenses which are not covered under such policies, then, in either event,
the Employer shall, to the extent permitted by law, indemnify and hold
harmless such parties against any and all costs, expenses and liabilities
incurred by such parties in performing their duties and responsibilities
under this Plan, provided such party or parties were acting in good faith
within what was reasonably believed to have been in the best interests of
the Plan and its Participants.
18.13 NO RETENTION OF INTEREST IN TRUST FUND. Neither the Employer
nor the Trustee guarantees the Trust Fund from losses or from decline in value.
Except as provided in Section 3.7, the Employer does not retain any beneficial
or reversionary interest in any contributions to the Trust Fund or in any of
the assets, profits, earnings or increment thereof, and all Employer
obligations in any respect, except the supplying of information to the Trustee,
as herein provided, shall cease upon the payment of contributions to the
Trustee. The Employer shall not be in any way responsible for the acts of the
Trustee.
18.14 TERMINATION OF PLAN AND TRUST UNDER RULE AGAINST PERPETUITIES.
Except as may be limited by the law of the State governing the administration
of the Trust Fund, in no event shall the Plan and Trust hereby created continue
beyond the last to survive of those persons born before the Effective Date of
this Plan and Trust who shall die while Participants or Former Participants
hereunder, and 21 years thereafter. This Plan and the Trust hereby created
shall be deemed to have been terminated on the day before the lapse of this
ultimate term determined under this Section 18.14.
Notwithstanding the above, this Section 18.14 shall be inapplicable if
ERISA requires otherwise or if, under the law of the State governing the
administration of the Trust Fund, the Rule against Perpetuities is not
applicable to said Trust Fund.
18.15 NOTICE TO INTERESTED PARTIES. Prior to submitting this Plan
to the Internal Revenue Service for a determination that it qualifies under
section 401 of the Code, the Employer shall provide written notice to all
interested parties, in accordance with section 7476 of the Code, and the
regulations thereunder, that such a submission will be made.
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18.16 EFFECTIVE DATE OF ADOPTION OF PLAN AND TRUST AGREEMENT. The
effective date of adoption of the Plan and Trust Agreement by an adopting
Employer shall be indicated in Section A.1.20 of the Adoption Agreement
applicable to such Employer.
18.17 RESTATEMENT OF EXISTING PLAN. If the adoption of the Plan and
Trust Agreement is as a restatement of an Employer's Prior Plan and trust
agreement, the Employer shall so indicate in the Adoption Agreement applicable
to such Employer. If the Prior Plan provided for participation and/or vesting
standards which were different from those provided in this Plan, as adopted by
the Employer, and the standards, as adopted by the Employer, in this Plan are
to be given prospective application only, the Employer shall so indicate in the
Adoption Agreement applicable to such Employer. If the Prior Plan contained
terms which the adopting Employer desires to make applicable to this Plan, the
provisions of the Prior Plan shall be inserted in the Adoption Agreement
applicable to such adopting Employer. Moreover, any necessary and/or desirable
transitional rules shall be inserted in the Adoption Agreement applicable to
such adopting Employer.
18.18 INDIVIDUAL PROVISIONS. Any provisions applicable to the
adopting Employer only and not otherwise provided for in the Plan and Adoption
Agreement shall be inserted in the Adoption Agreement applicable to such
adopting Employer.
18.19 FAILURE OF QUALIFICATION. If the Plan, as adopted by the
Employer, fails to attain or retain qualification, such Plan shall no longer
participate in the DRINKER BIDDLE & REATH REGIONAL PROTOTYPE DEFINED
CONTRIBUTION PLAN and shall be considered an individually designed plan.
18.20 WAIVER OF MINIMUM FUNDING STANDARDS. Any Employer adopting
this Plan as a money purchase plan that amends this Plan because of a waiver of
the minimum funding standards under section 412(d) of the Code shall be
considered to have an individually designed plan and such plan may no longer
participate in the DRINKER BIDDLE & REATH REGIONAL PROTOTYPE DEFINED
CONTRIBUTION PLAN.
ARTICLE XIX
ADOPTION OF PLAN BY AFFILIATED EMPLOYERS
19.1 ADOPTION OF PLAN AND TRUST. If the Adoption Agreement so
provides, the terms of this Plan, as adopted by the adopting Employer indicated
in the applicable Adoption Agreement, may be adopted by any Affiliated
Employer of the adopting Employer provided:
(A) The Board of Directors or other governing entity of
the adopting Employer consents to such adoption;
(B) The Board of Directors or other governing entity of
the adopting Affiliated Employer adopts this Plan by appropriate action;
(C) The adopting Affiliated Employer executes the
Adoption Agreement; and
(D) The adopting Affiliated Employer executes such other
documents as may be required to make such adopting Affiliated Employer a
party to the Plan and Trust as an Employer (except as provided below).
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An adopting Affiliated Employer that adopts the Plan and Trust
Agreement is thereafter an Employer with respect to its employees for purposes
of the Plan and Trust Agreement except that such adopting Affiliated Employer
delegates to the adopting Employer the power to amend, after the adopting
Affiliated Employer's initial adoption of the Adoption Agreement, the Adoption
Agreement with respect to such adopting Affiliated Employer and the power to
terminate the Plan and Trust Agreement as set forth in Section 19.6.
19.2 WITHDRAWAL FROM PLAN. Subject to the requirements of Article
XVII, any adopting Affiliated Employer may, at any time, withdraw from the Plan
upon giving the Board of Directors or other governing entity of the adopting
Employer, the Administrative Committee and the Trustee at least 30 days notice
in writing of its intention to withdraw. Upon the withdrawal of an adopting
Affiliated Employer pursuant to this Section 19.2, the Trustee shall segregate
a portion of the assets in the Trust as set forth below, the value of which
shall equal the total amount credited to the accounts of Participants employed
by the withdrawing adopting Affiliated Employer. Subject to the requirements
of Article XVII, the determination of which assets are to be so segregated
shall be made by the Trustee in its sole discretion as set forth below.
The Administrative Committee may, at any time, direct the Trustee to
segregate from the Trust such part thereof as the Administrative Committee
shall determine to be held for the benefit of the employees of an adopting
Affiliated Employer, and shall give a copy of such directions to the adopting
Employer and each adopting Affiliated Employer. Such directions shall specify
the assets of the Trust to be segregated. Unless the adopting Employer or any
adopting Affiliated Employer files with the Trustee a written protest within 30
days after delivery of such directions to the Trustee, such directions shall
conclusively establish that the assets specified therein represent the part of
the Trust held for the benefit of the Employees of the adopting Employer and of
each adopting Affiliated Employer.
After the expiration of such 30 day period, and after settlement of
any such protest, the Trustee shall follow the Administrative Committee's
directions, including any modification thereof adopted in settlement of any
protest. Any part of the Trust segregated pursuant to such directions shall
thereafter be held in a separate trust identical in terms to the Trust hereby
established or maintained, except that, with respect to such separate trust,
this Plan and Trust Agreement shall be construed as if such adopting Affiliated
Employer were the adopting Employer and all powers and authority conferred
upon the adopting Employer or its Board or other governing entity and the
Administrative Committee shall devolve upon such adopting Affiliated Employer
or its Board of Directors or other governing entity. At any time thereafter,
such adopting Affiliated Employer and the Trustee may (but they shall not be
required to) enter into a separate agreement stating the terms of such separate
plan and trust agreement which may be the DRINKER BIDDLE & REATH REGIONAL
PROTOTYPE DEFINED CONTRIBUTION PLAN AND TRUST AGREEMENT. If the DRINKER BIDDLE
& REATH REGIONAL PROTOTYPE DEFINED CONTRIBUTION PLAN AND TRUST AGREEMENT is not
so adopted, the plan and trust agreement with respect to the withdrawing
adopting Affiliated Employer shall be considered an individually designed plan.
19.3 EXCLUSIVE PURPOSE OF TRUST. Neither the segregation and
transfer of the Trust assets upon the withdrawal of an adopting Affiliated
Employer nor the execution of a new plan and trust agreement by such
withdrawing adopting Affiliated Employer shall operate to permit any part of
the Trust to be used for, or diverted to, purposes other than for the
exclusive benefit of the Participants or their Beneficiaries.
19.4 APPLICATION OF WITHDRAWAL PROVISIONS. The withdrawal
provisions contained in Section 19.2 and Section 19.3 shall be applicable only
if the withdrawing adopting Affiliated Employer continues to cover its
Participants and eligible Employees in another plan and trust qualified under
sections 401 and 501 of the Code. Otherwise, the termination provisions of the
Plan and Trust Agreement shall apply.
-105-
<PAGE> 114
19.5 SINGLE PLAN. Notwithstanding any other provision set forth
herein, the Plan, as adopted pursuant to this Article XIX by the adopting
Employer and each adopting Affiliated Employer, shall constitute a single plan,
as such term is defined in Treas. Reg. Section 1.414(1)-1(b)(1), as to the
adopting Employer and each adopting Affiliated Employer.
19.6 ADOPTING EMPLOYER APPOINTED AGENT OF ADOPTING AFFILIATED
EMPLOYERS. Each adopting Affiliated Employer appoints the Board of Directors or
other governing entity of the adopting Employer as its agent to exercise on
its behalf all of the power and authority conferred upon the adopting Employer
by this Plan and Trust Agreement, including, without limitation, the power to
amend this Plan and Trust Agreement as set forth in Article XV and the power to
terminate this Plan and/or the Trust Agreement as set forth in Article XVI.
The authority of the Board of Directors or other governing entity of the
adopting Employer to act as agent of any adopting Affiliated Employer shall
terminate only if the part of the Plan's assets held for the benefit of the
employees of such adopting Affiliated Employer shall be segregated in a
separate trust as provided in Section 19.2 and such adopting Affiliated
Employer thereupon withdraws from the Plan in accordance with Section 19.2.
-106-
<PAGE> 115
PART II
[ MUNICIPAL FUND FOR TEMPORARY INVESTMENT]
----------------------------------------
NAME OF ADOPTING EMPLOYER
DEFINED CONTRIBUTION PLAN
(PROFIT-SHARING OR PROFIT-SHARING 401(K))
REGIONAL PROTOTYPE PLAN NUMBER 001
ADOPTION AGREEMENT
DRINKER BIDDLE & REATH
REGIONAL PROTOTYPE DEFINED CONTRIBUTION PLAN AND TRUST AGREEMENT
[ FUND OFFICE RETIREMENT PROFIT-SHARING PLAN ]
--------------------------------------------
NAME OF PLAN
(REV. 06/94)
(C) DRINKER BIDDLE & REATH 1995
<PAGE> 116
<TABLE>
<S> <C>
INTERNAL REVENUE SERVICE DEPARTMENT OF THE TREASURY
DISTRICT DIRECTOR
31 HOPKINS PLAZA
BALTIMORE, MD 21201-0000
Employer Identification Number:
Date: JAN 04, 1993 23-1423089
File Folder Number:
DRINKER BIDDLE & REATH 521006125
PHILADELPHIA NATIONAL BANK BLDG Person to Contact:
C/O HOMER L ELLIOTT ESQUIRE G.N. Wallace
DRINKER BIDDLE & REATH Contact Telephone Number:
1345 CHESTNUT STREET PH NAT BK BLDG (410) 962-2973
PHILADELPHIA, PA 19107-3496 Plan Name:
REGIONAL PROTOTYPE
DEFINED CONTRIBUTION PLAN
Plan Number: 001
Letter Serial Number:
D8520005
</TABLE>
Dear Applicant:
The amendment to the form of the plan identified above is acceptable
under section 401(a) or 403(a) of the Internal Revenue Code. This letter
relates only to the amendment to the form of the plan. It is not a
determination of any other amendment or of the form of the plan as a whole, or
on the effect of other federal or local statutes.
You must furnish a copy of this letter and the enclosed publication to
each employer who adopts this plan. You must also send a copy of this letter,
a copy of the approved form of the plan, and any approved amendments and
related documents to each key District Director of the Internal Revenue Service
in whose jurisdiction there are adopting employers.
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). To adopt the form of the plan, the employer should apply for a
determination letter by filing an application with the key District Director of
the Internal Revenue Service on Form 5307, Application for Determination for
Adopters of Master or Prototype, Regional Prototype or Volume Submitter Plans.
For purposes of sections 15.02 and 15.03 of Rev. Proc. 89-13, 1989-1
C.B. 801, your application was received before March 31, 1991.
Please advise those adopting the plan to contact you if they have any
questions about the operation of the plan.
We have sent a copy of this letter to your representative as indicated
in your Power of Attorney.
If you have any questions on our processing of this case, please call
the above telephone number. If you write, 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.
Sincerely yours,
/s/ H.J. Hightower
District Director
Enclosure(s)
Publication 1488 Letter 2026/DO/CG)
A-2
<PAGE> 117
Department of the Treasury Internal Revenue Service
PUBLICATION 1488
(Rev. February 1991)
FAVORABLE NOTIFICATION LETTER
INTRODUCTION
This publication is issued in conjunction with a favorable notification letter.
It explains the significance of your letter, points out some features that may
affect the qualified status of the plan, and provides information on the
reporting requirements for the plan.
An employee retirement plan qualified under Internal Revenue Code
section 401(a) or 403(a) (qualified plan) is entitled to favorable tax
treatment. For example, contributions made in accordance with the plan
document are generally currently deductible. Participants will not include
these contributions into income until the time they receive a distribution from
the plan, at which time special income averaging rates for lump sum
distributions may serve to reduce the tax liability. In some cases, taxation
may be further deferred by rollover to another qualified plan or individual
retirement arrangement. See Publication 575, Pension and Annuity Income
(Including Simplified General Rule), for further details. Finally, plan
earnings may accumulate free of tax.
Employee retirement plans that fail to satisfy the requirements under
section 401(a) or 403(a) are not entitled to this favorable tax treatment.
Therefore, many employers desire advance assurance that the terms of their
plans satisfy the qualification requirements. The Service provides such
advance assurance for regional prototype plans by issuing favorable
notification letters. However, in some cases, a determination letter is also
required for reliance.
SIGNIFICANCE OF A FAVORABLE NOTIFICATION LETTER
Notification letters are issued by the Service to sponsors of regional
prototype plans. Plan sponsors then make the plan available to employers who
may adopt the plans for the benefit of their employees.
The significance of a favorable notification letter differs for
standardized plans and nonstandardized plans. A standardized plan can be
identified by the number 2, 5, or 7 appearing in the second position of the
letter serial number (the number following the alpha character which appears in
the upper right portion of the letter). A nonstandardized plan may be
identified by the number 3, 6, or 8 appearing in the second position.
STANDARDIZED PLANS. A standardized plan is designed to be automatically
acceptable under any fact pattern, except as indicated below. Therefore, there
is no need to request a determination letter for such plans, provided the
employer does not amend the plan and chooses only those options in the adoption
agreement that were approved by the Service. Although a determination letter
is not requested, the employer must still inform interested parties of the
establishment or amendment of the plan. However, a determination letter is
required for advance assurance that the provisions of the plan satisfy the
qualification requirements if the employer maintains or has maintained another
qualified plan. The Employer is not considered to have maintained another plan
merely because the plan was previously not a standardized plan. Under certain
circumstances, employers who have adopted standardized defined benefit plans
may wish to request a determination letter that their plans prior benefit
structure satisfies the requirements of Internal Revenue Code section
401(a)(26).
Paired plans are standardized plans that are designed to work
together. A paired plan may be recognized by the phrase "other than a
specified paired plan" appearing in the fifth or sixth paragraph of the
notification letter. If the employer maintains and has maintained only paired
plans, a determination letter is not needed.
NONSTANDARDIZED PLANS. It is possible that the unique fact patterns applicable
to a specific employer may cause a nonstandardized plan to fail qualification.
Therefore, to obtain advance assurance that the plan is qualified, the plan
must be submitted for a determination letter. A determination letter is
similar to an insurance policy that will, in many cases, protect the employer
and plan beneficiaries from adverse tax consequences if the plan is later found
to be nonqualified in the absence of a change in law, provided the plan is
being operated in good faith in accordance with plan provisions. This advance
assurance is a service provided by the Internal Revenue Service, and is not
required for qualification. Form 5307, Application for Determination for
Adopters of Master or Prototype Regional Prototype or Volume Submitter Plans,
is used to request a determination letter, along with Form 5302, Employee
Census, Form 8717 (explained later), a copy of the adoption agreement, a copy
of the notification letter, a certification from the plan sponsor that the plan
has not been withdrawn and is still in effect, and a copy of any separate trust
or custodial account document.
USER FEE. There is a charge for requesting a determination letter, but the
charge is significantly reduced for regional prototype plans. Please complete
and attach Form 8717, User Fee for Employee Plan Determination Letter Request,
to Form 5307 when requesting a determination letter.
A-3
<PAGE> 118
LAW CHANGES AFFECTING THE PLAN. Plans must be amended to retain their
qualified status if any plan provision fails qualification requirements because
of changes in the law becoming effective subsequent to the issuance of the
notification letter. If the plan is not amended, the plan will become
nonqualified without specific notice from the Service. This will occur even if
the employer has received a favorable determination letter in addition to the
notification letter. The employer and plan participants may be subject to
adverse tax consequences if the plan is nonqualified.
The first character of the serial number assigned to the plan
indicates the latest law change for which the plan had been amended. For
example, the letter "D" indicates the plan was amended for the Tax Reform Act
of 1986, which generally became effective for plan years after the 1988 plan
year.
A notification letter will not be applicable after a change in
qualification requirements unless the plan sponsor requests a new notification
letter within 12 months after the change. The plan sponsor must provide those
employers for whom the employer is continuing to sponsor the plan with a copy
of the amendments and the new notification letter within 60 days of the receipt
of the new letter. If a change requires modification of the adoption
agreement, employers must execute the new agreement by the later of 6 months
after issuance of the new notification letter, or the end of the period
specified in Internal Revenue Code section 401(b).
If the application for a notification letter was submitted to the
Service within certain time frames, the plan generally need not be amended
again unless required to do so by legislation. The application was submitted
to the Service within these time frames, if the following paragraph appears in
the notification letter: "For purposes of sections 15.02 and 15.03 of Rev.
Proc. 89-13, 1989-1 C.B. 801, your application was received timely".
REQUIRED NOTIFICATIONS TO ADOPTING EMPLOYERS. The plan sponsor must provide
adopting employers with annual notifications indicating whether the sponsor
intends to continue to sponsor the plan, and whether amendments have been made
to the plan. The plan sponsor must also notify employers within 60 days if the
plan sponsor discontinues its sponsoring of the plan.
REQUIRED NOTIFICATIONS TO THE INTERNAL REVENUE SERVICE. On each anniversary of
the date of issuance of the notification letter, the plan sponsor must advise
the Service whether the sponsor has made any changes to the plan, and whether
the plan is still being made available for adoption by employers. The plan
sponsor must also provide a listing of adopting employers, and a statement that
the plan sponsor has provided employers with the notification described in the
above paragraph.
REPORTING REQUIREMENTS. Most plan administrators or employers who maintain an
employee benefit plan must file an annual return/report with the Internal
Revenue Service. The following forms should be used for this purpose:
FORM 5500EZ - generally for a "One-Participant Plan," which is a plan that
covers only: (1) an individual, or an individual or his or her spouse who
wholly owns a business, whether incorporated or not, or (2) partner(s) in a
partnership or the partner(s) and their spouse(s). If Form 5500EZ cannot be
used, the one-participant plan should use 5500-C or 5500-R, whichever applies.
NOTE: Keogh (H.R. 10) plans are required to file an annual return even if the
only participants are owner-employees. The term "owner-employee" includes a
partner who owns more than 10% interest in either the capital or the profits of
the partnership. This applies to both defined contribution and defined benefit
plans.
FILING EXCEPTION FOR PLANS THAT HAVE NO MORE THAN $100,000 IN ASSETS. An
annual return is not required to be filed for one participant plans having less
than $100,000 in assets that otherwise qualify for filing Form 5500EZ.
FORM 5500 - for a pension benefit plan with 100 or more participants at the
beginning of the plan year.
FORM 5500-C - for a pension benefit plan with more than one but fewer than 100
participants at the beginning of the plan year.
FORM 5500-R - for a pension benefit plan with more than one but fewer than 100
participants at the start of the plan year for which 5500-C is not filed.
NOTE: For 1989 and subsequent years Form 5500-R is part of the Form 5500C/R
package. Filing only the first two pages of the Form 5500C/R package
constitutes the filing of a Form 5500-R.
WHEN TO FILE. Forms 5500 and 5500EZ must be filed annually. Form 5500-C must
be filed for (i) the initial plan year, (ii) the year a final return/report
would be filed, and (iii) at three-year intervals. Form 5500-R must be filed
in the years when Form 5500-C is not filed (See Note above). However, 5500-C
will be accepted in place of 5500-R.
DISCLOSURE. The Internal Revenue Service will process the returns and provide
the Department of Labor and the Pension Benefit Guarantee Corporation with the
necessary information and copies of the returns on microfilm for disclosure
purposes.
A-4
<PAGE> 119
PART II
[MUNICIPAL FUND FOR TEMPORARY INVESTMENT]
DEFINED CONTRIBUTION PLAN
(PROFIT-SHARING OR PROFIT-SHARING 401(K))
REGIONAL PROTOTYPE PLAN NUMBER 001
ADOPTION AGREEMENT
DRINKER BIDDLE & REATH
REGIONAL PROTOTYPE DEFINED CONTRIBUTION PLAN AND TRUST AGREEMENT
NOTES TO ADOPTING EMPLOYERS AND TO ADOPTING AFFILIATED EMPLOYERS:
THIS ADOPTION AGREEMENT MAY ONLY BE USED WITH THE DRINKER BIDDLE & REATH
REGIONAL PROTOTYPE DEFINED CONTRIBUTION PLAN.
FAILURE TO PROPERLY FILL OUT THIS ADOPTION AGREEMENT MAY RESULT IN THE
DISQUALIFICATION OF THE PLAN AS ADOPTED BY THE EMPLOYER.
A CASH OR DEFERRED ARRANGEMENT MAY NOT BE ADOPTED BY A TAX EXEMPT OR
GOVERNMENTAL ORGANIZATION WITH THE EXCEPTION OF CERTAIN PRE-EXISTING PLANS.
DRINKER BIDDLE & REATH, THE SPONSORING ORGANIZATION OF THIS PLAN, WILL INFORM
THE ADOPTING EMPLOYER AND/OR ADOPTING AFFILIATED EMPLOYER OF ANY AMENDMENTS
MADE TO THE PLAN OR OF THE DISCONTINUANCE OR ABANDONMENT OF THE PLAN.
DRINKER BIDDLE & REATH IS THE SPONSORING ORGANIZATION OF THIS PLAN. ITS
ADDRESS IS PHILADELPHIA NATIONAL BANK BUILDING, 1345 CHESTNUT STREET,
PHILADELPHIA, PA 19107-3496 AND ITS TELEPHONE NUMBER IS (215) 988-2855.
(FILL IN BLANKS AND INDICATE SELECTION WHERE REQUIRED)
The undersigned Employer hereby (check applicable box)
[ ] adopts
[ X ] adopts, as an amendment to a predecessor
plan and trust agreement of the Employer,
the DRINKER BIDDLE & REATH REGIONAL PROTOTYPE DEFINED CONTRIBUTION PLAN AND
TRUST AGREEMENT, consisting of Part I, the Plan and Trust Agreement, and Part
II, this Adoption Agreement. The Plan and Trust Agreement, as so adopted,
shall be known as the [FUND OFFICE RETIREMENT PROFIT-SHARING PLAN AND TRUST
AGREEMENT] (the "Plan"), a DEFINED CONTRIBUTION PLAN (PROFIT-SHARING OR PROFIT-
SHARING 401(K)) AND TRUST AGREEMENT. The Employer and Trustee, by signing this
Adoption Agreement, mutually agree and consent to the terms of the Plan and
Trust, consisting of Part I, the Plan and Trust Agreement, and Part II, this
Adoption Agreement.
(C) DRINKER BIDDLE & REATH 1995
A-5
<PAGE> 120
NAME OF ADOPTING EMPLOYER: [MUNICIPAL FUND FOR TEMPORARY INVESTMENT]
ADDRESS OF ADOPTING EMPLOYER:[BELLEVUE PARK CORPORATE CENTER
400 BELLEVUE PARKWAY, SUITE 100
WILMINGTON, DE 19809 ]
ADOPTING EMPLOYER'S EMPLOYER IDENTIFICATION NUMBER: [ 6742 ]
ADOPTING EMPLOYER'S BUSINESS CODE NUMBER: [ 51-0241021 ]
TYPE OF ENTITY (check one): [ ] Corporation [ ] S Corporation
[ ] Sole Proprietor [ ] Partnership [ ] Church
[ ] Tax Exempt Organization [ ] Governmental Organization
[ ] Professional Corporation
[ X ] Other (Specify): [ BUSINESS TRUST ]
PLACE OF INCORPORATION OR OTHER ORGANIZATION (SPECIFY): [
PENNSYLVANIA ]
DATE OF INCORPORATION OR DATE BUSINESS BEGAN: [ 1979 ]
ADMINISTRATIVE COMMITTEE EMPLOYER IDENTIFICATION NUMBER: [23-2118138]
PLAN NAME: [ FUND OFFICE RETIREMENT PROFIT-SHARING PLAN ]
PLAN IDENTIFICATION NUMBER: [ 001 (333 FOR FORM 5500C/R) ]
TRUST NAME: [ FUND OFFICE RETIREMENT PROFIT-SHARING PLAN TRUST ]
TRUST EMPLOYER IDENTIFICATION NUMBER (IF ANY): [ 23-2487197 ]
REGIONAL PROTOTYPE (PROFIT-SHARING (401(K)) PLAN NOTIFICATION
LETTER NUMBER: D8520005 (PN:001 JANUARY 4, 1993)
FROZEN PLAN: If the Employer has discontinued all further contributions
to the Plan, check here [ ]. The Employer and the Trustee shall,
however, continue to maintain the Plan and Trust in accordance with the
requirements of the Internal Revenue Code and the Treasury regulations
thereunder.
TYPE PLAN: The Plan, as adopted under this Adoption Agreement, is a
(check one):
[ X ] (A) Profit-Sharing Plan.
[ ] (B) Profit-Sharing 401(k) Plan.
A.1.1 ACCRUAL COMPUTATION PERIOD. The Accrual Computation Period is the
(check one):
[ X ] (A) Plan Year
[ ] (B) (A consecutive 12-month period ending with or within the
Plan Year.) Enter the day and the month this period begins:
[ ](day) [ ](month). For Employees whose
date of hire is less than 12 months before the end of the
12-month period designated, Compensation will be determined
over the Plan Year.
A.1.4 ADMINISTRATIVE COMMITTEE. The name(s) and address(es) of the
member(s) of the Administrative Committee are:
A-6
<PAGE> 121
[(A) EDWARD H. ROACH
----------------------------------------------------------------------
BELLEVUE PARK CORPORATE CENTER
----------------------------------------------------------------------
400 BELLEVUE PARKWAY, SUITE 100
----------------------------------------------------------------------
WILMINGTON, DE 19809
----------------------------------------------------------------------
(B)
----------------------------------------------------------------------
----------------------------------------------------------------------
----------------------------------------------------------------------
----------------------------------------------------------------------
(C)
----------------------------------------------------------------------
----------------------------------------------------------------------
----------------------------------------------------------------------
----------------------------------------------------------------------
]
A.1.10 COMPENSATION. Compensation shall be determined over the Accrual
Computation Period elected in Section A.1.1.
(A) Compensation shall (check one):
[ X ] (1) Include [ ] (2) Not include
Employer contributions made pursuant to a salary reduction agreement which
are not includible in the gross income of the Employee under sections 125,
402(e)(3), 402(h)(1)(B) or 403(b) of the Code.
(B) Compensation shall exclude (specify): [
N/A .]
(Note that this exclusion applies only to the manner of determining
contributions to the Plan and for no other purpose; if not applicable,
insert letters N/A in blanks).
A.1.12 CONTROLLED GROUP.
(A) Is the adopting Employer a member of a Controlled Group
(check one)?
[ ] (1) Yes [ X ] (2) No
(B) If Section A.1.12(A)(1) is checked, is the adopting Employer
a member of an affiliated service group (check one)?
[ ] (1) Yes [ ] (2) No [ X ] (3) N/A
If Section A.1.12(A)(1) is checked, list the name and address of each
member in the following blanks (and if Section A.1.12(B)(1) is also
checked, indicate whether the member is an affiliated service group
member): [ N/A
]
(If Section A.1.12(A)(2) is checked, the letters N/A should be inserted in
these blanks)
A.1.17 CONTRIBUTIONS ON BEHALF OF DISABLED PARTICIPANTS. The Employer
(check one):
[ ] (A) Will [ X ] (B) Will not
make contributions on behalf of disabled Participants on the basis of the
compensation each 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, and
A-7
<PAGE> 122
contributions made on behalf of such Participant shall be nonforfeitable when
made.
A.1.18 EARLY RETIREMENT DATE.
(A) Shall the Plan provide for an Early Retirement Date (check
one)?
[ ] (1) Yes [ X ] (2) No
If Section A.1.18(A)(1) is checked, complete the following:
(B) Early Retirement Date shall mean the (check one):
[ ] (1) Last day of the Plan Year
[ ] (2) Last day of the month (must coincide with a Valuation
Date)
[ ] (3) [ ] (fill in date) (must coincide with a
Valuation Date)
in which the Participant attains age [ ] (not later than age 64) and
completes [ ] Years of Service for Benefit Accrual with the Employer.
A.1.19 EARNED INCOME. This Section shall apply only if the Plan, as
adopted by the adopting Employer, covers Self-Employed Persons.
A.1.20 EFFECTIVE DATE. If the adoption of this Plan and Trust Agreement
constitutes the adoption of a new plan and trust agreement, check (A) and fill
in blank. If the adoption of this Plan and Trust Agreement constitutes the
restatement of an existing plan and trust agreement (including a prior version
of this Plan and Trust Agreement), check (B) and fill in blanks.
[ ] (A) NEW PLAN. The Effective Date of the Plan and Trust
Agreement is [ ].
[ X ] (B) RESTATED PLAN. The original effective date of the
predecessor plan and trust agreement was [SEPTEMBER 18, 1981].
Except as otherwise specifically provided herein, the Effective
Date of the Plan and Trust Agreement, as restated herein, is
[DECEMBER 1, 1989].
A.1.24 ELIGIBILITY COMPUTATION PERIOD. If Section A.1.33(A)(4) is
checked or if the elapsed time method is checked under Section A.2.2(B)(2),
check here [ ] and do NOT complete the remainder of this Section A.1.24.
Otherwise, the Eligibility Computation Period shall be calculated as follows:
(A) COMPUTATION PERIOD. The Eligibility Computation Period
shall be calculated pursuant to (check (1) or (2)):
[ X ] (1) NORMAL RULE. The Eligibility Computation Period(s)
shall be determined under Section 1.24(A) of the Plan.
[ ] (2) ALTERNATE RULE. The Eligibility Computation Period(s)
shall be determined under Section 1.24(B) of the Plan.
(B) HOURS OF SERVICE REQUIRED. The number of Hours of Service
which must be completed in order to meet the Eligibility Computation Period
requirements of the Plan is [ 1 ] (fill in blank but not to exceed 1,000
Hours of Service).
A-8
<PAGE> 123
A.1.27 EMPLOYEE PENSION BENEFIT PLAN. Does the Employer or any member
of its Controlled Group maintain or has the Employer or any member of its
Controlled Group maintained any other Employee Pension Benefit Plan (check
one)?
[ X ] (A) Yes [ ] (B) No
If Section A.1.27(A) is checked, list such Employee Pension Benefit Plan(s)
in the following lines: [CHESTNUT STREET EXCHANGE FUND RETIREMENT
PROFIT-SHARING PLAN; INDEPENDENCE SQUARE INCOME SECURITIES, INC. RETIREMENT
PROFIT-SHARING PLAN; TEMPORARY INVESTMENT FUND, INC. RETIREMENT
PROFIT-SHARING PLAN; AND TRUST FOR SHORT TERM FEDERAL SECURITIES RETIREMENT
PROFIT-SHARING PLAN. ALL OF THE FOREGOING PLANS WERE MERGED INTO THIS PLAN
EFFECTIVE DECEMBER 1, 1987. ]
(If Section A.1.27(B) is checked, the letters N/A should be inserted in these
blanks).
A.1.33 ENTRY DATE. Entry Date shall mean (check (A) or (B)):
[ X ] (A) REGULAR METHOD.
[ ] (1) The first day of the Plan Year (this option cannot be
used unless the maximum age and service requirements are
reduced by 1/2 year (i.e., age 20 1/2 or less must be
selected in Section A.2.2(B)(1)(a)(ii) and the service
requirement in Section A.2.2(B)(1)(a) (i) must be reduced
by 1/2 year), coincident with, or, if the first day of the
Plan Year does not so coincide, the first day of the Plan
Year next following, the date on which an Employee meets
the eligibility requirements of Article II of the Plan.
[ ] (2) The first day of the Plan Year or the date six months
after the first day of the Plan Year (whichever date is
earlier), coincident with, or if such dates do not so
coincide, the first day of the Plan Year or the date six
months after the first day of the Plan Year (whichever date
is earlier) next following, the date on which an Employee
meets the eligibility requirements of Article II of the
Plan.
[ ] (3) The first day of the month coincident with, or if the
first day of the month does not so coincide, the first day
of the month next following, the date on which an Employee
meets the eligibility requirements of Article II of the
Plan.
[ ] (4) The Employee's date of hire.
[ X ] (5) The date on which the eligibility requirements of
Article II of the Plan are met.
[ ] (6) The first day of the quarter (in the Plan Year)
coincident with, or if the first day of the quarter does
not so coincide, the first day of the quarter (in the Plan
Year) next following, the date on which an Employee meets
the eligibility requirements of Article II of the Plan.
[ ] (7) The first day of the Plan Year in which an Employee
meets the eligibility requirements of Article II of the
Plan.
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[ ] (B) ELAPSED TIME METHOD. The Employee's first day of
employment or reemployment in accordance with the rules of
Section 1.55(B) of the Plan.
A.1.35 EXCESS COMPENSATION. Excess Compensation shall mean Compensation
in excess of (check applicable block):
[ ] (A) Taxable Wage Base.
[ ] (B) [$ ] (if (B) is checked, insert dollar amount not to
exceed the Taxable Wage Base).
[ X ] (C) N/A (The Plan is not integrated with Social Security).
A.1.38 HIGHLY COMPENSATED EMPLOYEE.
(A) CALENDAR YEAR ELECTION. Does the Employer desire to make the
calendar year election provided in Section 1.38 of the Plan for purposes of
determining the look-back year calculation (check one)?
[ ] (1) Yes [ X ] (2) No
IF THIS ELECTION IS MADE, SUCH ELECTION MUST APPLY TO ALL PLANS, ENTITIES AND
ARRANGEMENTS OF THE EMPLOYER.
(B) SIMPLIFIED DEFINITION. If the Employer maintains significant
business activities (and employs Employees) in at least two significantly
separate geographic areas, the Employer may elect the simplified definition
of Highly Compensated Employee in Section 1.38 of the Plan. Does the
Employer desire to make this election (check one):
[ ] (1) Yes [ X ] (2) No [ ] (3) N/A
A.1.44 INVESTMENT MANAGER. The name and address of the Investment
Manager are: [ N/A
]
(If no Investment Manager has been appointed by the Employer, the letters N/A
should be inserted in these blanks).
A.1.46 LEASED EMPLOYEES. Does the Employer have any Leased Employees
(check one)?
[ ] (A) Yes [ X ] (B) No
If Section A.1.46(A) is checked, complete Section A.2.3(H) below.
A.1.47 LIMITATION COMPENSATION. Limitation Compensation shall mean all
of each Participant's (check one):
[ X ] (A) Wages, Tips and Other Compensation as Reported on Form
W-2.
[ ] (B) Code Section 3401(a) Wages.
[ ] (C) Code Section 415 Safe-Harbor Compensation.
A.1.48 LIMITATION YEAR. The Limitation Year is the (check applicable
block):
[ ] (A) Calendar year.
[ X ] (B) Twelve-consecutive month period ending (insert month and
day) [ NOVEMBER 30 ].
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A.1.53 NORMAL RETIREMENT AGE. Normal Retirement Age shall mean (check
one):
[ X ] (A) Age [ 65 ] (fill in blank but not earlier than age 62 and
not later than age 65).
[ ] (B) The later of age [ ] fill in blank but not earlier than
age 62 and not later than age 65) or the [ ] (fill in blank
but not to exceed 5th) anniversary of the first day of the
first Plan Year in which the Participant commenced
participation in the Plan.
A.1.55 ONE-YEAR BREAK IN SERVICE. A One-Year Break In Service shall be
determined by the following method (check one):
[ X ] (A) REGULAR METHOD. If this method is selected, a One-Year
Break In Service shall occur in any Computation Period in which
the Employee completes not more than [ 100] (fill in blank, but
not to exceed 500) Hours of Service.
[ ] (B) ELAPSED TIME METHOD.
A.1.56 OWNER-EMPLOYEES OR SHAREHOLDER-EMPLOYEES.
(A) Does the Plan cover any Owner-Employees, as defined in
Section 1.56 of the Plan (check one)?
[ ] (1) Yes [ ] (2) No
[ X ] (3) N/A (This Plan does not cover any Self-Employed
Persons)
If Section A.1.56(A)(1) is checked, see Section 2.4 of the Plan.
(B) Does the Plan cover any shareholder-employees, as defined in
Section 7.11(A)(7) of the Plan (check one)?
[ ] (1) Yes [ ] (2) No
[ X ] (3) N/A (The Employer is not an electing S corporation)
If Section A.1.56(B)(1) is checked, see Section 7.11(A)(7) of the Plan.
A.1.63 PLAN SPONSOR. The name(s) and address(es) of the Plan Sponsor(s)
are: [ MUNICIPAL FUND FOR TEMPORARY INVESTMENT
BELLEVUE PARK CORPORATE CENTER
400 BELLEVUE PARKWAY, SUITE 100
WILMINGTON, DE 19809 ]
A.1.64 PLAN YEAR. The Plan Year shall be the Computation Period ending
(insert month and day) [ NOVEMBER 30 ].
A.1.72 QUALIFYING EMPLOYER SECURITIES. If this Adoption Agreement
provides for investments in Qualifying Employer Securities, the Employer may
restrict the types of Employer Securities so qualifying by indicating the
restrictions in the following blanks: [ NO RESTRICTIONS
]
(If investment in Qualifying Employer Securities is not restricted to type,
insert in the blanks the words "No Restrictions"; if investment in Qualifying
Employer Securities is not permitted, insert the letters N/A in the blanks).
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A.1.78 SELF-EMPLOYED PERSONS. Does the Plan cover Self-Employed Persons
(check one)?
[ ] (A) Yes [ X ] (B) No
A.1.79 SERVICE.
(A) If not otherwise required by the Plan, shall service with
predecessor employer(s) (to the extent specified in Section A.1.79 (B) and
(C)) be treated as Service with the Employer (check one)?
[ ] (1) Yes [ ] (2) No
[ X ] (3) N/A (No predecessor employer)
(B) If Section A.1.79(A)(1) is checked, service with the
predecessor employer(s) specified in Section A.1.79 (C) shall be treated as
Service with the Employer for purposes of (check applicable blank(s)):
[ ] (1) Eligibility for Participation
[ ] (2) Vesting
[ X ] (3) N/A
(C) If Section A.1.79(A)(1) is checked, indicate the name of the
predecessor employer(s) in the following blanks: [ N/A ]
(If Section A.1.79(A)(2) or (3) is checked, insert the letters N/A in the
blanks).
(D) If Section A.18.17(A) is checked, and the Prior Plan
credited service under the elapsed time method, indicate the equivalency
(if any) which is to be used to credit service in the Computation Period in
which the amendment is effective, if the effective date of the amendment is
other than the first day of the Computation Period (check one):
[ ] Daily [ ] Monthly
[ ] Weekly [ X ] N/A
[ ] Semi-Monthly
A.1.83 TAXABLE YEAR. The Employer's Taxable Year is the year ending
(insert month and day) [ NOVEMBER 30 ].
A.1.85 TOP-HEAVY RATIO. For purposes of establishing present value to
compute the Top-Heavy Ratios of Section 1.85 of the Plan, any benefit shall be
discounted only for mortality and interest based on the following:
(A) INTEREST RATE (check one):
[ X ] (1) APPLICABLE INTEREST RATE (For purposes of this Section
A.1.85, "Applicable Interest Rate" shall mean the interest
rate or rates which would be used, as of the date
distribution commences under a Defined Benefit Plan, by the
Pension Benefit Guaranty Corporation for purposes of
determining the present value of a participant's benefits
under such Defined Benefit Plan if such Defined Benefit
Plan had terminated on the date distribution commences with
insufficient assets to provide benefits guaranteed by the
Pension Benefit Guaranty Corporation on that date. For
purposes of this
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provision, the "date distribution commences" shall mean the
Top-Heavy Valuation Date).
[ ] (2) OTHER (specify) [ ]%
(B) MORTALITY TABLE: [ 1984 UNISEX MORTALITY TABLE]
A.1.86 TOP-HEAVY VALUATION DATE. The Top-Heavy Valuation Date, for
purposes of calculating the Top-Heavy Ratios shall be (fill in blank) [ THE
LAST DAY ] of each Plan Year.
A.1.91 TRUSTEE(S). The name(s) and address(es) of the Trustee(s) are:
[(A) ROBERT R. FORTUNE
----------------------------------------------------------------------
BELLEVUE PARK CORPORATE CENTER
----------------------------------------------------------------------
400 BELLEVUE PARKWAY, SUITE 100
----------------------------------------------------------------------
WILMINGTON, DE 19809
----------------------------------------------------------------------
(B) EDWARD J. ROACH
----------------------------------------------------------------------
BELLEVUE PARK CORPORATE CENTER
----------------------------------------------------------------------
400 BELLEVUE PARKWAY, SUITE 100
----------------------------------------------------------------------
WILMINGTON, DE 19809
----------------------------------------------------------------------
(C)
----------------------------------------------------------------------
----------------------------------------------------------------------
----------------------------------------------------------------------
]
----------------------------------------------------------------------
A.1.93 VALUATION DATE. Valuation Date shall mean:
(A) For purposes of determining a Participant's Accrued Benefit
which is distributable in accordance with Article VII of the Plan (check
one):
[ ] (1) Last day of Plan Year.
[ X ] (2) Last day of Plan Year and [ THE LAST DAY OF EVERY
OTHER CALENDAR MONTH DURING THE PLAN YEAR
] (insert date(s)).
(B) For purposes of determining the fair market value of assets
in the Trust Fund and allocating the increase or decrease in the assets in
accordance with Sections 5.3 and 5.4 of the Plan (check one):
[ X ] (1) The date(s) specified in Section A.1.93(A).
[ ] (2) Last day of Plan Year and [
] (insert date(s)).
A.1.97 YEAR OF SERVICE FOR BENEFIT ACCRUAL.
(A) GENERAL. A Year of Service for Benefit Accrual shall be
determined by the following method (check one):
[ X ] (1) REGULAR METHOD. (This method must be selected if
Section A.1.55(A) is checked). In order for a Participant
to have a Year of Service for Benefit Accrual for any Plan
Year, the Participant must complete the number of Hours of
Service indicated (check either (a) and fill in blank or
(b)):
[ X ] (a) The number of Hours of Service which must be
completed with the Employer in order for a Participant
to have a Year of Service for Benefit Accrual is [ 200
] (fill in blank but not to exceed 1,000 Hours of
Service).
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<PAGE> 128
[ ] (b) The number of Hours of Service which must be
completed with the Employer in order for a Participant
to have a Year of Service for Benefit Accrual for a
Plan Year is 501 if the Participant is not an active
Employee on the last day of the Plan Year; if the
Participant is an active Employee on the last day of
the Plan Year, only one Hour of Service with the
Employer must be completed in order for the Participant
to have a Year of Service for Benefit Accrual for such
Plan Year.
NOTE: UNDER PROPOSED TREAS. REG. Sections 1.410(B) AND
1.401(A)(26), IT MAY BE NECESSARY TO PROVIDE THAT NO MORE THAN 501
HOURS OF SERVICE ARE REQUIRED FOR A YEAR OF SERVICE FOR BENEFIT
ACCRUAL FOR ANY PARTICIPANT WHO HAS TERMINATED EMPLOYMENT AND IS
NOT AN ACTIVE EMPLOYEE ON THE LAST DAY OF THE PLAN YEAR AND THAT NO
MORE THAN ONE HOUR OF SERVICE IS REQUIRED FOR A YEAR OF SERVICE FOR
BENEFIT ACCRUAL FOR ANY PARTICIPANT WHO IS AN ACTIVE EMPLOYEE ON
THE LAST DAY OF THE PLAN YEAR. (PROPOSED TREAS. REG. Section
Section 1.410(B)-3(C) AND 1.401(A)(26)-3(B)(8)).
[ ] (2) ELAPSED TIME METHOD. (This method must be selected if
Section A.1.55(B) is checked).
(B) ELECTIVE DEFERRAL CONTRIBUTIONS. If Elective Deferral
Contributions are provided for under Section A.3.4 of the Adoption
Agreement, the number of Hours of Service which a Participant must complete
in a Year of Service for Benefit Accrual is [ N/A] (fill in blank but not
to exceed 1,000 Hours of Service unless Section A.1.97(A)(2) is checked, in
which case insert letters "ET" and the elapsed time rules apply; if there
are no Elective Deferral Contributions, insert letters "N/A") in order for
the Participant to have Elective Deferral Contributions made on his behalf
under the Plan.
(C) MATCHING CONTRIBUTIONS. If Matching Contributions by the
Employer are provided for under Section A.3.5 of the Adoption Agreement,
the number of Hours of Service which a Participant must complete in a Year
of Service for Benefit Accrual is [ N/A ] (fill in blank (if there are
no Matching Contributions, insert letters "N/A") but not to exceed 1,000
Hours of Service unless Section A.1.97(A)(2) is checked, in which case
insert letters "ET" and the elapsed time rules apply) in order for the
Employer to match Participant Contributions or Elective Deferral
Contributions of such Participant under Section A.3.5 of the Adoption
Agreement.
Except as provided in Sections A.1.97(B) and A.1.97(C), a Year of Service
for Benefit Accrual shall be determined under Section A.1.97(A).
A.1.98 YEAR OF SERVICE FOR ELIGIBILITY. The number of Hours of Service
which must be completed in order for an Employee to have a Year of Service for
Eligibility is [ 1 ] (fill in blank, but not to exceed 1,000 Hours of
Service; insert letters N/A if Section A.1.33(A)(4) is checked or if the
elapsed time method is selected under Section A.2.2.(B)(2).
A.1.99 YEAR OF SERVICE FOR VESTING. A Year of Service for Vesting shall
be determined by the following method (check one):
[ X ] (A) REGULAR METHOD. (This method must be selected if Section
A.1.55(A) is checked). The number of Hours of Service which
must be completed in order for a Participant to have a Year of
Service for Vesting is [ 200 ] (fill in blank but not to
exceed 1,000 Hours of Service).
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<PAGE> 129
[ ] (B) ELAPSED TIME METHOD. (This method must be selected if
Section A.1.55(B) is checked).
[ ] (C) N/A (Plan provides 100% immediate vesting).
A.2.2 ELIGIBILITY REQUIREMENTS.
(A) ELIGIBLE CLASSES OF EMPLOYEES:
(1) Except as provided in (2) below, the following Employees
are or shall be eligible to participate in the Plan (check
one):
[ X ] (a) All Employees
[ ] (b) Salaried Employees only (as defined in Section
1.77 of the Plan)
[ ] (c) Hourly Employees only (as defined in Section 1.40
of the Plan)
[ ] (d) All Employees except (specify class or classes of
Employees to be excluded): [
]
(2) The following Employees shall not be eligible to
participate in the Plan (check block(s) if such Employees are
to be excluded):
[ X ] (a) Union Employees (as defined in Section 1.92 of the
Plan)
[ X ] (b) Non-Resident Aliens (as defined in Section 1.52 of
the Plan)
(B) LENGTH OF SERVICE; MINIMUM AGE: Participation in the Plan
shall be determined under either the regular method or the elapsed time
method (check (1) or (2)):
[ X ] (1) REGULAR METHOD. If the regular method is selected,
check (a) or (b):
[ ] (a) SERVICE AND AGE REQUIREMENT. In order to
participate in the Plan, an Employee shall meet the
following requirements (complete blanks):
(i) SERVICE.
(AA) ELECTIVE DEFERRAL CONTRIBUTIONS. An Employee
shall have completed [ ] Year of Service for
Eligibility (not more than one Year of Service for
Eligibility) to be eligible to make Elective Deferral
Contributions.
(BB) MATCHING CONTRIBUTIONS. An Employee shall have
completed [ ] Year(s) of Service for Eligibility
(not more than two Years of Service for Eligibility)
to be eligible for Matching Contributions.
(CC) EMPLOYER CONTRIBUTIONS AND ALL OTHER PURPOSES.
An Employee shall have completed [ ] Year(s) of
Service
A-15
<PAGE> 130
for Eligibility (not more than two Years of Service
for Eligibility) for Employer Contributions and for
all other purposes of the Plan.
Note that in Section A.2.2(B)(1)(a)(i)(BB) and (CC) not
more than one Year of Service for Eligibility may be
selected, if the option under Section A.7.6(B)(1)(a) is
not elected nor more than two Years of Service for
Eligibility if the option under Section A.7.6(B)(1)(a) is
elected. For purposes of this Section A.2.2(B)(1)(a)(i),
Service includes service with a predecessor employer if
the Employer adopting the Plan is maintaining the plan of
a predecessor employer. Such Service also includes
predecessor service to the extent required by the
Secretary of the Treasury or his delegate.
Service for purposes of eligibility also includes service
with a predecessor employer if such service is not
otherwise required to be included under Sections 1.79 and
2.2 of the Plan to the extent provided in Section A.1.79.
(ii) AGE. An Employee shall have attained [ ]
years of age (not more than age 21).
[ X ] (b) NO SERVICE OR AGE REQUIREMENT. The Plan shall
cover Employees in eligible classes effective on the
first Entry Date coinciding with, or next following,
their date of hire.
[ ] (2) ELAPSED TIME METHOD. The Employee shall be eligible
to participate in the Plan on his first day of employment
or reemployment in accordance with the rules of Section
1.55(B) of the Plan.
A.2.3 ADDITIONAL RULES.
(A)-(F) RESERVED.
(G) ALLOCATIONS TO PARTICIPANTS. Except as otherwise provided
below, a Participant shall share in Employer contributions in any Plan Year
if the Participant completes a Year of Service for Benefit Accrual during
such Plan Year. Notwithstanding any other provision of the Plan or this
Adoption Agreement, any Participant making Elective Deferral or Participant
Contributions to the Plan for any Plan Year shall be entitled to such
Elective Deferral or Participant Contributions.
(1) EMPLOYER CONTRIBUTIONS. This provision shall only apply
if Section A.1.97(A)(1) is checked and then only to the
extent permitted by Section 3.11 of the Plan.
(a) SEPARATION FROM SERVICE FOR REASONS OTHER THAN
DISABILITY, DEATH OR RETIREMENT.
(i) Shall Participants who separate from the service
of the Employer (for reasons other than Disability,
death or retirement) before the end of the Plan Year
even if they have completed a Year of Service for
Benefit Accrual share in Employer
A-16
<PAGE> 131
contributions for such Plan Year (check one)?
[ X ] (AA) Yes [ ] (BB) No
[ ] (CC) N/A (Section A.1.97(A)(2) checked)
NOTE THAT SECTION A.2.3(G)(1)(A)(I)(AA) MUST BE CHECKED IF SECTION
A.1.97(A)(1)(B) IS CHECKED.
(ii) If Section A.2.3(G)(1)(a)(i)(AA) is checked,
shall such Participant share in Employer contributions
for such Plan Year if such Participant has not
completed a Year of Service for Benefit Accrual (check
one)?
[ X ] (AA) Yes [ ] (BB) No
[ ] (CC) N/A (Section A.2.3 (G)(1) (a)(i)(AA) not
checked)
(b) DISABILITY, DEATH OR RETIREMENT.
(i) Shall Participants who separate from the service
of the Employer because of Disability, death or
retirement before the end of the Plan Year even if they
have completed a Year of Service for Benefit Accrual
share in Employer contributions for such Plan Year
(check one)?
[ X ] (AA) Yes [ ] (BB) No
[ ] (CC) N/A (Section A.1.97(A)(2) checked)
NOTE THAT SECTION A.2.3(G)(1)(B)(I)(AA) MUST BE CHECKED IF SECTION
A.1.97(A)(1)(B) IS CHECKED.
(ii) If Section A.2.3(G)(1)(b)(i)(AA) is checked,
shall such Participant share in Employer contributions
for such Plan Year if such Participant has not
completed a Year of Service for Benefit Accrual (check
one)?
[ X ] (AA) Yes [ ] (BB) No
[ ] (CC) N/A (Section A.2.3(G)(1)(b) (i)(AA) not
checked)
(2) MATCHING CONTRIBUTIONS. This provision shall only apply
if Section A.1.97(A)(1) is checked.
(a) SEPARATION FROM SERVICE FOR REASONS OTHER THAN
DISABILITY, DEATH OR RETIREMENT.
(i) Shall Participants who separate from the service of
the Employer (for reasons other than Disability, death
or retirement) before the end of the (check one) [ ]
(aa) month [ ] (bb) quarter [ ] (cc) Plan Year for
which the Matching Contribution is being made even if
they have completed a Year of Service for
A-17
<PAGE> 132
Benefit Accrual share in Matching Contributions for
such period (check one)?
[ ] (AA) Yes [ ] (BB) No
[ X ] (CC) N/A (No Matching Contributions or Section
A.1.97(A)(2) checked)
NOTE THAT SECTION A.2.3(G)(2)(A)(I)(AA) MUST BE CHECKED IF SECTION
A.1.97 (A)(1)(B) IS CHECKED.
(ii) If Section A.2.3(G)(2)(a)(i) (AA) is checked,
shall such Participant share in Matching Contributions
for such (check one) [ ] (aa) month [ ] (bb)
quarter [ ] (cc) Plan Year if such Participant has
not completed a Year of Service for Benefit Accrual
(check one)?
[ ] (AA) Yes [ ] (BB) No
[ X ] (CC) N/A (Section A.2.3(G)(2)(a)(i) (AA) not
checked)
(b) DISABILITY, DEATH OR RETIREMENT.
(i) Shall Participants who separate from the service
of the Employer because of Disability, death or
retirement before the end of the (check one) [ ] (aa)
month [ ] (bb) quarter [ ] (cc) Plan Year for which
the Matching Contribution is being made even if they
have completed a Year of Service for Benefit Accrual
share in Matching Contributions for such period (check
one)?
[ ] (AA) Yes [ ] (BB) No
[ X ] (CC) N/A (no Matching Contributions or Section
A.1.97(A)(2) checked)
NOTE THAT SECTION A.2.3(G)(2)(B)(I)(AA) MUST BE CHECKED IF SECTION
A.1.97(A)(1)(B) IS CHECKED.
(ii) If Section A.2.3(G)(2)(b) (i)(AA) is checked,
shall such Participant share in Matching Contributions
for such (check one) [ ] (aa) month [ ] (bb)
quarter [ ] (cc) Plan Year if such Participant has
not completed a Year of Service for Benefit Accrual
(check one):
[ ] (AA) Yes [ ] (BB) No
[ X ] (CC) N/A (Section A.2.3(G)(2)(b)(i)(AA) not
checked.
(H) LEASED EMPLOYEES. Shall Leased Employees be eligible to
participate in the Plan (check applicable block)?
[ ] (1) Yes [ ] (2) No [ X ] (3) N/A
If Section A.2.3(H)(1) is checked, describe Leased Employees to be covered by
the Plan and conditions and other limitations on such coverage in the
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<PAGE> 133
following lines: [ N/A ]
(If not applicable, insert letters N/A in these blanks)
A.2.4 PLANS COVERING OWNER-EMPLOYEES. Section 2.4 of the Plan does not
apply unless Section A.1.56(A) is checked.
A.3.1 EMPLOYER CONTRIBUTIONS.
(A) EMPLOYER CONTRIBUTIONS.
(1) GENERAL. Shall the Employer, in its sole discretion, be
permitted to make Employer Contributions to the Plan (check
one)?
[ X ] (a) Yes [ ] (b) No
If Section A.3.1(A)(1)(a) is checked, such Employer
Contributions shall be allocated under Section A.5.1(A).
(2) PROFIT REQUIREMENTS. Shall Profits be required for
Employer Contributions to the Plan (check one)?
[ ] (a) Yes [ X ] (b) No
(B) QUALIFIED NONELECTIVE CONTRIBUTIONS.
(1) ELECTION. May the Employer be permitted to make, in its
sole discretion, Qualified Nonelective Contributions to the
Plan (check one)?
[ ] (a) Yes [ ] (b) No
[ X ] (c) N/A (No Elective Deferral or Participant
Contributions)
(2) AMOUNT. If the Employer does make such contributions to
the Plan, then the amount of such contributions for each Plan
Year shall be (check one):
[ ] (a) [ ] percent (not to exceed 15 percent) of the
Compensation of all Participants eligible to share in
the allocation.
[ ] (b) [ ] percent of the Profits, but in no event more
than [$ ] for any Plan Year.
[ ] (c) An amount determined by the Employer.
[ X ] (d) N/A (Qualified Nonelective contributions not
permitted).
(3) PARTICIPANTS ELIGIBLE FOR ALLOCATION. Allocation of
Qualified Nonelective Contributions shall be made to the
accounts of (check one):
[ ] (a) All Participants
[ ] (b) Only Participants who are Non-Highly Compensated
Employees
[ ] (c) Only Participants who are Non-Highly Compensated
Employees and who are (specify group to which
allocations are to be made) [
A-19
<PAGE> 134
]
[ X ] (d) N/A (Qualified Nonelective Contributions not
permitted)
(4) MANNER OF ALLOCATION. Allocation of Qualified
Nonelective Contributions shall be made (check one):
[ ] (a) In the ratio which each affected Participant's
Compensation for the Plan Year bears to the total
Compensation of all affected Participants for such Plan
Year.
[ ] (b) In the ratio which each affected Participant's
Compensation not in excess of [$ ] for the Plan
Year bears to the total Compensation of all affected
Participants not in excess of [$ ] for such Plan
Year.
[ X ] (c) N/A (Qualified Nonelective Contributions not
permitted).
(C) QUALIFIED MATCHING CONTRIBUTIONS.
(1) ELECTION. May the Employer be permitted to make
Qualified Matching Contributions to the Plan?
[ ] (a) Yes [ ] (b) No
[ X ] (c) N/A (No Elective Deferrals or Participant
Contributions)
(2) ALLOCATION. The Employer shall, in its sole discretion,
make Qualified Matching Contributions to the Plan on behalf
of (check one):
[ ] (a) All Participants
[ ] (b) All Participants who are Non-Highly Compensated
Employees
[ ] (c) All Participants who are Non-Highly Compensated
Employees and who are (specify group to which
allocations are to be made)
[
]
[ X ] (d) N/A (No Qualified Matching Contributions)
If Section A.3.1(C)(2)(a), (b) or (c) is checked, the
allocation shall be made to applicable Participants who make
(check (i) and/or (ii) or (iii)):
[ ] (i) Elective Deferral Contributions
[ ] (ii) Participant Contributions
[ X ] (iii) N/A (No Qualified Matching Contributions)
(3) AMOUNT. The Employer shall contribute and allocate to
each Participant's Qualified Matching
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Contribution account an amount determined as follows (check
applicable block(s)):
[ ] (a) ELECTIVE DEFERRAL CONTRIBUTIONS. The Employer
shall contribute an amount equal to (check one):
[ ] (i) [ ] percent of the Participant's Elective
Deferral Contributions; or
[ ] (ii) that percent of the Participant's Elective
Deferral Contributions, as determined by the
Employer, in its sole discretion, for the Plan
Year.
[ ] (b) PARTICIPANT CONTRIBUTIONS. The Employer shall
contribute an amount equal to (check one):
[ ] (i) [ ] percent of the Participant's
Participant Contributions; or
[ ] (ii) that percent of the Participant's
Participant Contributions, as determined by the
Employer, in its sole discretion, for the Plan
Year.
[ X ] (c) N/A (No Qualified Matching Contributions).
The Employer shall not match amounts provided above in excess of [$ N/A],
or in excess of [N/A] percent of the Participant's Compensation (if
there are no limitations or if this provision is not otherwise
applicable, insert letters N/A in blank(s)).
A.3.2 PARTICIPANT CONTRIBUTIONS.
(A) PERMISSIBILITY. Participant Contributions shall (check (1),
(2) or (3)):
[ X ] (1) Not be permitted under the Plan (NOTE: THIS BLOCK
MUST BE CHECKED UNLESS THE PLAN HAS A CODA AS INDICATED BY
CHECKING SECTION A.3.4(A)(2)).
[ ] (2) Be permitted (but not required) in the amounts
provided by Section 3.2 of the Plan but subject to the
limitations of Section 3.8 of the Plan.
[ ] (3) Be required in order for an Employee to participate in
the Plan. Such Participant Contributions shall be made by
payroll deduction and shall equal no less than [ ]
percent but shall not exceed [ ] percent (not to exceed 6
percent) of the Participant's Compensation for the Plan
Year. The Employee shall enter into an agreement with the
Employer providing for Participant Contributions in any
amount from [ ] percent to [ ] percent (not to exceed 6
percent) of the Participant's Compensation for the Plan
Year. In addition, the Employee may, but is not required
to, make voluntary Participant Contributions in the amounts
provided
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for in Section 3.2 of the Plan subject to the limitations
of Section 3.8 of the Plan.
(B) PAYROLL DEDUCTION. Participant Contributions by payroll
deduction (check (1), (2) or (3)):
[ ] (1) Shall not be permitted.
[ ] (2) Shall be permitted.
[ X ] (3) Are N/A (No Participant Contributions).
A.3.4 ELECTIVE DEFERRAL CONTRIBUTIONS.
(A) ELECTION. Elective Deferral Contributions shall (check (1)
or (2)):
[ X ] (1) Not be permitted under the Plan.
[ ] (2) Be permitted in accordance with the provisions of
Section 3.4 of the Plan.
If Section A.3.4(A)(2) is checked, a salary reduction agreement must be
completed and filed by the Participant with the Administrative Committee
prior to the date the Elective Deferral Contributions are made.
(B) ELECTION CHANGES. If Section A.3.4(A)(2) is checked, the
Participant shall be permitted to enter into a new salary reduction agreement
(check one):
[ ] (1) Monthly [ ] (2) Quarterly
[ ] (3) Semi-Annually [ ] (4) Annually
[ ] (5) Other (Specify): [ ]
[ X ] (6) N/A
A salary reduction agreement shall remain in effect until revoked or changed.
(C) REVOCATION OF ELECTION. A Participant shall be permitted to
revoke his salary reduction agreement (check one):
[ ] (1) Only as permitted under Section A.3.4(B).
[ ] (2) Upon 15 days' written notice to the Administrative
Committee on the Appropriate Form.
[ X ] (3) N/A.
(D) INCLUSION OF QUALIFIED MATCHING AND QUALIFIED NONELECTIVE
CONTRIBUTIONS. Qualified Matching Contributions and Qualified Nonelective
Contributions may be taken into account as Elective Deferral Contributions
for purposes of calculating the "Actual Deferral Percentages." In
determining Elective Deferral Contributions for the purpose of the ADP test,
the Employer shall include, under the Plan or any other plan of the Employer
as provided by Treasury regulations under the Code, (check one):
[ ] (1) Qualified Matching Contributions.
[ ] (2) Qualified Nonelective Contributions.
[ X ] (3) N/A (Elective Deferral Contributions are not permitted
or Employer does not desire to make this election or no
Qualified Matching or Qualified Nonelective Contributions
are permitted).
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<PAGE> 137
(E) QUALIFIED MATCHING CONTRIBUTIONS - AMOUNT. The amount of
Qualified Matching Contributions made under Sections 3.1 of the Plan and
A.3.1 of this Adoption Agreement and taken into account as Elective Deferral
Contributions for purposes of calculating the "Actual Deferral Percentages,"
subject to such other requirements as may be prescribed by the Secretary of
the Treasury, shall be (check one):
[ ] (1) All such Qualified Matching Contributions.
[ ] (2) Such Qualified Matching Contributions that are needed
to meet the "Actual Deferral Percentage" test stated in
Section 3.4(B)(2) of the Plan.
[ X ] (3) N/A (Elective Deferral Contributions not permitted
and/or Qualified Matching Contributions not permitted).
(F) QUALIFIED NONELECTIVE CONTRIBUTIONS - AMOUNT. The amount of
Qualified Nonelective Contributions made under Sections 3.1 of the Plan and
A.3.1 of this Adoption Agreement and taken into account as Elective Deferral
Contributions for purposes of calculating the "Actual Deferral Percentages,"
subject to such other requirements as may be prescribed by the Secretary of
the Treasury, shall be (check one):
[ ] (1) All such Qualified Nonelective Contributions.
[ ] (2) Such Qualified Nonelective Contributions that are
needed to meet the Actual Deferral Percentage test stated
in Section 3.4(B)(2) of the Plan.
[ X ] (3) N/A (Elective Deferral Contributions and/or Qualified
Nonelective Contributions not permitted).
A.3.5 MATCHING CONTRIBUTIONS.
(A) ELECTION. Matching Contributions by the Employer (check
(1), (2) or (3)):
[ ] (1) Shall not be permitted under the Plan.
[ ] (2) Shall be permitted in accordance with the provisions
of Section 3.5 of the Plan and Section A.3.5(B) of the
Adoption Agreement.
[ X ] (3) Are N/A (No Elective Deferral or Participant
Contributions).
If Section A.3.5(A)(2) is checked, the Employer may, in its sole
discretion, match, in accordance with Section A.3.5(B), the Elective
Deferral Contributions of a Participant made pursuant to Section A.3.4 or
Participant Contributions made pursuant to Section A.3.2.
(B) ALLOCATION OF MATCHING CONTRIBUTIONS.
(1) AMOUNT. If Section A.3.5(A)(2) is checked, Matching
Contributions for the Plan Year shall be allocated to the
Matching Account of each Participant, on whose behalf
Elective Deferral Contributions for the Plan Year are being
made, in an amount equal to (check one):
[ ] (a) [ ] (insert percentage) percent of the (check
applicable block): (i) [ ] Elective Deferral
Contribution; (ii)[ ]
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<PAGE> 138
Participant Contribution made on behalf of each
Participant for such Plan Year; or
[ ] (b) that percent of the (check applicable block): (i)
[ ] Elective Deferral Contribution; (ii) [ ]
Participant Contribution made on behalf of each
Participant for such Plan Year as determined by the
Employer, in its sole discretion, for such Plan Year.
[ X ] (c) N/A (No Matching Contributions).
In no event shall such Matching Contribution exceed the
lesser of (aaa) (insert percentage) [ ] percent of such
Participant's Compensation for such Plan Year or (bbb)
(insert amount, if any, of dollar limitation)
[$ ].
(2) ALLOCATION DATE. Shall Matching Contributions be
allocated effective as of a date or dates other than the last
day of the Plan Year (check one)?
[ ] (a) Yes [ ] (b) No [ X ](c) N/A
(aaa) If Section A.3.5(B)(2)(a) is checked, list the
date(s) (month and day) in each Plan Year as of which
Matching Contributions shall be allocated:
[
].
(bbb) If Section A.3.5(B)(2)(a) is checked, a
Participant who is employed as of a date specified for
the allocation of Matching Contributions and on whose
behalf Elective Deferral Contributions or Participant
Contributions are being made shall receive an
allocation of Matching Contributions as of such date
regardless of the number of Hours of Service credited
to the Participant for purposes of a Year of Service
for Benefit Accrual as of such date, notwithstanding
anything in the Plan to the contrary.
(C) VESTING. Matching Contributions shall be vested in
accordance with the following schedule (check one):
[ ] (1) Nonforfeitable when made.
[ ] (2) The Plan's general vesting schedule, other than that
for Elective Deferral Contributions.
[ ] (3) [The sponsor may add elections for one or more of the
vesting schedules that comply with section 411(a)(2) of the
Code:
[
].
[ X ] (4) N/A (No Matching Contributions).
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<PAGE> 139
(D) "AVERAGE CONTRIBUTION PERCENTAGE" COMPUTATIONS.
(1) In computing the "Average Contribution Percentage" with
respect to Participant Contributions and Matching
Contributions, the Employer shall take into account, under
this Plan or any other plan of the Employer, as provided by
Treasury regulations, and include as "Contribution Percentage
Amounts" (check applicable block or blocks):
[ ] (a) Elective Deferral Contributions.
[ ] (b) Qualified Nonelective Contributions.
[ X ] (c) N/A (There are no Participant or Matching
Contributions, or Employer does not desire to make this
election).
(2) The amount of Qualified Nonelective Contributions that
are made under Section 3.1 of the Plan and Section A.3.1 and
taken into account as "Contribution Percentage Amounts" for
purposes of calculating the "Average Contribution
Percentage," subject to such other requirements as may be
prescribed by the Secretary of the Treasury, shall be (check
one):
[ ] (a) All such Qualified Nonelective Contributions.
[ ] (b) Such Qualified Nonelective Contributions that are
needed to meet the "Average Contribution Percentage"
test stated in Section 3.2 of the Plan.
[ X ] (c) N/A (No Participant or Matching Contributions or
Employer does not desire to make this election).
(3) The amount of Elective Deferral Contributions made under
Section 3.4 of the Plan and Section A.3.4 and taken into
account as "Contribution Percentage Amounts" for purposes of
calculating the "Average Contribution Percentage", subject to
such other requirements as may be prescribed by the Secretary
of the Treasury, shall be:
[ ] (a) All such Elective Deferral Contributions.
[ ] (b) Such Elective Deferral Contributions that are
needed to meet the "Average Contribution Percentage"
test stated in Section 3.2 of the Plan.
[ X ] (c) N/A (There are no Elective Deferral Contributions
under the Plan or Employer did not make election under
Section A.3.5(D)(1)).
(4) To the extent forfeitable, forfeitures of "Excess
Aggregate Contributions" shall be:
[ ] (a) Applied to reduce Employer contributions.
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<PAGE> 140
[ ] (b) Allocated, after all other forfeitures under the
Plan, to each Participant's Matching Account in the
ratio which each Participant's Compensation for the
Plan Year bears to the total Compensation of all
Participants for such Plan Year. Such forfeitures
shall not be allocated to the account of any Highly
Compensated Employee.
[ X ] (c) N/A (No Matching Contributions).
A.3.8 LIMITATIONS ON ALLOCATIONS.
(A) GENERAL RULES. If the Employer maintains or ever maintained
another qualified plan (other than a paired defined contribution regional
prototype plan) in which any Participant in this Plan is (or was) a
participant or could become a participant, the Employer must complete this
Section A.3.8. The Employer must also complete this Section A.3.8 if it
maintains a Welfare Benefit Fund or an individual medical benefit 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. Does the
Employer maintain or has the Employer maintained any such plan(s) (check
one):
[ ] (1) Yes [ X ] (2) No
If Section A.3.8(A)(1) is checked, complete Section A.3.8(B) and/or (C).
(B) MAINTENANCE OF OTHER DEFINED CONTRIBUTION PLAN. If the
Participant is covered under another qualified Defined Contribution Plan
maintained by the Employer, other than a regional prototype plan (check
applicable provisions as necessary):
[ ] (1) The provisions of Section 3.8(B) of the Plan shall
apply as if the other plan were a regional prototype
plan.
[ X ] (2) Provide the method under which the plans will limit
the total "Annual Additions" to the "Maximum Permissible
Amount", and will properly reduce any "Excess Amounts",
in a manner that precludes Employer discretion: [CERTAIN
OF THE PARTICIPATING EMPLOYERS HAVE MAINTAINED OTHER
QUALIFIED DEFINED CONTRIBUTION PLANS. ALL SUCH PLANS
WERE MERGED INTO THIS PLAN EFFECTIVE DECEMBER 1, 1987.
TO THE EXTENT REQUIRED, ALL ADJUSTMENTS SHALL BE MADE
UNDER THIS PLAN.].
[ ] (3) N/A (No other qualified Defined Contribution Plan
(other than a regional prototype plan), Defined Benefit
Plan, Welfare Benefit Fund or individual medical benefit
account maintained).
(C) MAINTENANCE OF A DEFINED BENEFIT PLAN. If a Participant is or
has ever been a participant in a Defined Benefit Plan maintained by the
Employer, check either (1) or (2) and complete as necessary:
[ ] (1) The limitations set forth in Section 3.8(C)(2) through
(4) of the Plan shall apply.
[ ] (2) Provide the method under which the Plan will satisfy
the 1.0 limitation of section 415(e) of the Code (such
language must preclude employer discretion; see Treas. Reg.
Section 1.415-1 for guidance) in the following blanks:
[
A-26
<PAGE> 141
].
IF ADDITIONAL SPACE IS REQUIRED THE EMPLOYER IS TO INSERT APPLICABLE
LIMITATIONS IN AN ATTACHMENT TO THIS ADOPTION AGREEMENT. SUCH
ATTACHMENT SHALL BE ADDED TO, AND MADE A PART OF, THIS ADOPTION
AGREEMENT.
A.3.9 ROLLOVERS.
(A) PARTICIPANT ROLLOVERS. May Participants be permitted to make
Rollover Contributions to the Plan (check one)?
[ X ] (1) Yes [ ] (2) No
(B) NON-PARTICIPANT ROLLOVERS. May Employees other than
Participants be permitted to make Rollover Contributions to the Plan (check
one)?
[ ] (1) Yes [ X ] (2) No
A.3.10 TRANSFERS.
(A) PARTICIPANT DIRECT TRANSFERS. May Participants be permitted
to have direct transfers made on their behalf to the Plan (check one)?
[ X ] (1) Yes [ ] (2) No
(B) NON-PARTICIPANT DIRECT TRANSFERS. May Employees other than
Participants be permitted to have direct transfers made on their behalf to
the Plan (check one)?
[ ] (1) Yes [ X ] (2) No
(C) TRANSFERS OF ACCOUNTS. Are assets being transferred to this
Plan from a qualified plan covering Key Employees in a Top-Heavy Plan or
five-percent owners (within the meaning of section 416(i)(1) of the Code)
(check one)?
[ ] (1) Yes [ X ] (2) No
If such assets are transferred, the restrictions of Section 3.10(B) of the
Plan apply.
A.3.11 TOP-HEAVY PROVISIONS.
(A) APPLICATION OF PROVISIONS AND ADJUSTMENTS.
(1) APPLICATION. Is the Plan a Top-Heavy Plan on the
Effective Date (check one):
[ ] (a) Yes [ X ] (b) No
[ ] (c) Uncertain (Note that if this box is checked and the
Plan is a Top-Heavy Plan, the Top-Heavy Plan provisions
as set forth herein shall apply)
(2) ADJUSTMENTS. If the Employer maintains more than one
plan in a Permissive or Required Aggregation Group, set forth
here any adjustments to be made for Employer contributions or
benefits attributable to Employer contributions under such
other plan(s) in determining the amount of contributions to
be made under the Top-Heavy
A-27
<PAGE> 142
provisions of this Plan (if not applicable, insert letters
N/A)): [ N/A
]
(B) VESTING. The nonforfeitable interest of each Employee in
his account balance attributable to Employer contributions shall be
determined on the basis of the following (check either (1) or (2) and fill in
blank(s):
[ ] (1) 100% vesting after [ ] (not to exceed 3) Years of
Service for Vesting;
[ X ] (2) [ 10 ]% (no minimum) vesting after 1 Year of Service
for Vesting;
[ 25 ]% (not less than 20) vesting after 2 Years of
Service for Vesting;
[ 50 ]% (not less than 40) vesting after 3 Years of
Service for Vesting;
[ 75 ]% (not less than 60) vesting after 4 Years of
Service for Vesting;
[ 100 ]% (not less than 80) vesting after 5 Years of
Service for Vesting;
100% vesting after 6 Years of Service for Vesting.
If the vesting schedule under the Plan shifts in or out of the above
schedule for any Plan Year because of the Plan's top-heavy status, such
shift is an amendment to the vesting schedule and the election in Section
15.2(G) of the Plan applies.
A.5.1 ALLOCATIONS. If Section A.3.1(A)(1)(a) is checked, complete the
following:
(A) ALLOCATION OF EMPLOYER CONTRIBUTIONS.
(1) METHOD. Shall Employer Contributions (if any) to the
Employer Accounts of Participants be integrated with Social
Security contributions, subject to the overall permitted
disparity limits set forth below (check (a) if integrated,
(b) if not integrated)?
[ ] (a) Yes
The annual Employer Contribution shall not exceed the
limitations set forth in Section A.5.1(A)(2). In any Plan
Year in which there are Employer Contributions, such Employer
Contributions shall, subject to the Top-Heavy Plan
provisions, be allocated to each Participant's Employer
Account as follows:
(i) ALLOCATION OF EMPLOYER CONTRIBUTIONS FOR PLAN
YEARS IN WHICH PLAN IS A TOP-HEAVY PLAN. If the Plan
is a Top-Heavy Plan for the Plan Year, the Employer
Contribution for such Plan Year shall be allocated to
each Participant's Employer Account as follows:
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<PAGE> 143
(aa) "BASE CONTRIBUTION PERCENTAGE". First, (check
either (aaa) or (bbb))(percent in either (aaa) or
(bbb) must not be less than the "Minimum Top-Heavy
Rate"):
[ ] (aaa) [ ] (insert percent), or
[ ] (bbb) that percent determined by the
Employer for the Plan Year
of the Participant's "Base Compensation" for such
Plan Year shall be allocated to the Employer Account
of such Participant;
(bb) "EXCESS CONTRIBUTION PERCENTAGE". Second,
(check either (aaa) or (bbb))(percent in either
(aaa) or (bbb) must not be less than the "Minimum
Top-Heavy Rate" and must not exceed the "Maximum
Excess Allowance"):
[ ] (aaa)[ ] (insert percent) percent, or
[ ] (bbb) that percent determined by the
Employer for the Plan Year
of the Participant's Excess Compensation for such
Plan Year shall be allocated to the Employer Account
of such Participant (for purposes of this allocation,
forfeitures allocated to a Participant in the Plan
Year shall be treated as Employer Contributions);
however, in the case of any Participant who has
exceeded the cumulative permitted disparity limit
described below, the Employer shall contribute for
such Participant an amount equal to the "Excess
Contribution Percentage" multiplied by the
Participant's total Compensation for the Plan Year;
and
(cc) "ADDITIONAL CONTRIBUTION PERCENTAGE". Lastly,
any excess over (aa) and (bb) shall be allocated to
each Participant's Employer Account in the same ratio
as his Compensation for such Plan Year bears to the
Compensation of all Participants for such Plan Year.
(ii) ALLOCATION OF EMPLOYER CONTRIBUTIONS FOR PLAN
YEARS IN WHICH PLAN IS NOT A TOP-HEAVY PLAN. The
Employer Contribution for the Plan Year, if the Plan is
not a Top-Heavy Plan for the Plan Year, shall be
allocated as follows:
(aa) "BASE CONTRIBUTION PERCENTAGE". First, (check
either (aaa) or (bbb)):
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<PAGE> 144
[ ] (aaa)[ ] (insert percent) percent, or
[ ] (bbb) that percent determined by the
Employer for the Plan Year
of the Participant's "Base Compensation" for such
Plan Year shall be allocated to the Employer Account
of such Participant;
(bb) "EXCESS CONTRIBUTION PERCENTAGE". Second,
(check either (aaa) or (bbb))(percent in either (aaa)
or (bbb) must not exceed the "Maximum Excess
Allowance"):
[ ] (aaa)[ ] (insert percent) percent, or
[ ] (bbb) that percent determined by the
Employer for the Plan Year
of the Participant's Excess Compensation for such
Plan Year shall be allocated to the Employer Account
of such Participant (for purposes of this allocation,
forfeitures allocated to a Participant in the Plan
Year shall be treated as Employer Contributions);
however, in the case of any Participant who has
exceeded the cumulative permitted disparity limit
described below, the Employer shall contribute for
such Participant an amount equal to the "Excess
Contribution Percentage" multiplied by the
Participant's total Compensation for the Plan Year;
and
(cc) "ADDITIONAL CONTRIBUTION PERCENTAGE". Lastly,
any excess over (aa) and (bb) shall be allocated to
each Participant's Employer Account in the same ratio
as his Compensation for such Plan Year bears to the
Compensation of all Participants for such Plan Year.
With respect to any Employee who is a Participant in the Plan for
only a portion of the Plan Year for which the Employer Contribution
is made, the allocation to such Employee of the Employer
Contribution (other than the Top-Heavy portion, if the Plan is a
Top-Heavy Plan), shall be (check one):
[ ] (AA) Based only upon the amount of "Base
Compensation", Excess Compensation and/or
Compensation earned by such Employee and all
other Employees during the portion of the Plan
Year in which they are or were Plan Participants.
[ ] (BB) Based upon the amount of "Base
Compensation", Excess Compensation and/or
Compensation earned by such Employee and all
other Employees during the entire Plan Year.
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<PAGE> 145
NOTE THAT THIS PLAN MAY NOT PROVIDE FOR PERMITTED DISPARITY IF THE EMPLOYER
MAINTAINS ANY OTHER PLAN THAT PROVIDES FOR PERMITTED DISPARITY AND BENEFITS
ANY OF THE SAME PARTICIPANTS.
[ X ] (b) No
The annual Employer Contributions (if any) shall be determined by
the Employer for each Plan Year but shall not exceed the
limitations of Section A.5.1(A)(2). In any Plan Year in which
there are Employer Contributions, such Employer Contributions
shall, subject to the Top-Heavy Plan provisions, be allocated to
such Participant's Employer Account as follows:
(i) ALLOCATION OF EMPLOYER CONTRIBUTIONS FOR PLAN
YEARS IN WHICH PLAN IS A TOP-HEAVY PLAN. If the Plan
is a Top-Heavy Plan for the Plan Year, the Employer
Contribution for such Plan Year shall be first
allocated to each Participant's Employer Account in the
same ratio as his Compensation for such Plan Year bears
to the Compensation of all Participants for such Plan
Year, in an amount which is not less than the "Minimum
Top-Heavy Rate". The balance of the Employer
Contribution for such Plan Year shall be allocated to
each Participant's Employer Account as follows (check
one):
[ ] (aa) In the same ratio as his Compensation for
such Plan Year bears to the Compensation of all
Participants for such Plan Year.
[ X ] (bb) In the same ratio as his Compensation for
the portion of the Plan Year in which he was a
Participant bears to the Compensation of all
Participants for the portion of the Plan Year
in which they were Participants.
(ii) ALLOCATION OF EMPLOYER CONTRIBUTIONS FOR PLAN
YEARS IN WHICH PLAN IS NOT A TOP-HEAVY PLAN. The
Employer Contribution for the Plan Year, if the Plan is
not a Top-Heavy Plan for the Plan Year, shall be
allocated to each Participant's Employer Account as
follows (check one):
[ ] (aa) In the same ratio as his Compensation for
such Plan Year bears to the Compensation of all
Participants for such Plan Year.
[ X ] (bb) In the same ratio as his Compensation for
the portion of the Plan Year in which he was a
Participant bears to the Compensation of all
Participants for the portion of the Plan Year
in which they were Participants.
[ ] (c) N/A (Section A.3.1(A)(1)(b) checked)
A-31
<PAGE> 146
(2) LIMITATIONS ON EMPLOYER CONTRIBUTIONS. The following
limitations on Employer Contributions apply:
(a) DEDUCTION LIMITATIONS. The annual Employer,
Matching, and Elective Deferral Contributions and any
other Employer contribution shall, in the aggregate, not
exceed the greater of:
(i) the Employer's "Primary Limitation" (as defined
below) for the Taxable Year which ends with or within
the Plan Year for which the Employer, Matching, and/or
Elective Deferral Contribution and/or other Employer
contribution is being made: or
(ii) the Employer's "Secondary Limitation" (as defined
below) for the Taxable Year which ends with or within
the Plan Year for which the Employer, Matching, and/or
Elective Deferral Contribution and/or other Employer
contribution is being made.
(b) CODE SECTION 415 LIMITATION. The allocation of the
Employer contributions for the Plan Year shall be further
limited by Section 3.8 of the Plan (Limitations on
Allocations).
(c) OVERALL PERMITTED DISPARITY LIMITS.
(i) ANNUAL OVERALL PERMITTED DISPARITY LIMIT.
Notwithstanding the preceding paragraphs, for any Plan
Year this Plan "Benefits" any Participant who
"Benefits" under another qualified plan or simplified
employee pension, as defined in section 408(k) of the
Code, maintained by the Employer that provides for
permitted disparity (or imputes disparity), Employer
contributions and forfeitures shall be allocated to the
account of every Participant otherwise eligible to
receive an allocation in the ratio that such
Participant's total Compensation bears to the total
Compensation of all Participants.
(ii) CUMULATIVE PERMITTED DISPARITY LIMIT. Effective
for Plan Years beginning on or after January 1, 1995,
the cumulative permitted disparity limit for a
Participant is 35 total cumulative permitted disparity
years. Total cumulative permitted years means the
number of years credited to the Participant for
allocation or accrual purposes under this Plan, any
other qualified plan or simplified employee pension
plan (whether or not terminated) ever maintained by the
Employer. For purposes of determining the
Participant's cumulative permitted disparity limit, all
years ending in the same calendar year are treated as
the same year. If the Participant has not "Benefitted"
under a defined benefit or target benefit plan for
A-32
<PAGE> 147
any year beginning on or after January 1, 1994, the
Participant has no cumulative disparity limit.
(3) DEFINITIONS. For purposes of this Section A.5.1(A), the
following definitions apply:
(a) "BASE CONTRIBUTION PERCENTAGE" means, for any Plan
Year, the percentage of Compensation contributed under
the Plan with respect to that portion of each
Participant's Compensation up to the "Integration Level"
(i.e., with respect to such Participant's "Base
Compensation") specified in the Plan for such Plan Year.
(b) "BASE COMPENSATION" means, for any Plan Year,
Compensation up to the "Integration Level" for such Plan
Year.
(c) "BENEFIT" OR" BENEFITING" means, with respect to a
Participant, that such 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 Treas. Reg. Section
1.410(b)-3(a).
(d) "EXCESS CONTRIBUTION PERCENTAGE" means, for any Plan
Year, the percentage of Compensation which is contributed
under the Plan with respect to that portion of each
Participant's Compensation in excess of the "Integration
Level" (i.e., with respect to such Participant's Excess
Compensation) specified in the Plan for such Plan Year.
(e) "INTEGRATION LEVEL" means the amount of Compensation
specified in the Plan at or below which the rate of
contributions (expressed as a percentage of such
Compensation) provided under the Plan is less than the
rate of contributions (expressed as a percentage of
Compensation) provided under the Plan with respect to
Compensation above such level. The "Integration Level"
for any Plan Year may in no event exceed the Taxable Wage
Base as in effect on the first day of such Plan Year.
(f) "MAXIMUM EXCESS ALLOWANCE" means, for any Plan Year
beginning before January 1, 1989, the "Base Contribution
Percentage" plus 5.7% and for any Plan Year beginning
after December 31, 1988, the percentage determined under
either (i) or (ii):
(i) If the "Integration Level" for such Plan Year is
equal to the Taxable Wage Base, in effect on the first
day of such Plan Year, or if the "Integration Level" is
a uniform dollar amount for all Participants which is
no greater than the greater of $10,000 or 1/5 of the
Taxable Wage Base in effect on the first day of such
Plan Year, then the "Maximum Excess
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<PAGE> 148
Allowance" for such Plan Year is the lesser of:
(aa) The "Base Contribution Percentage", or
(bb) The greater of (AA) 5.7% or (BB) the
percentage equal to the rate of tax under section
3111(a) of the Code (in effect on the first day of
the Plan Year) which is attributable to the old age
insurance portion of the Old Age, Survivors and
Disability Insurance provisions of the Social
Security Act.
(ii) If the "Integration Level" for such Plan Year is
greater than the greater of $10,000 or 1/5 of the
Taxable Wage Base in effect on the first day of such
Plan Year but less than the Taxable Wage Base in effect
on the first day of such Plan Year then the "Maximum
Excess Allowance" shall be determined as follows:
<TABLE>
<CAPTION>
IF THE "INTEGRATION LEVEL" THE "MAXIMUM EXCESS
----------------------------------
IS MORE THAN BUT NOT MORE THAN ALLOWANCE" IS
---------------------------------- ----------------------
<S> <C>
(1) X* 80% OF TAXABLE
WAGE BASE 4.3%
(2) 80% OF Y**
TAXABLE
WAGE BASE 5.4%
</TABLE>
* x=The greater of $10,000 or 1/5 of Taxable Wage Base
**y=Any amount more than 80% of Taxable Wage Base but
less than 100% of Taxable Wage Base.
(g) "MINIMUM TOP-HEAVY RATE" means a rate of at least
three percent (unless the total Employer contribution to
the Plan is less than three percent), or, in certain cases
where a Defined Benefit Plan is maintained, five percent
or seven and one-half percent (whichever is applicable)
of each Participant's Compensation for such Plan Year; if
the Plan is integrated with Social Security, the
"Base Contribution Percentage" plus the "Excess
Contribution Percentage" plus the "Additional Contribution
Percentage" (if any) must be no less than the "Minimum
Top-Heavy Rate" as set forth in the preceding clause.
(h) "PRIMARY LIMITATION" means 15 percent of the
Compensation otherwise paid or accrued by the Employer
during such Taxable Year to, or for, the Participants in
the Plan.
A-34
<PAGE> 149
(i) "SECONDARY LIMITATION" means the lesser of:
(i) 25 percent of the Participants' Compensation for
the Taxable Year which ends with or within the Plan
Year for which the Employer, Matching, and/or Elective
Deferral Contribution or other Employer contribution is
being made, or
(ii) Any excess of (aa) the aggregate of the "Primary
Limitations" for all Taxable Years beginning before
January 1, 1987, over (bb) the aggregate of the
deductions allowed or allowable (for Employer, Matching,
and Elective Deferral Contributions or other Employer
contributions paid or deemed paid to the Plan) under
section 404(a)(3)(A) of the Code for all Taxable Years
beginning before January 1, 1987, which excess is
available as a carryforward to the current Taxable Year
from such prior Taxable Year(s) under said section
404(a)(3)(A).
(B) OTHER ALLOCATIONS. Other contributions shall be allocated
in accordance with the Plan document.
A.5.4 ALLOCATION OF INCREASES AND DECREASES. Allocation of
increases or decreases in the fair market value of assets described in Section
5.4 of the Plan shall be made on the basis of the amounts in the Accounts under
the Plan (as adjusted under Section 5.4 of the Plan) as determined on (check
either (A) or (B)):
[ X ] (A) First day of the period in which the
Valuation Date occurs (except that the last day
of the period shall be used for the initial
allocation).
[ ] (B) Last day of the period in which the Valuation
Date occurs.
A.5.5 ALLOCATION OF FORFEITURES.
(A) Shall forfeitures be allocated in accordance
with Section 5.5 of the Plan (check one)?
[ X ] (1) Yes [ ] (2) No
[ ] (3) N/A (No forfeitures)
If Section A.5.5(A)(1) is checked, such allocation shall be effected as of
the last day of the (check one): [ ] (a) month [ ] (b) quarter [ X ]
(c) Plan Year in which the forfeiture occurs under Section 7.6(c) of the
Plan, in proportion to the Employer and/or Matching Contributions (as
applicable) allocated to the remaining Participants for the period for
which the allocation is effected.
(B) If Section A.5.5(A)(2) is checked,
forfeitures shall be allocated as follows (check applicable block):
[ ] (1) Matching Account forfeitures shall
be used to reduce Matching Contributions
for the Plan Year in which such
forfeitures occur but otherwise the
provisions of Section 5.5 of the Plan
shall apply.
A-35
<PAGE> 150
[ ] (2) All Matching and Employer Account
forfeitures shall be used to reduce
Matching and Employer Contributions for
the Plan Year in which such forfeitures
occur.
[ X ] (3) N/A (Forfeitures shall be allocated
under Section 5.5 of Plan or no
forfeitures).
A.6.1 INVESTMENT OF ACCOUNTS.
(A) INVESTMENT POWER. Investment of Trust
assets shall be directed as follows (check (1), (2) or (3)):
[ X ] (1) Subject to the terms of the Plan,
the Trustee shall, subject to any
limitations indicated below, have the
sole power and authority to direct
investment of Trust assets.
[ ] (2) Subject to the terms of the Plan,
the Investment Manager shall, subject to
any limitations indicated below, have the
sole power and authority to direct
investment of Trust assets held in (check
applicable block(s)):
[ ] Employer Accounts [ ] Matching
Accounts
[ ] Participant Accounts [ ] Elective
Deferral
Accounts
[ ] QVEC Accounts [ ] Rollover
Accounts
[ ] Transfer Accounts [ ] Other
Accounts
Subject to the terms of the Plan, the Trustee shall have
the sole power and authority to direct investment of Trust
assets not committed to the direction of the Investment
Manager.
[ ] (3) Subject to the terms of the Plan,
each Plan Participant or Beneficiary
shall, subject to any limitations
indicated below, have the sole power and
authority to direct investment of the
Trust assets held in (check applicable
block(s)):
[ ] Employer Accounts [ ] Matching
Accounts
[ ] Participant Accounts [ ] Elective
Deferral
Accounts
[ ] QVEC Accounts [ ] Rollover
Accounts
[ ] Transfer Accounts [ ] Other
Accounts
The investments which the Participant or Beneficiary may
select are any one or more of the following (specify
investment selections available):
[
]
Investment instructions shall be given by the Participant
or Beneficiary on the Appropriate Form to the
Administrative Committee not later than (fill in blank)
[ ] days before the Valuation Date preceding the
effective date of the investment direction. The
Administrative Committee shall deliver such instructions
to the Trustee. Such investment instructions shall be
effected by the Trustee not later than (fill in blank)
[ ] days following the Valuation Date coincident with or
next
A-36
<PAGE> 151
following the date on which the investment instructions
are delivered to the Administrative Committee.
Subject to the terms of the Plan, the Trustee shall have
the sole power and authority to direct investment of Trust
assets not committed to the direction of the Participant
or Beneficiary.
(B) LIMITATIONS. List any limitations on types
of investments and transitional investment rules (if none, write "none"): [
NONE
]
(C) QUALIFYING EMPLOYER SECURITIES. May Plan
assets be invested in Qualifying Employer Securities (check one)?
[ X ] (1) Yes [ ] (2) No
In no event may Employer, Participant, Elective Deferral, Matching,
Rollover or Qualified Voluntary Employee Contributions or other Employer
contributions or direct transfers or Employer, Participant, Elective
Deferral, Matching, Rollover, Transfer or QVEC Accounts or other accounts
be invested in Qualifying Employer Securities unless such investment is in
compliance with applicable Federal and state securities laws (including any
necessary filings under such Federal and state securities laws) and the
requirements of the Plan.
If such investment is in compliance with such laws (including any required
filings) and Plan requirements, the prohibition on investment of Plan
assets in Qualifying Employer Securities does not apply and up to [ 100 ]
(insert percentage; if not applicable, insert letters N/A in blank) percent
of Plan assets may be so invested.
If any such required filings have not been made, only Employer
Contributions and Employer Accounts not subject to Participant or
Beneficiary directed investment may be invested in Qualifying Employer
Securities. In such case, indicate the percentage of Employer
Contributions and Employer Accounts which may be invested in Qualifying
Employer Securities in the following blank: [ 100 ] percent (insert
percentage; if not applicable, insert letters N/A in blank).
A.7.6 SEPARATION FROM SERVICE.
(A) DISTRIBUTION OF ACCRUED BENEFITS UPON
SEPARATION FROM SERVICE.
(1) NORMAL RULES. Upon separation of a
Participant from the service of his
Employer under Section 7.6(A) of the
Plan, distribution of such Participant's
Vested Accrued Benefit shall be made
(check only one block (i.e., (a), (b) or
(c)):
[ ] (a) Upon the request of the
Participant in writing on the
Appropriate Form, within 60 days
following the last day of the
Plan Year in which such
Participant incurs five
consecutive One-Year Breaks In
Service but if distribution is
not so requested by the
Participant, distribution shall
be made on the date the
Participant would have attained
his Normal Retirement Age had he
remained in the employ of the
Employer;
[ X ] (b) Upon the request of the
Participant in writing on the
Appropriate Form, at any time
A-37
<PAGE> 152
following the first Valuation
Date coincident with or next
following the date such
Participant separates from the
service of the Employer;
however, if distribution is not
so requested by the Participant
earlier, distribution shall be
made no later than 60 days
following the date the
Participant would have attained
his Normal Retirement Age had he
remained in the employ of the
Employer; or
[ ] (c) Within 60 days following
the date the Participant would
have attained his Normal
Retirement Age had he remained
in the employ of the Employer.
Notwithstanding any other provision in the Plan or Adoption
Agreement, if the Plan provides for distribution on an Early
Retirement Date and if a separated Participant met the service but
not the age requirement for such Early Retirement Date on the date
of his separation from the service of his Employer, upon meeting
such age requirement after separation, such Participant, if he so
requests in writing on the Appropriate Form, shall commence
receiving his deferred Vested Accrued Benefit no later than the
date which would have been his Early Retirement Date had he
continued in the service of the Employer. If no such request is
made, distribution shall be made in accordance with Section
A.7.6(A)(1)(a), (b) or (c), as elected by the Employer in this
Adoption Agreement. All requests for payment under this Section
A.7.6(A) shall be made within the 90-day period preceding the date
payment is to commence.
(2) EXCEPTION. If a Participant
separates from the service of the
Employer and the value of the
Participant's Vested Accrued Benefit does
not exceed and at the time of any prior
distribution did not exceed $3,500, the
Participant shall automatically, whether
or not he requests distribution, receive,
in one lump sum, a distribution of his
entire Vested Accrued Benefit (and if the
Vested Accrued Benefit is $-0-, he shall
be deemed to have received such Vested
Accrued Benefit) within 60 days following
the first Valuation Date coincident with
or next following the date such
Participant separates from the service of
the Employer.
This provision shall only apply if this block is checked [ X ].
If the above block is not checked or if the value of the
Participant's Vested Accrued Benefit exceeds or at the time of a
prior distribution exceeded $3,500, the election made under
Section A.7.6(A)(1) shall apply to the distribution of the
Participant's Vested Accrued Benefit under the Plan.
(B) VESTING UPON SEPARATION FROM SERVICE.
(1) Except as otherwise provided in the
Plan and in Sections A.3.5 and A.3.11,
the interest of each Participant in his
Employer Account and Matching Account
shall vest as follows (check one and
complete applicable blanks):
[ ] (a) 100 percent vesting
immediately. (This alternative
must be chosen if a period of
more than one year has been
designated in Section
A.2.2(B)(1)(a)(i)).
A-38
<PAGE> 153
[ ] (b) [ ] percent for each
Year of Service for Vesting (not
less than 20 percent for each
Year of Service for Vesting, but
not more than 100 percent).
[ ] (c) Nothing for the first five
Years of Service for Vesting and
100 percent thereafter.
[ ] (d) Nothing for the first
[ ] Years of Service for
Vesting, then [ ] percent
for each Year of Service for
Vesting thereafter, but not more
than 100 percent. (Full vesting
must occur after five Years of
Service for Vesting).
[ ] (e) In accordance with the
following table:
<TABLE>
<CAPTION>
IF YEARS OF SERVICE
FOR VESTING THEN THE VESTED
EQUAL OR EXCEED - PERCENTAGE IS
<S> <C>
3..................................20
4..................................40
5..................................60
6..................................80
7 or more.........................100
</TABLE>
[ X ] (f) [Other. (This alternative,
if chosen, must provide a
percentage of vesting which is
not less than the percentage
that would be provided under
options (c) or (e) used
consistently) - Specify:
<TABLE>
<CAPTION>
[IF YEARS OF SERVICE
-------------------
FOR VESTING THEN THE VESTED
----------- -------------------
EQUAL OR EXCEED - PERCENTAGE IS
--------------- --- ---------------
<S> <C>
1..................................10
-------------------------------------
2..................................25
-------------------------------------
3..................................50
-------------------------------------
4..................................75
-------------------------------------
5 OR MORE.........................100
-------------------------------------
</TABLE>
(2) For purposes of Section A.7.6(B)(1)
above and for purposes of Section A.3.5
and Section 3.11(B) of the Plan, Years of
Service for Vesting attributable to the
following shall be disregarded (check
applicable blocks):
[ ] (a) Service prior to the
attainment of age 18, exclusive
of the year within which the
Employee attained age 18.
[ ] (b) Service during any period
for which the Employer did not
maintain this Plan or a
predecessor trust or plan.
[ ] (c) Service before January 1,
1971, unless the Employee has
had at least three years of
credited service after December
31, 1970, determined without
application of paragraphs (a),
(b), (d) and (e) hereof if
selected by the Employer.
A-39
<PAGE> 154
[ X ] (d) If an Employee is reemployed by the
Employer following a One-Year Break In
Service, service before such One-Year
Break In Service, if the Employee has not
completed a Year of Service for Vesting
after such One-Year Break In Service, for
the purpose of determining the vested
percentage in his Employer-derived Accrued
Benefit which accrues after such One-Year
Break In Service.
[ X ] (e) If an Employee is reemployed by the
Employer following five consecutive
One-Year Breaks In Service (check only (i)
or (ii) whichever is to apply):
[ ] (i) Service after such five
consecutive One-Year Breaks
In Service, for the purpose
of determining the vested
percentage in his
Employer-derived Accrued
Benefit which accrued before
such five consecutive
One-Year Breaks In Service
but both pre-Break and
post-Break service will count
for purposes of determining
the vested percentage in his
Employer-derived Accrued
Benefit which accrued after
such Break.
[ X ] (ii) Service after such five
consecutive One-Year Breaks
In Service, for the purpose
of determining the vested
percentage in his
Employer-derived Accrued
Benefit which accrued before
such five consecutive
One-Year Breaks In Service
and, if the Employee had no
vested interest in his
Employer-derived Accrued
Benefit prior to such
Break(s) and the number of
consecutive One-Year Breaks
In Service equals or exceeds
the aggregate Years of
Service for Vesting, service
before such five consecutive
One-Year Breaks In Service
for the purpose of
determining the vested
percentage in his
Employer-derived Accrued
Benefit which accrues after
such five consecutive
One-Year Breaks In Service.
To the extent required by the Plan, separate accounts
shall be maintained for the Participant's pre-Break and
post-Break Employer-derived account balances.
(3) Except as otherwise provided in Section 7.6(C)
of the Plan relating to benefits accruing before a
separation from service, if a Participant separates
from service and thereafter returns to employment
with the Employer without incurring five
consecutive One-Year Breaks In Service, he shall
continue to vest in his Accrued Benefit.
(4) In the event that an Employee who is not a
member of the eligible class of Employees becomes a
A-40
<PAGE> 155
member of the eligible class, such
Employee shall, subject to any applicable
limitation set forth in this Section
A.7.6, receive credit, for vesting
purposes, for Service with the Employer
while such Employee was not a member of
the eligible class.
(5) Service, for purposes of Section
A.7.6(B)(1), includes service with a
predecessor employer if the Employer
adopting the Plan is maintaining the Plan
as a plan of a predecessor employer.
Service, for purposes of Section A.7.6(B)(1), also includes
service with a predecessor employer whose plan is not being
continued by the Employer to the extent provided in Section
A.1.79.
(C) FORFEITURES. If the provisions of Section
7.6(C)(1)(b) of the Plan are to apply, check this block [ X ];
otherwise the provisions of Section 7.6(C)(1)(a) of the Plan shall apply.
A.7.9 COMMENCEMENT OF PAYMENTS; DEFERRAL OF PAYMENTS; MINIMUM
DISTRIBUTION REQUIREMENTS.
(A) DATE PAYMENTS TO COMMENCE. This provision
is contained in the Plan.
(B) DEFERRAL OF PAYMENTS. Shall a Participant,
to the extent permitted by the Plan, be permitted to defer payment of
benefits under Sections 7.3, 7.4, 7.5 and 7.7 of the Plan (check one)?
[ X ] (1) Yes [ ] (2) No
(C) MINIMUM DISTRIBUTION REQUIREMENTS. This
provision is contained in the Plan.
A.7.10 WITHDRAWALS DURING EMPLOYMENT.
(A) WITHDRAWALS FROM PARTICIPANT ACCOUNTS.
Shall withdrawals of Participant Accounts (other than the portion of such
Participant Accounts attributable to required Participant Contributions and
to Participant Contributions which are matched by the Employer) be
permitted (check one)?
[ ] (1) Yes [ ] (2) No [ X ] (3) N/A
(B) WITHDRAWALS FROM QVEC ACCOUNTS. Shall
withdrawals of QVEC Accounts be permitted (check one)?
[ ] (1) Yes [ ] (2) No [ X ] (3) N/A
(C) WITHDRAWALS FROM ROLLOVER ACCOUNTS. Shall
withdrawals of Rollover Accounts be permitted (check one)?
[ ] (1) Yes [ X ] (2) No [ ] (3) N/A
(D) HARDSHIP AND POST - 59 1/2 WITHDRAWALS FROM
ELECTIVE DEFERRAL ACCOUNTS. Shall withdrawals of Elective Deferral
Accounts be permitted (if such withdrawals are to be permitted, check
either (1) or (2) or both) [ ] (1) on account of hardship [ ] (2) after
reaching age 59-1/2 (check one)?
[ ] (a) Yes [ ] (b) No [ X ] (c) N/A
(E) HARDSHIP AND POST - 59 1/2 WITHDRAWALS FROM
EMPLOYER, PARTICIPANT, ROLLOVER AND TRANSFER ACCOUNTS. Shall withdrawals
of Employer, Participant, Rollover and Transfer Accounts be permitted (if
such withdrawals
A-41
<PAGE> 156
are to be permitted, check either (1) or (2) or both) [ ] (1) on account
of hardship [ ] (2) after reaching age 59-1/2 (check one)?
[ ] (a) Yes [ X ] (b) No
(F) HARDSHIP AND POST - 59 1/2 WITHDRAWALS FROM
MATCHING ACCOUNTS. Shall hardship and post - age 59 1/2 withdrawals of
Matching Accounts be permitted (if such withdrawals are to be permitted,
check either (1) or (2) or both) [ ] (1) on account of hardship [ ] (2)
after reaching age 59-1/2 (check one)?
[ ] (a) Yes [ ] (b) No [ X ] (c) N/A
(G) OTHER PRE-59-1/2 IN-SERVICE WITHDRAWALS.
Shall withdrawals of a Participant's Vested Accrued Benefit attributable to
Participant Contributions, Employer Contributions, and Matching
Contributions after such Participant completes five Years of Service for
Benefit Accrual but before he attains age 59 1/2 be permitted (check one)?
[ ] (1) Yes [ X ] (2) No
WITHDRAWALS SHALL ONLY BE MADE IN ACCORDANCE WITH THE PROVISIONS OF SECTION
7.10 OF THE PLAN.
A.7.11 LOANS.
(A) Shall loans to Participants and
Beneficiaries if such Beneficiaries are parties-in-interest (as defined in
the Plan) be permitted (check one)?
[ X ] (1) Yes [ ] (2) No
NOTE: NO LOANS MAY BE MADE TO OWNER-EMPLOYEES OR TO
SHAREHOLDER EMPLOYEES (AS DEFINED IN SECTION 7.11(A)(7) OF THE PLAN).
(B) The interest rate shall be determined as
follows: [ THE INTEREST RATE SHALL EQUAL ONE PERCENTAGE POINT ABOVE THE PRIME
INTEREST RATE AS PUBLISHED IN THE WALL STREET JOURNAL ON THE FIRST BUSINESS DAY
OF THE WEEK IN WHICH THE LOAN IS MADE.
]
(C) Shall the exception to the 50% of Vested
Accrued Benefit limitation on loans not in excess of $10,000 apply?
[ ] (1) Yes [ X ] (2) No
[ ] (3) N/A (No loans permitted)
If the exception is to apply, note that only 50% of the Vested Accrued
Benefit may be used as security for the loan. Additional security
must be provided by the Participant or Beneficiary. Specify the type
of additional collateral which will be used to secure the remainder of
the loan: [ N/A
]
(D) Specify the types of collateral to be used
to secure loans under the Plan: [ ONE HALF OF THE PRESENT VALUE OF THE
PARTICIPANT'S OR BENEFICIARY'S VESTED ACCRUED BENEFIT UNDER THE PLAN.
]
(E) If Section A.7.11(A)(1) is checked, indicate
any additional limitations to be placed on loans (if none, so state; if not
applicable, insert letters N/A):[ LOANS FROM THE PLAN WILL BE PERMITTED
ONLY IN THE EVENT OF A PERSONAL EMERGENCY OR FINANCIAL HARDSHIP IN
ACCORDANCE WITH THE GUIDELINES SET FORTH IN SECTION 7.10(C)(3) OF THE PLAN.
]
A-42
<PAGE> 157
(F) Shall loans to a Participant be treated as
an investment by such Participant for his Accounts only (check one)?
[ X ] (1) Yes [ ] (2) No
[ ] (3) N/A (No loans permitted)
A.7.14 JOINT AND SURVIVOR ANNUITY. The provisions of Section
7.14 of the Plan shall not apply to the Plan, as adopted under this Adoption
Agreement.
A.8.2 SPECIAL PROVISION WITH RESPECT TO QUALIFIED DOMESTIC
RELATIONS ORDERS. Shall the special provision of Section 8.2 of the Plan with
respect to Qualified Domestic Relations Orders apply to the Plan as adopted by
the Employer (check one)?
[ X ] (A) Yes [ ] (B) No
A.15.1 AMENDMENT. THE CHANGES MADE BY THIS AMENDMENT AND
RESTATEMENT SHALL BE DEEMED ADOPTED BY EACH ADOPTING EMPLOYER ON THE DATE THE
NOTIFICATION LETTER IS ISSUED BY THE DISTRICT OFFICE OF THE INTERNAL REVENUE
SERVICE WITHOUT FURTHER ACTION ON THE PART OF THE ADOPTING EMPLOYER EXCEPT THAT
SUCH ADOPTING EMPLOYER MUST SEND A NOTICE TO INTERESTED PARTIES INFORMING SUCH
INTERESTED PARTIES THAT THE PLAN HAS BEEN AMENDED. SUCH NOTICE MUST BE GIVEN
IN ACCORDANCE WITH THE RULES OF SECTION 15.1(C) OF THE PLAN. SEE SECTION
15.1(C) OF THE PLAN FOR FURTHER INFORMATION.
A.18.4 AGENT FOR SERVICE OF LEGAL PROCESS. The name(s) and
address(es) of the agent(s) for service of legal process under the Plan are:
[ ADMINISTRATIVE COMMITTEE, FUND OFFICE RETIREMENT PROFIT-SHARING PLAN
C/O MUNICIPAL FUND FOR TEMPORARY INVESTMENT
BELLEVUE PARK CORPORATE CENTER
400 BELLEVUE PARKWAY, SUITE 100
WILMINGTON, DE 19809
A.18.17 RESTATEMENT.
(A) RESTATEMENT OF EXISTING PLAN. The Employer
may adopt the Plan as an amendment and restatement of any Prior Plan
(including a prior version of this Plan and Trust Agreement). Adoption
shall not require termination of the Prior Plan, except that amendment and
restatement of an existing Defined Benefit Plan into the Plan shall be
deemed to be a termination of such Prior Plan for the purposes of Title IV
of ERISA. Upon adoption of this Plan, the assets of the Prior Plan shall
be invested in accordance with the provisions of this Plan. Check if
applicable:
[ X ] This is an amendment and restatement of the [ FUND
OFFICE RETIREMENT PROFIT-SHARING ] PLAN, an existing
qualified [ PROFIT-SHARING ] plan, which was adopted effective
as of [ SEPTEMBER 18, 1981].
(B) LIMITATIONS APPLICABLE TO PLAN PROVISIONS.
Except as otherwise provided in Section 3.11 of the Plan, the participation
and/or vesting provisions of the Plan, as adopted by the Employer, shall
apply as follows (check applicable block or blocks; to the extent not
checked, the Plan shall apply in accordance with the terms set forth
herein):
[ ] (1) The participation provisions of this
Plan, as adopted by the Employer, shall
apply only to Employees hired on or after
the date the Plan is adopted by the
Employer. The participation provisions
of the Prior Plan shall otherwise apply.
[ ] (2) The vesting provisions of this Plan,
as adopted by the Employer, shall apply
only to Employees hired on or after the
date the Plan is adopted by the
A-43
<PAGE> 158
Employer. The vesting provisions of the
Prior Plan shall otherwise apply.
[ X ] (3) N/A.
(C) INCORPORATION OF APPLICABLE PRIOR PLAN
PROVISIONS AND TRANSITIONAL RULES. If the Employer checked A.18.17(A),
such Employer shall insert here any Prior Plan provisions and any
transitional rules which such Employer desires or is required to make
applicable to this Plan (if none, write the word "none"):
[ (1) MERGER OF PLANS. EFFECTIVE DECEMBER 1, 1987, THE CHESTNUT STREET
EXCHANGE FUND RETIREMENT PROFIT-SHARING PLAN, THE INDEPENDENCE SQUARE INCOME
SECURITIES, INC. RETIREMENT PROFIT-SHARING PLAN, THE TEMPORARY INVESTMENT FUND,
INC. RETIREMENT PROFIT-SHARING PLAN, AND THE TRUST FOR SHORT-TERM FEDERAL
SECURITIES RETIREMENT PROFIT-SHARING PLAN WERE MERGED INTO, AND THEIR ASSETS
TRANSFERRED INTO, THE PLAN.
(2) CHANGE IN ACCRUAL COMPUTATION PERIODS, LIMITATION YEARS, PLAN
YEARS AND VESTING COMPUTATION PERIODS. AS A RESULT OF THE MERGER AND TRANSFER
OF ASSETS, THE ACCRUAL COMPUTATION PERIODS, LIMITATION YEARS, PLAN YEARS AND
VESTING COMPUTATION PERIODS FOR THE CHESTNUT STREET EXCHANGE FUND, INDEPENDENCE
SQUARE INCOME SECURITIES, INC., TEMPORARY INVESTMENT FUND, INC., AND TRUST FOR
FEDERAL SECURITIES RETIREMENT PROFIT-SHARING PLANS HAVE BEEN CHANGED AS
FOLLOWS:
<TABLE>
<CAPTION>
PLAN OLD (UNDER OLD PLAN) NEW (UNDER THIS PLAN)
- --------------------------------------------------------------------------
<S> <C> <C>
CHESTNUT STREET EX-
- -------------------------------------------------------------------------
CHANGE FUND 1/1 TO 12/31 12/1 TO 11/30
- -------------------------------------------------------------------------
INDEPENDENCE SQUARE
- -------------------------------------------------------------------------
INCOME SECURITIES,
- -------------------------------------------------------------------------
INC. 1/1 TO 12/31 12/1 TO 11/30
- -------------------------------------------------------------------------
TEMPORARY INVESTMENT
- -------------------------------------------------------------------------
FUND, INC. 10/1 TO 9/30 12/1 TO 11/30
- -------------------------------------------------------------------------
TRUST FOR FEDERAL
- -------------------------------------------------------------------------
SECURITIES 11/1 TO 10/31 12/1 TO 11/30
- -------------------------------------------------------------------------
</TABLE>
THIS RESULTED IN THE FOLLOWING SHORT ACCRUAL COMPUTATION PERIODS,
LIMITATION YEARS, PLAN YEARS AND VESTING COMPUTATION PERIODS:
<TABLE>
<CAPTION>
PLAN SHORT PERIOD/YEAR
- -------------------------------------------------------------------------
<S> <C>
CHESTNUT STREET 1/1/87 TO 11/30/87
- -------------------------------------------------------------------------
INDEPENDENCE SQUARE INCOME SECURITIES, INC. 1/1/87 TO 11/30/87
- -------------------------------------------------------------------------
TEMPORARY INVESTMENT FUND, INC. 10/1/87 TO 11/30/87
- -------------------------------------------------------------------------
TRUST FOR FEDERAL SECURITIES 11/1/87 TO 11/30/87
- -------------------------------------------------------------------------
</TABLE>
(A) CHANGE IN VESTING COMPUTATION PERIODS. EACH PARTICIPANT IN THE
ABOVE LISTED PLANS RECEIVED VESTING CREDIT FOR TWO YEARS OF
SERVICE FOR VESTING PROVIDED SUCH PARTICIPANT COMPLETED 200 OR
MORE HOURS OF SERVICE IN BOTH THE OLD VESTING COMPUTATION PERIOD
AND THE NEW VESTING COMPUTATION PERIOD AS SET FORTH ABOVE.
(B) CHANGE IN ACCRUAL COMPUTATION PERIODS. ANY PARTICIPANT IN THE
ABOVE LISTED PLANS WHO COMPLETED 200 HOURS OF SERVICE MULTIPLIED
BY THE NUMBER OF MONTHS IN THE SHORT ACCRUAL COMPUTATION PERIOD
DIVIDED BY TWELVE RECEIVED HIS PROPORTIONATE SHARE OF EMPLOYER
CONTRIBUTIONS DURING THE SHORT ACCRUAL COMPUTATION PERIOD SET
FORTH ABOVE.
(C) CHANGE IN LIMITATION YEARS. FOR THE SHORT LIMITATION YEARS, THE
DOLLAR LIMITATIONS UNDER SECTION 415(C)(1)(A) OF THE CODE WERE
ADJUSTED AS PROVIDED UNDER TREAS. REG. Section 1.415-2(B)(4).
THE ABOVE CHANGES WERE MADE PURSUANT TO THE AUTOMATIC APPROVAL
PROVISIONS OF REV. PROC. 87-27, 1987-25 I.R.B. 41. ]
A-44
<PAGE> 159
A.18.18 INDIVIDUAL PROVISIONS. Any provisions applicable to the
adopting Employer only should be inserted here (if none, write the word
"none"):
[ (A) EMPLOYER AMENDMENT OF PLAN AND/OR TRUST. ANY EMPLOYER AMENDMENT OF
THE PLAN AND/OR TRUST PERMITTED BY SECTION 15.1 OF THE PLAN AND TRUST AGREEMENT
SHALL BE EFFECTED BY RESOLUTION OF THE EMPLOYER'S BOARD OF DIRECTORS ADOPTED AT
A DULY HELD MEETING OF SAID BOARD OR BY UNANIMOUS WRITTEN CONSENT OF SAID
BOARD, IF THE EMPLOYER IS INCORPORATED AND OTHERWISE BY APPROPRIATE WRITTEN
ACTION OF EMPLOYER'S OWNER OR OTHER GOVERNING ENTITY UNDER STATE LAW. A
CERTIFIED COPY OF SUCH RESOLUTIONS OR OTHER WRITTEN ACTION SHALL BE DELIVERED
TO THE ADMINISTRATIVE COMMITTEE AND THE TRUSTEE.
(B) TERMINATION OR PARTIAL TERMINATION OF PLAN AND/OR TRUST. TERMINATION
OR PARTIAL TERMINATION OF THE PLAN AND/OR TRUST UNDER ARTICLE XVI OF THE PLAN
AND TRUST AGREEMENT SHALL BE EFFECTED BY RESOLUTION OF THE EMPLOYER'S BOARD OF
DIRECTORS ADOPTED AT A DULY HELD MEETING OF SAID BOARD OR BY UNANIMOUS WRITTEN
CONSENT OF SAID BOARD, IF SUCH EMPLOYER IS INCORPORATED AND OTHERWISE BY
APPROPRIATE WRITTEN ACTION OF EMPLOYER'S OWNER OR OTHER GOVERNING ENTITY UNDER
STATE LAW. A CERTIFIED COPY OF SUCH RESOLUTIONS OR OTHER WRITTEN ACTION SHALL
BE DELIVERED TO THE ADMINISTRATIVE COMMITTEE AND THE TRUSTEE.
(C) ADOPTION OF PLAN BY OTHER EMPLOYERS.
(1) EFFECTIVE DATE. THIS SECTION A.18.18(C) SHALL BE EFFECTIVE AS OF
DECEMBER 1, 1989.
(2) ADOPTION OF PLAN AND TRUST. ANY OTHER EMPLOYER MAY ADOPT THE
TERMS OF THIS PLAN AS ADOPTED BY THE ADOPTING EMPLOYER, AND THEREBY BECOME
A "PARTICIPATING EMPLOYER," PROVIDED:
(A) THE BOARD OF DIRECTORS OR OTHER GOVERNING ENTITY OF THE
ADOPTING EMPLOYER CONSENTS TO SUCH ADOPTION;
(B) THE BOARD OF DIRECTORS OR OTHER GOVERNING ENTITY OF THE
ADOPTING PARTICIPATING EMPLOYER ADOPTS THIS PLAN BY APPROPRIATE
ACTION;
(C) THE ADOPTING PARTICIPATING EMPLOYER EXECUTES THE ADOPTION
AGREEMENT; AND
(D) THE ADOPTING PARTICIPATING EMPLOYER EXECUTES SUCH OTHER
DOCUMENTS AS MAY BE REQUIRED TO MAKE SUCH ADOPTING PARTICIPATING
EMPLOYER A PARTY TO THE PLAN AND TRUST AS A PARTICIPATING EMPLOYER
(EXCEPT AS PROVIDED BELOW).
A PARTICIPATING EMPLOYER WHICH ADOPTS THE PLAN AND TRUST AGREEMENT IS
THEREAFTER AN EMPLOYER WITH RESPECT TO ITS EMPLOYEES FOR PURPOSES OF THE
PLAN, THE TRUST AGREEMENT AND THIS ADOPTION AGREEMENT EXCEPT THAT SUCH
PARTICIPATING EMPLOYER DELEGATES TO THE ADOPTING EMPLOYER THE POWER TO
AMEND THE ADOPTION AGREEMENT ON ITS BEHALF AND ON BEHALF OF THE ADOPTING
EMPLOYER AND EACH OTHER PARTICIPATING EMPLOYER, PROVIDED SUCH AMENDMENT
DOES NOT MATERIALLY AFFECT THE SUBSTANCE OF THE PLAN WITH RESPECT TO THE
ADOPTING EMPLOYER OR ANY PARTICIPATING EMPLOYER OR MATERIALLY AFFECT THE
COSTS OF THE ADOPTING EMPLOYER OR ANY PARTICIPATING EMPLOYER. A
PARTICIPATING EMPLOYER RESERVES THE POWER TO WITHDRAW FROM THE PLAN, AS
PROVIDED IN SECTION A.18.18(C)(3), AND TO TERMINATE THE PLAN AND TRUST
AGREEMENT WITH RESPECT TO SUCH PARTICIPATING EMPLOYER, AS PROVIDED IN
SECTION A.18.18(5).
(3) WITHDRAWAL FROM PLAN. SUBJECT TO THE REQUIREMENTS OF ARTICLE
XVII, ANY PARTICIPATING EMPLOYER MAY, AT ANY TIME, WITHDRAW FROM THE PLAN
UPON GIVING THE BOARD OF DIRECTORS OR OTHER GOVERNING ENTITY OF THE
ADOPTING EMPLOYER, THE ADMINISTRATIVE COMMITTEE AND THE TRUSTEE AT LEAST 30
DAYS NOTICE IN WRITING OF ITS INTENTION TO WITHDRAW. UPON THE WITHDRAWAL
OF A PARTICIPATING EMPLOYER PURSUANT TO THIS SECTION A.18.18(C)(3), THE
TRUSTEE SHALL SEGREGATE A PORTION OF THE ASSETS IN THE TRUST AS SET FORTH
BELOW, THE VALUE OF WHICH SHALL EQUAL THE TOTAL AMOUNT CREDITED TO THE
ACCOUNTS OF PARTICIPANTS EMPLOYED BY THE WITHDRAWING PARTICIPATING
EMPLOYER. SUBJECT TO THE REQUIREMENTS OF ARTICLE XVII, THE DETERMINATION
OF WHICH ASSETS ARE TO BE
A-45
<PAGE> 160
SO SEGREGATED SHALL BE MADE BY THE TRUSTEE IN ITS SOLE DISCRETION AS SET
FORTH BELOW.
THE ADMINISTRATIVE COMMITTEE MAY, AT ANY TIME, DIRECT THE TRUSTEE TO
SEGREGATE FROM THE TRUST SUCH PART THEREOF AS THE ADMINISTRATIVE COMMITTEE
SHALL DETERMINE TO BE HELD FOR THE BENEFIT OF THE EMPLOYEES OF A
PARTICIPATING EMPLOYER, AND SHALL GIVE A COPY OF SUCH DIRECTIONS TO THE
ADOPTING EMPLOYER AND EACH PARTICIPATING EMPLOYER. SUCH DIRECTIONS SHALL
SPECIFY THE ASSETS OF THE TRUST TO BE SEGREGATED. UNLESS THE ADOPTING
EMPLOYER OR ANY PARTICIPATING EMPLOYER FILES WITH THE TRUSTEE A WRITTEN
PROTEST WITHIN 30 DAYS AFTER DELIVERY OF SUCH DIRECTIONS TO THE TRUSTEE,
SUCH DIRECTIONS SHALL CONCLUSIVELY ESTABLISH THAT THE ASSETS SPECIFIED
THEREIN REPRESENT THE PART OF THE TRUST HELD FOR THE BENEFIT OF THE
EMPLOYEES OF THE ADOPTING EMPLOYER AND OF EACH PARTICIPATING EMPLOYER.
AFTER THE EXPIRATION OF SUCH 30 DAY PERIOD, AND AFTER SETTLEMENT OF
ANY SUCH PROTEST, THE TRUSTEE SHALL FOLLOW THE ADMINISTRATIVE COMMITTEE'S
DIRECTIONS, INCLUDING ANY MODIFICATION THEREOF ADOPTED IN SETTLEMENT OF ANY
PROTEST. ANY PART OF THE TRUST SEGREGATED PURSUANT TO SUCH DIRECTIONS
SHALL THEREAFTER BE HELD IN A SEPARATE TRUST IDENTICAL IN TERMS TO THE
TRUST HEREBY ESTABLISHED OR MAINTAINED, EXCEPT THAT, WITH RESPECT TO SUCH
SEPARATE TRUST, THIS PLAN AND TRUST AGREEMENT SHALL BE CONSTRUED AS IF SUCH
PARTICIPATING EMPLOYER WERE THE ADOPTING EMPLOYER AND ALL POWERS AND
AUTHORITY CONFERRED UPON THE ADOPTING EMPLOYER OR ITS BOARD OR OTHER
GOVERNING ENTITY AND THE ADMINISTRATIVE COMMITTEE SHALL DEVOLVE UPON SUCH
PARTICIPATING EMPLOYER OR ITS BOARD OF DIRECTORS OR OTHER GOVERNING ENTITY.
AT ANY TIME THEREAFTER, SUCH PARTICIPATING EMPLOYER AND THE TRUSTEE MAY
(BUT THEY SHALL NOT BE REQUIRED TO) ENTER INTO A SEPARATE AGREEMENT STATING
THE TERMS OF SUCH SEPARATE PLAN AND TRUST AGREEMENT WHICH MAY BE THE
DRINKER BIDDLE & REATH REGIONAL PROTOTYPE DEFINED CONTRIBUTION PLAN AND
TRUST AGREEMENT. IF THE DRINKER BIDDLE & REATH REGIONAL PROTOTYPE DEFINED
CONTRIBUTION PLAN AND TRUST AGREEMENT IS NOT SO ADOPTED, THE PLAN AND TRUST
AGREEMENT WITH RESPECT TO THE WITHDRAWING PARTICIPATING EMPLOYER SHALL BE
CONSIDERED AN INDIVIDUALLY DESIGNED PLAN.
(4) EXCLUSIVE PURPOSE OF TRUST. NEITHER THE SEGREGATION AND TRANSFER
OF THE TRUST ASSETS UPON THE WITHDRAWAL OF A PARTICIPATING EMPLOYER NOR THE
EXECUTION OF A NEW PLAN AND TRUST AGREEMENT BY SUCH WITHDRAWING
PARTICIPATING EMPLOYER SHALL OPERATE TO PERMIT ANY PART OF THE TRUST TO BE
USED FOR, OR DIVERTED TO, PURPOSES OTHER THAN FOR THE EXCLUSIVE BENEFIT OF
THE PARTICIPANTS OR THEIR BENEFICIARIES.
(5) APPLICATION OF WITHDRAWAL PROVISIONS. THE WITHDRAWAL PROVISIONS
CONTAINED IN SECTION A.18.18(C)(3) AND (4) SHALL BE APPLICABLE ONLY IF THE
WITHDRAWING PARTICIPATING EMPLOYER CONTINUES TO COVER ITS PARTICIPANTS AND
ELIGIBLE EMPLOYEES IN ANOTHER PLAN AND TRUST QUALIFIED UNDER SECTIONS 401
AND 501 OF THE CODE. OTHERWISE, THE TERMINATION PROVISIONS OF THE PLAN AND
TRUST AGREEMENT SHALL APPLY WITH RESPECT TO THE WITHDRAWING PARTICIPATING
EMPLOYER.
(6) SINGLE PLAN. NOTWITHSTANDING ANY OTHER PROVISION SET FORTH
HEREIN, THE PLAN, AS ADOPTED PURSUANT TO THIS SECTION A.18.18(C) BY THE
ADOPTING EMPLOYER AND EACH PARTICIPATING EMPLOYER, SHALL CONSTITUTE A
SINGLE PLAN, AS SUCH TERM IS DEFINED IN TREAS. REG. Section
1.414(1)-1(B)(1), AS TO THE ADOPTING EMPLOYER AND EACH PARTICIPATING
EMPLOYER.
(7) QUALIFYING EMPLOYER SECURITIES. FOR PURPOSES OF SECTIONS A.1.72
AND A.6.1(B), AND FOR ALL OTHER PURPOSES OF THE PLAN AND TRUST AGREEMENT,
THE STOCK OF ANY ADOPTING EMPLOYER AND ANY PARTICIPATING EMPLOYER SHALL BE
TREATED AS QUALIFYING EMPLOYER SECURITIES.
(8) ADOPTING EMPLOYER APPOINTED AGENT OF PARTICIPATING EMPLOYERS.
EACH PARTICIPATING EMPLOYER APPOINTS THE BOARD OF DIRECTORS OR OTHER
GOVERNING ENTITY OF THE ADOPTING EMPLOYER AS ITS AGENT TO EXERCISE ON ITS
BEHALF ALL OF THE ADMINISTRATIVE POWER AND AUTHORITY CONFERRED UPON THE
ADOPTING EMPLOYER BY THIS PLAN AND TRUST AGREEMENT, INCLUDING THE POWER TO
AMEND THE ADOPTION AGREEMENT ON ITS BEHALF AND ON BEHALF OF THE ADOPTING
EMPLOYER AND
A-46
<PAGE> 161
EACH OTHER PARTICIPATING EMPLOYER AS SET FORTH IN ARTICLE XV, PROVIDED SUCH
AMENDMENT DOES NOT MATERIALLY AFFECT THE SUBSTANCE OF THE PLAN WITH RESPECT
TO THE ADOPTING EMPLOYER OR ANY PARTICIPATING EMPLOYER OR MATERIALLY AFFECT
THE COST OF THE ADOPTING EMPLOYER OR ANY PARTICIPATING EMPLOYER. THE
AUTHORITY OF THE BOARD OF DIRECTORS OR OTHER GOVERNING ENTITY OF THE
ADOPTING EMPLOYER TO ACT AS AGENT OF ANY PARTICIPATING EMPLOYER, IN
ACCORDANCE WITH SECTIONS A.18.18(C)(2) AND A.18.18(C)(8), SHALL TERMINATE
ONLY IF THE PART OF THE PLAN'S ASSETS HELD FOR THE BENEFIT OF THE EMPLOYEES
OF SUCH PARTICIPATING EMPLOYER SHALL BE SEGREGATED IN A SEPARATE TRUST AS
PROVIDED IN SECTION A.18.18(C)(3) AND SUCH PARTICIPATING EMPLOYER THEREUPON
WITHDRAWS FROM THE PLAN IN ACCORDANCE WITH SECTION A.18.18(C)(3). ANY
MATERIAL AMENDMENT (I.E., ANY AMENDMENT MATERIALLY AFFECTING THE SUBSTANCE
OF THE PLAN WITH RESPECT TO THE ADOPTING EMPLOYER OR ANY PARTICIPATING
EMPLOYER OR MATERIALLY AFFECTING THE COSTS OF THE ADOPTING EMPLOYER OR ANY
PARTICIPATING EMPLOYER CAN ONLY BE ADOPTED BY THE ADOPTING EMPLOYER AND ALL
PARTICIPATING EMPLOYERS. EACH PARTICIPATING EMPLOYER EXCLUSIVELY RESERVES
THE POWER TO TERMINATE THIS PLAN AND/OR THE TRUST AGREEMENT AS SET FORTH IN
ARTICLE XVI WITH RESPECT TO SUCH PARTICIPATING EMPLOYER. THE COMPLETE
TERMINATION OF THE PLAN CAN ONLY BE EFFECTED BY ACTION OF THE ADOPTING
EMPLOYER AND ALL PARTICIPATING EMPLOYERS.
(9) NAME OF ADOPTING EMPLOYER. THE MUNICIPAL FUND FOR TEMPORARY
INVESTMENT IS THE ADOPTING EMPLOYER.
(10) PARTICIPATING EMPLOYERS. THE NAMES AND PERTINENT DATA FOR THE
PARTICIPATING EMPLOYERS ARE AS FOLLOWS:
(A) CHESTNUT STREET EXCHANGE FUND:
ADDRESS: BELLEVUE PARK CORPORATE CENTER
400 BELLEVUE PARKWAY, SUITE 100
WILMINGTON, DE 19809
EMPLOYER IDENTIFICATION NUMBER:51-0199471
TAXABLE YEAR: JANUARY 1 - DECEMBER 31
BUSINESS CODE NUMBER: 6742
TYPE OF ENTITY: PARTNERSHIP
PLACE OF ORGANIZATION: CALIFORNIA
(B) INDEPENDENCE SQUARE INCOME SECURITIES, INC.:
ADDRESS: ONE ALDWYN CENTER
VILLANOVA, PA 19085
EMPLOYER IDENTIFICATION NUMBER:23-1861553
TAXABLE YEAR: JANUARY 1 - DECEMBER 31
BUSINESS CODE NUMBER: 6742
TYPE OF ENTITY: CORPORATION
PLACE OF ORGANIZATION: MARYLAND
(C) TEMPORARY INVESTMENT FUND, INC.:
ADDRESS: BELLEVUE PARK CORPORATE CENTER
400 BELLEVUE PARKWAY, SUITE 100
WILMINGTON, DE 19809
EMPLOYER IDENTIFICATION NUMBER:52-0983343
A-47
<PAGE> 162
TAXABLE YEAR: OCTOBER 1 - SEPTEMBER 30
BUSINESS CODE NUMBER: 6742
TYPE OF ENTITY: CORPORATION
PLACE OF ORGANIZATION: MARYLAND
(D) TRUST FOR FEDERAL SECURITIES:
ADDRESS: BELLEVUE PARK CORPORATE CENTER
400 BELLEVUE PARKWAY, SUITE 100
WILMINGTON, DE 19809
EMPLOYER IDENTIFICATION NUMBER:52-1036683
TAXABLE YEAR: NOVEMBER 1 - OCTOBER 31
BUSINESS CODE NUMBER: 6742
TYPE OF ENTITY: BUSINESS TRUST
PLACE OF ORGANIZATION: PENNSYLVANIA
(E) MUNICIPAL FUND FOR CALIFORNIA INVESTORS, INC.:
ADDRESS: BELLEVUE PARK CORPORATE CENTER
400 BELLEVUE PARKWAY, SUITE 100
WILMINGTON, DE 19809
EMPLOYER IDENTIFICATION NUMBER:51-0266273
TAXABLE YEAR: FEBRUARY 1 - JANUARY 31
BUSINESS CODE NUMBER: 6742
TYPE OF ENTITY: CORPORATION
PLACE OF ORGANIZATION: MARYLAND
(F) MUNICIPAL FUND FOR NEW YORK INVESTORS, INC.:
ADDRESS: BELLEVUE PARK CORPORATE CENTER
400 BELLEVUE PARKWAY, SUITE 100
WILMINGTON, DE 19809
EMPLOYER IDENTIFICATION NUMBER:51-0270312
TAXABLE YEAR: AUGUST 1 - JULY 31
BUSINESS CODE NUMBER: 6742
TYPE OF ENTITY: CORPORATION
PLACE OF ORGANIZATION: MARYLAND
(G) PORTFOLIOS FOR DIVERSIFIED INVESTMENT:
ADDRESS: BELLEVUE PARK CORPORATE CENTER
400 BELLEVUE PARKWAY, SUITE 100
WILMINGTON, DE 19809
EMPLOYER IDENTIFICATION NUMBER:51-0300345
TAXABLE YEAR: JULY 1 - JUNE 30
A-48
<PAGE> 163
BUSINESS CODE NUMBER: 6742
TYPE OF ENTITY: BUSINESS TRUST
PLACE OF ORGANIZATION: MASSACHUSETTS
(H) THE PNC(R) FUND:
ADDRESS: BELLEVUE PARK CORPORATE CENTER
400 BELLEVUE PARKWAY, SUITE 100
WILMINGTON, DE 19809
EMPLOYER IDENTIFICATION NUMBER:51-0318674
TAXABLE YEAR: OCTOBER 1 - SEPTEMBER 30
BUSINESS CODE NUMBER: 6742
TYPE OF ENTITY: BUSINESS TRUST
PLACE OF ORGANIZATION: MASSACHUSETTS
(I) THE RBB FUND, INC.:
ADDRESS: BELLEVUE PARK CORPORATE CENTER
400 BELLEVUE PARKWAY, SUITE 100
WILMINGTON, DE 19809
EMPLOYER IDENTIFICATION NUMBER:51-0312196
TAXABLE YEAR: SEPTEMBER 1 - AUGUST 31
BUSINESS CODE NUMBER: 6742
TYPE OF ENTITY: CORPORATION
PLACE OF ORGANIZATION: MARYLAND
(J) PROVIDENT INSTITUTIONAL FUNDS, INC. (EFFECTIVE FEBRUARY
16, 1995):
ADDRESS: BELLEVUE PARK CORPORATE CENTER
400 BELLEVUE PARKWAY, SUITE 100
WILMINGTON, DE 19809
EMPLOYER IDENTIFICATION NUMBER:41-1769812
TAXABLE YEAR: JANUARY 1 - DECEMBER 31
BUSINESS CODE NUMBER: 6742
TYPE OF ENTITY: CORPORATION
PLACE OF ORGANIZATION: MARYLAND ]
A.19.1 ADOPTION OF PLAN AND TRUST BY AFFILIATED EMPLOYERS. Shall
Article XIX of the Plan apply (check one)?
[ ] (A) Yes [ ] (B) No
[ X ] (C) N/A (No Affiliated Employers adopting Plan)
A-49
<PAGE> 164
If Section A.19.1(A) is checked, fill in the following blanks:
Name of Adopting Employer: [ ]
Name(s), Address(es), Type of Entity and Tax Identification
Number(s) of Adopting Affiliated Employer(s):[
]
The adopting Employer and each adopting Affiliated Employer must adopt the Plan
and execute the Adoption Agreement upon the initial adoption by an adopting
Affiliated Employer of the Plan. Thereafter the adopting Affiliated Employer,
pursuant to Article XIX of the Plan, authorizes the adopting Employer to take
all further action including, but not limited to, the amendment and/or
termination of the Plan, on behalf of the adopting Affiliated Employer under
the Plan (unless such adopting Affiliated Employer withdraws from the Plan
pursuant to Article XIX of the Plan) and such adopting Affiliated Employer need
not be a party to this Adoption Agreement with respect to any such subsequent
action relating to the Plan and Trust Agreement and/or Adoption Agreement.
THE ADOPTING EMPLOYER OR ADOPTING AFFILIATED EMPLOYER MAY NOT RELY ON THE
NOTIFICATION LETTER ISSUED BY THE NATIONAL OR DISTRICT DIRECTOR OF THE INTERNAL
REVENUE SERVICE AS EVIDENCE THAT THE PLAN IS QUALIFIED UNDER SECTION 401 OF THE
INTERNAL REVENUE CODE. IN ORDER TO OBTAIN RELIANCE WITH RESPECT TO PLAN
QUALIFICATION, THE ADOPTING EMPLOYER AND/OR ADOPTING AFFILIATED EMPLOYER MUST
APPLY TO THE APPROPRIATE KEY DISTRICT OFFICE FOR A DETERMINATION LETTER.
Executed at [WILMINGTON ], [ DELAWARE ], on this the [ 28th ]
day of [ March ], 19[95].
<TABLE>
<S> <C>
ADOPTING EMPLOYER:
ATTEST: MUNICIPAL FUND FOR TEMPORARY
INVESTMENT
---------------------------------
[SEAL] NAME OF ADOPTING EMPLOYER
/s/ MORGAN R. JONES By: /s/ G. WILLING PEPPER
- ----------------------------------- ------------------------------
Morgan R. Jones, Secretary G. Willing Pepper, President
PARTICIPATING EMPLOYERS:
ATTEST: CHESTNUT STREET EXCHANGE FUND
---------------------------------
Name of Participating Employer
[SEAL]
/s/ MORGAN R. JONES By: /s/ ROBERT R. FORTUNE
- ----------------------------------- ---------------------------------
Morgan R. Jones, Secretary Robert R. Fortune, President
ATTEST: INDEPENDENCE SQUARE INCOME
SECURITIES, INC.
---------------------------------
[SEAL] Name of Participating Employer
/s/ GARY M. GARDNER By: /s/ ROBERT R. FORTUNE
- ----------------------------------- ---------------------------------
Gary M. Gardner, Secretary Robert R. Fortune, President
ATTEST: TEMPORARY INVESTMENT FUND, INC.
---------------------------------
Name of Participating Employer
[SEAL]
/s/ W. BRUCE McCONNEL By: /s/ G. WILLING PEPPER
- ---------------------------------- ---------------------------------
W. Bruce McConnel, III, Secretary G. Willing Pepper, President
</TABLE>
A-50
<PAGE> 165
<TABLE>
<S> <C>
ATTEST: TRUST FOR FEDERAL SECURITIES
---------------------------------
Name of Participating Employer
[SEAL]
/s/ W. BRUCE McCONNEL By: /s/ G. WILLING PEPPER
- ---------------------------------- ---------------------------------
W. Bruce McConnel, III, Secretary G. Willing Pepper, President
ATTEST: MUNICIPAL FUND FOR CALIFORNIA
INVESTORS, INC.
---------------------------------
[SEAL] Name of Participating Employer
/s/ MORGAN R. JONES By: /s/ G. WILLING PEPPER
- ---------------------------------- ----------------------------------
Morgan R. Jones, Secretary G. Willing Pepper, President
ATTEST: MUNICIPAL FUND FOR NEW YORK
INVESTORS, INC.
---------------------------------
[SEAL] Name of Participating Employer
/s/ MORGAN R. JONES By: /s/ EDWARD J. ROACH
- ---------------------------------- ---------------------------------
Morgan R. Jones, Secretary Edward J. Roach, Vice President
ATTEST: PORTFOLIOS FOR DIVERSIFIED
INVESTMENT
---------------------------------
[SEAL] Name of Participating Employer
/s/ W. BRUCE McCONNEL By: /s/ G. WILLING PEPPER
- --------------------------------- ---------------------------------
W. Bruce McConnel, III, Secretary G. Willing Pepper, President
ATTEST: THE PNC(R) FUND
-----------------------------------
Name of Participating Employer
[SEAL]
/s/ MORGAN R. JONES By: /s/ G. WILLING PEPPER
- --------------------------------- ---------------------------------
Morgan R. Jones, Secretary G. Willing Pepper, President
ATTEST: THE RBB FUND, INC.
---------------------------------
Name of Participating Employer
[SEAL]
/s/ MORGAN R. JONES By: /s/ EDWARD J. ROACH
- --------------------------------- ---------------------------------
Morgan R. Jones, Secretary Edward J. Roach, President
ATTEST: PROVIDENT INSTITUTIONAL FUNDS, INC.
-----------------------------------
[SEAL] Name of Participating Employer
/s/ W. BRUCE McCONNEL By: /s/ G. WILLING PEPPER
- --------------------------------- ---------------------------------
W. Bruce McConnel, III, Secretary G. Willing Pepper, President
</TABLE>
The undersigned hereby agree(s) to serve as the Trustee(s) under the Plan and
Trust Agreement.
<TABLE>
<S> <C>
EDWARD J. ROACH ROBERT R. FORTUNE
- --------------------------------- ---------------------------------
Name of Trustee Name of Trustee
/s/ ANTHONY M. SANTOMERO /s/ ROBERT R. FORTUNE
- --------------------------------- -----------------------------
Witness Signature
/s/ LINDA G. HAGAN /s/ EDWARD J. ROACH
- --------------------------------- -----------------------------
Witness Signature
</TABLE>
A-51
<PAGE> 1
EXHIBIT (8)(a)
May 9, 1991
Trust for Federal Securities
Bellevue Park Corporate Center
103 Bellevue Parkway, Suite 152
Wilmington, DE 19809
Re: Trust for Federal Securities - Custodian Fees
Gentlemen:
This letter constitutes our agreement, and supersedes any prior
agreement, with respect to compensation to be paid to Provident National Bank
("Provident") under the terms of a Custodian Agreement dated June 1, 1989, as
supplemented by Addenda Nos. 1 and 2 dated as of November 1, 1990 and May 9,
1991, respectively, between you (the "Company") and Provident, with respect of
the FedFund, T-Fund, FedCash, T-Cash, Federal Trust Fund, Treasury Trust Fund,
Short Government Fund, Intermediate Government Fund and Long Government Fund
portfolios of the Company (the "Funds"). Pursuant to Paragraph 21 of that
Agreement, and in consideration of the services to be provided to you, you will
pay Provident the following for each Fund:
1. An annual custody fee of $.25 for each $1,000 of the Fund's first $250
million average daily gross assets, $.20 for each $1,000 on the next $250
million of average daily gross assets, $.15 for each $1,000 on the next $500
million of average daily gross assets, $.09 for each $1,000 on the next $2
billion of average daily gross assets, and $.08 for each $1,000 on average daily
gross assets over $3 billion, which custody fee shall be calculated daily and
paid monthly;
2. For all fixed income and equity securities, which do not include "Money
Market" obligations, a transaction charge of $15.00 for each purchase, sale or
delivery of such security upon its maturity date;
3. For each interest collection or claim item, a fee of $40;
4. Provident's incremental costs in providing foreign custody services for
foreign denominated and held securities; and
<PAGE> 2
Trust for Federal Securities
May 9, 1991
Page 2
5. Provident's out-of-pocket expenses, including but not limited to
postage, telephone, telex, Federal Express and Federal Reserve wire fees, on
behalf of the Company.
The fee attributable to each Fund shall be the several (and not joint
or joint and several) obligation of each such Fund. The fee for the period from
the day of the year this agreement is entered into until the end of that year
shall be pro-rated according to the proportion which such period bears to the
full annual period.
If the foregoing accurately sets forth our agreement and you intend to
be legally bound thereby, please execute a copy of this letter and return it to
us.
Very truly yours,
PROVIDENT NATIONAL BANK
By:
-------------------
Title: Vice President
ACCEPTED: TRUST FOR FEDERAL SECURITIES
By:
------------------------------
Title: Vice President & Treasurer
Date: May 9, 1991
<PAGE> 1
EXHIBIT (8)(b)
CUSTODIAN AGREEMENT
THIS AGREEMENT is made as of June 1, 1989 by and between TRUST FOR
FEDERAL SECURITIES, a Pennsylvania business trust (the "Company"), and
PROVIDENT NATIONAL BANK, a national banking association ("Provident").
W I T N E S S E T H :
WHEREAS, the Company is registered as an open-end, diversified
management investment company under the Investment Company Act of 1940, as
amended (the "1940 Act"); and
WHEREAS, the Company currently offers shares of series
representing interest in six separate investment portfolios, known as FedFund,
T-Fund, Treasury Trust Fund, Short Government Fund, Intermediate Government
Fund and Long Government Fund (each a "Fund"), and classes of shares in each
such Fund; and
WHEREAS, Provident has served as the Company's Custodian
pursuant to an Amended and Restated Custodian and Services Agreement dated as
of November 19, 1979, as amended on January 16, 1981, November 30, 1981, March
22, 1982, July 2, 1982, January 12, 1984, November 1, 1984 and May 9, 1986; and
WHEREAS, the Company desires to continue to retain Provident
to serve as the Company's custodian and Provident is willing to serve as the
Company s custodian;
NOW, THEREFORE, in consideration of the premises and mutual
covenants herein contained, it is agreed between the parties hereto as follows:
<PAGE> 2
1. Appointment. The Company hereby appoints Provident to act as
custodian of the portfolio securities, cash and other property belonging to the
Company for the period and on the terms set forth in this Agreement. Provident
accepts such appointment and agrees to furnish the services herein set forth in
return for the compensation as provided in Paragraph 21 of this Agreement.
Provident agrees to comply with all relevant provisions of the 1940 Act and
applicable rules and regulations thereunder. The Company has, and may from time
to time continue to issue additional Funds or classes of such Funds, or classify
and reclassify shares of such current or future Funds or classes. Provident
shall identify to each such Fund or class property belonging to such Fund or
class in such reports, confirmations and notices to the Company called for under
this Agreement. In the event that the Company establishes additional Funds or
classes, the Company shall notify Provident in writing. If Provident is willing
to render such services, it shall notify the Company in writing, whereupon such
Fund or class shall become a Fund or class hereunder, and the compensation
payable by such new Fund or class to Provident will be agreed in writing at the
time, pursuant to Paragraph 21 hereof.
2. Delivery of Documents. The Company has furnished Provident with
copies properly certified or authenticated of each of the following:
(a) Resolutions of the Company's Board of Trustees authorizing
the appointment of Provident as custodian of
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<PAGE> 3
the portfolio securities, cash and other property belonging to the Company and
approving this Agreement;
(b) Appendix A identifying and containing the signatures of the
Company's President and Treasurer and/or other persons authorized to issue Oral
Instructions and to sign Written Instructions, as hereinafter defined, on behalf
of the Company;
(c) The Company's Amended and Restated Declaration of Trust
established on February 28, 1980, as amended on June 20, 1980, and March 2, 1987
and all further amendments thereto (such Declaration of Trust, as presently in
effect and as it shall from time to time be amended, is herein called the
"Declaration");
(d) The Company's Code of Regulations ("By-Laws") compiled on
December 1, 1982 and amended on January 28, 1988 and all amendments thereto
(such By-Laws, as presently in effect and as they shall from time to time be
amended, are herein called the "By-Laws");
(e) The Investment Advisory Agreement between Provident
Institutional Management Corporation (the "Advisor") and the Company dated as of
March 11, 1987 and relating to the Company with all addenda (such Advisory
Agreement as presently in effect and with any existing and future addenda is
herein called, the "Advisory Agreement");
(f) The Sub-Advisory Agreement between Provident and the Advisor
dated as of March 11, 1987 with all addenda (such Sub-Advisory Agreement as
presently in effect and with any
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<PAGE> 4
existing and future addenda, is herein called, the "Management Agreement");
(g) The Distribution Agreement between the Company and Shearson
Lehman Hutton Inc. ("Shearson") dated September 7, 1988 (the "Underwriting
Agreement");
(h) The Transfer Agency Agreement between Provident Financial
Processing Corporation (the "Transfer Agent") and the Company dated as of June
1, 1989 (the "Transfer Agency Agreement);
(i) The Administration Agreement between The Boston Company
Advisors, Inc. and the Company with all addenda (such Administration Agreement
as presently in effect and with any existing and future addenda is herein called
the "Administration Agreement");
(j) The Company's most recent Post-Effective Amendment to its
Registration Statement on Form N-IA under the Securities Act of 1933, as amended
("the 1933 Act") (File No. 2-53808) and under the 1940 Act as filed with the SEC
on August 30, 1988 relating to shares of the Company, no par value ("Shares"),
and all Amendments thereto, as well as such prior Registration Statements or
Amendments as Provident may request; and
(k) The Company's most recent prospectuses (prospectus herein is
deemed to include the Statement of Additional Information) relating to Shares
(such prospectuses, as presently in effect and all amendments and supplements
thereto are herein called the "Prospectus").
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<PAGE> 5
The Company will furnish Provident from time to time with copies,
properly certified or authenticated, of all amendments of or supplements to the
foregoing, if any.
3. Definitions.
(a) "Authorized Person." As used in this Agreement, the term
"Authorized Person" means the President and Treasurer of the Company and any
other person, whether or not any such person is an officer or employee of the
Company, duly authorized by the Board of Trustees of the Company to give Oral
and Written Instructions on behalf of the Company and listed on the Certificate
annexed hereto as Appendix A or any amendment thereto as may be received by
Provident from time to time.
(b) "Book-Entry System" As used in this Agreement, the term
"Book-Entry System" means the Federal Reserve/Treasury book-entry system for
United States and federal agency securities, its successor or successors and its
nominee or nominees and any book-entry system maintained by a clearing agency
registered with the SEC under Section 17A of the Securities Exchange Act of 1934
(the "1934 Act").
(c) "Oral Instructions" As used in this Agreement, the term
"Oral Instructions" means oral instructions actually received by Provident from
an Authorized Person or from a person reasonably believed by Provident to be an
Authorized Person. The Company agrees to deliver to Provident, at the time and
in the manner specified in Paragraph 8(b) of this Agreement, Written
Instructions confirming Oral Instructions.
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<PAGE> 6
(d) Property The term "Property," as used in this Agreement,
means:
(i) any and all securities and other property which the
Company may from time to time deposit, or cause to be deposited,
with Provident or which Provident may from time to time hold for
the Company, including securities and property deposited on
behalf of the Company with the Book-Entry System;
(ii) all income in respect of any of such securities or
other property;
(iii) all proceeds of the sale of any of such securities or
other property; and
(iv) all proceeds of the sale of securities issued by the
Company, which are received by Provident from time to time from
or on behalf of the Company.
(e) "Written Instructions." As used in this Agreement, the term
"Written Instructions" means written instructions delivered by hand, mail,
tested telegram, cable, telex or facsimile sending device, and received by
Provident and signed by an Authorized Person.
4. Delivery and Registration of the Property. The Company will
deliveror cause to be delivered to Provident all securities and all moneys
owned by it, including cash received for the issuance of its Shares, at any
time during the period of this Agreement. Provident will not be responsible for
such securities and such moneys until actually received by it. All
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<PAGE> 7
securities delivered to Provident (other than in bearer form) shall be
registered in the name of the Company or in the name of a nominee of the
Company or in the name of Provident or in the name of any nominee of Provident
(with or without indication of fiduciary status), or in the name of any
sub-custodian or any nominee of any such sub-custodian appointed pursuant to
Paragraph 6 hereof or shall be properly endorsed and in form for transfer
satisfactory to Provident.
5. Receipt and Disbursement of Money.
(a) Provident shall open and maintain a separate custodial
account or accounts in the name of the Company, subject only to draft or order
by Provident acting pursuant to the terms of this Agreement, and shall hold in
such account or accounts, subject to the provisions hereof, all cash received by
it from or for the account of the Company. Provident shall make payments of cash
to, or for the account of, the Company from such cash only (i) for the purchase
of securities for the Company's portfolio as provided in Paragraph 13 hereof;
(ii) upon receipt of Written Instructions, for the payment of interest,
dividends, taxes, administration, accounting, distribution, advisory or
management fees or expenses which are to be borne by the Company under the terms
of this Agreement, the Advisory Agreement, the Administration Agreement, the
Transfer Agency Agreement and the Distribution Agreement, as well as fees borne
by the Company under its agreements with institutional investors with respect to
the provision of support services to their customers who
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<PAGE> 8
beneficially own from time to time Shares of a Fund which has entered into such
agreements; (iii) upon receipt of Written Instructions, for payments in
connection with the conversion, exchange or surrender of securities owned or
subscribed to by the Company and held by or to be delivered to Provident; (iv)
to a sub-custodian pursuant to Paragraph 6 hereof; (v) for the redemption of
Company Shares; (vi) for payment of the amount of dividends received in respect
of securities sold short; (vii) for payment against receipt of securities
loaned pursuant to a specified agreement for loaning the Company's securities;
or (viii) upon receipt of Written Instructions, for other proper Company
purposes. No payment pursuant to (i) above shall be made unless Provident has
received a copy of the broker's or dealer's confirmation or the payees invoice,
as appropriate.
(b) Provident is hereby authorized to endorse and collect all
checks, drafts and other negotiable instruments or other orders for the payment
of money received as custodian for the account of the Company.
6. Receipt of Securities.
(a) Except as provided by Paragraph 7 hereof, Provident shall
hold and physically segregate in a separate account, identifiable at all times
from those of any other persons, firms, or corporations, all securities and
non-cash property received by it for the account of the Company. All such
securities and non-cash property are to be held or disposed of by Provident for
the Company pursuant to the terms of this
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<PAGE> 9
Agreement. In the absence of Written Instructions accompanied by a certified
resolution of the Company's Board of Trustees authorizing the transaction,
Provident shall have no power or authority to withdraw, deliver, assign,
hypothecate, pledge or otherwise dispose of any such securities and investments
except in accordance with the express terms provided for in this Agreement. In
no case may any trustee, officer, employee or agent of the Company withdraw any
securities. In connection with its duties under this Paragraph 6, Provident
may, at its own expense, enter into sub-custodian agreements with other banks
or trust companies for the receipt of certain securities and cash to be held by
Provident for the account of the Company pursuant to this Agreement; provided
that each such bank or trust company has an aggregate capital, surplus and
undivided profits, as shown by its last published report, of not less than one
million dollars ($1,000,000) for a Provident subsidiary or affiliate, or of not
less than twenty million dollars ($20,000,000) if such bank or trust company is
not a Provident subsidiary or affiliate and that in either case such bank or
trust company agrees with Provident to comply with all relevant provisions of
the 1940 Act and applicable rules and regulations thereunder. Provident shall
remain responsible for the performance of all of its duties under this
Agreement and shall hold the Company harmless from the acts and omissions,
under the standards of care provided for herein, of any bank or trust company
that it might choose pursuant to this Paragraph 6.
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<PAGE> 10
(b) Where securities are transferred to an account of the
Company established pursuant to Paragraph 7 hereof, Provident shall also by
book-entry or otherwise identify as belonging to the Company the quantity of
securities in a fungible bulk of securities registered in the name of Provident
(or its nominee) or shown in Provident's account on the books of the Book-Entry
System. At least monthly and from time to time, Provident shall furnish the
Company with a detailed statement of the Property held for the Company under
this Agreement.
7. Use of Book-Entry System. The Company shall deliver to Provident
certified resolutions of the Board of Trustees of the Company approving,
authorizing and instructing Provident on a continuous and on-going basis until
instructed to the contrary by Oral or Written Instructions actually received by
Provident (a) to deposit in a Book-Entry System all securities belonging to the
Company eligible for deposit therein and (b) to utilize the Book-Entry System to
the extent possible in connection with settlements of purchases and sales of
securities by the Company, and deliveries and returns of securities loaned,
subject to repurchase or reverse repurchase agreements or used as collateral in
connection with borrowings. Without limiting the generality of such use, it is
agreed that the following provisions shall apply thereto:
(a) Securities and any cash of the Company deposited in the
Book-Entry System will at all times be segregated from any assets and cash
controlled by Provident in
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<PAGE> 11
other than a fiduciary or custodian capacity but may be commingled with other
assets held in such capacities. Provident and its sub-custodian, if any, will
pay out money only upon receipt of securities and will deliver securities only
upon the receipt of money.
(b) All books and records maintained by Provident which relate
to the Company's participation in the Book-Entry System will at all times during
Provident's regular business hours be open to the inspection of the Company's
duly authorized employees or agents, and the Company will be furnished with all
information in respect of the services rendered to it as it may require.
(c) Provident will provide the Company with copies of any report
obtained by Provident on the system of internal accounting control of the
Book-Entry System promptly after receipt of such a report by Provident.
Provident will also provide the Company with such reports on its own system of
internal control as the Company may reasonably request from time to time.
8. Instructions Consistent with Declaration etc.
(a) Unless otherwise provided in this Agreement, Provident shall
act only upon Oral and Written Instructions. Although Provident may know of the
provisions of the Declaration and By-Laws of the Company, Provident may assume
that any Oral or Written Instructions received hereunder are not in any way
inconsistent with any provisions of such Declaration or By-Laws
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<PAGE> 12
or any vote, resolution or proceeding of the Shareholders, or of the Board of
Trustees, or of any committee thereof.
(b) Provident shall be entitled to rely upon any Oral
Instructions and any Written Instructions actually received by Provident
pursuant to this Agreement. The Company agrees to forward to Provident Written
Instructions confirming Oral Instructions in such manner that the Written
Instructions are received by Provident by the close of business of the same day
that such Oral Instructions are given to Provident. The Company agrees that the
fact that such confirming Written Instructions are not received by Provident
shall in no way affect the validity of the transactions or enforceability of the
transactions authorized by the Company by giving Oral Instructions. The Company
agrees that Provident shall incur no liability to the Company in acting upon
Oral Instructions given to Provident hereunder concerning such transactions
provided Provident reasonably believes such instructions have been received from
an Authorized Person.
9. Transactions Not Requiring Instructions. In the absence of
contrary Written Instructions, Provident is authorized to take the following
actions:
(a) Collection of Income and Other Payments. Provident shall:
(i) collect and receive for the account of the Company,
all income and other payments and distributions, including
(without limitation) stock
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<PAGE> 13
dividends, rights, bond coupons, option premiums and similar
items, included or to be included in the Property, and promptly
advise the Company of such receipt and shall credit such income,
as collected, to the Company's custodian account;
(ii) endorse and deposit for collection, in the name of
the Company, checks, drafts, and other negotiable instruments or
other orders for the payment of money on the same day as
received;
(iii) receive and hold for the account of the Company all
securities received as a distribution on the Company's portfolio
securities as a result of a stock dividend, share split-up or
reorganization, recapitalization, readjustment or other
rearrangement or distribution of rights or similar securities
issued with respect to any portfolio securities belonging to the
Company held by Provident hereunder;
(iv) present for payment and collect the amount payable
upon all securities which may mature or be called, redeemed, or
retired, or otherwise become payable on the date such securities
become payable; and
(v) take any action which may be necessary and proper in
connection with the collection and receipt of such income and
other payments and the endorsement for collection of checks,
drafts, and other negotiable instruments as described in
Paragraph 24 of this Agreement.
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<PAGE> 14
(b) Miscellaneous Transactions. Provident is authorized to
deliver or cause to be delivered Property against payment or other consideration
or written receipt therefor in the following cases:
(i) for examination by a broker selling for the account
of the Company in accordance with street delivery custom;
(ii) for the exchange of interim receipts or temporary
securities for definitive securities; and
(iii) for transfer of securities into the name of the
Company or Provident or nominee of either, or for exchange of
securities for a different number of bonds, certificates, or
other evidence, representing the same aggregate face amount or
number of units bearing the same interest rate, maturity date and
call provisions, if any; provided that, in any such case, the new
securities are to be delivered to Provident.
10. Transactions Requiring Instructions. Upon receipt of Oral or
Written Instructions and not otherwise, Provident, directly or through the use
of the Book-Entry System, shall:
(a) execute and deliver to such persons as may be designated in
such Oral or Written Instructions, proxies, consents, authorizations,
and any other instruments whereby the authority of the Company as owner
of any securities may be exercised;
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<PAGE> 15
(b) deliver any securities held for the Company against receipt
of other securities or cash issued or paid in connection with the
liquidation, reorganization, refinancing, tender offer, merger,
consolidation or recapitalization of any corporation, or the exercise
of any conversion privilege;
(c) deliver any securities held for the Company to any protective
committee, reorganization committee or other person in connection with
the reorganization, refinancing, merger, consolidation,
recapitalization or sale of assets of any corporation, and receive and
hold under the terms of this Agreement such certificates of deposit,
interim receipts or other instruments or documents as may be issued to
it to evidence such delivery;
(d) make such transfers or exchanges of the assets of the Company
and take such other steps as shall be stated in said Oral or Written
Instructions to be for the purpose of effectuating any duly authorized
plan of liquidation, reorganization, merger, consolidation or
recapitalization of the Company;
(e) release securities belonging to the Company to any bank or
trust company for the purpose of pledge or hypothecation to secure any
loan incurred by the Company; provided, however, that securities shall
be released only upon payment to Provident of the monies borrowed,
except that in cases where additional collateral is required to secure
a borrowing
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<PAGE> 16
already made, subject to proper prior authorization, further
securities may be released for that purpose; and repay such loan upon
redelivery to it of the securities pledged or hypothecated therefor
and upon surrender of the note or notes evidencing the loan;
(f) release and deliver securities owned by the Company in
connection with any reverse repurchase agreement entered into on behalf
of the Company, but only on receipt of payment therefor; and pay out
moneys of the Company in connection with such reverse repurchase
agreements, but only upon the delivery of the securities;
(g) pay out moneys of the Company in connection with any
repurchase agreement entered into on behalf of the Company, but only
upon the delivery of the subject securities; and release and deliver
such securities in connection with such repurchase agreements, but only
on receipt of payment therefor; and
(h) otherwise transfer, exchange or deliver securities in
accordance with Oral or Written Instructions.
11. Segregated Accounts. Provident shall upon receipt of Written or
Oral Instructions establish and maintain a segregated account or accounts on its
records for and on behalf of the Company, into which account or accounts may be
transferred cash and/or securities, including securities in the Book-Entry
System (i) for the purposes of compliance by the Company with the procedures
required by a securities or option exchange, providing
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<PAGE> 17
such procedures comply with the 1940 Act and Release No. 10666 or any
subsequent release or releases of the SEC relating to the maintenance of
segregated accounts by registered investment companies, and (ii) for other
proper corporate purposes, but only, in the case of clause (ii), upon receipt
of Written Instructions.
12. Dividends and Distributions. The Company shall furnish Provident
with appropriate evidence of action by the Company's Board of Trustees declaring
and authorizing the payment of any dividends and distributions. Upon receipt by
Provident of Written Instructions with respect to dividends and distributions
declared by the Company's Board of Trustees and payable to Shareholders who have
elected in the proper manner to receive their distributions or dividends in
cash, and in conformance with procedures mutually agreed upon by Provident, the
Company, and the Company's Transfer Agent, Provident shall pay to the Company's
Transfer Agent, as agent for the Shareholders, an amount equal to the amount
indicated in said Written Instructions as payable by the Company to such
Shareholders for distribution in cash by the Transfer Agent to such
Shareholders. In lieu of paying the Company's Transfer Agent cash dividends and
distributions, Provident may arrange for the direct payment of cash dividends
and distributions to Shareholders by Provident in accordance with such
procedures and controls as are mutually agreed upon from time to time by and
among the Company, Provident and the Company's Transfer Agent.
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<PAGE> 18
13. Purchases of Securities. Promptly after each decision to purchase
securities by the Advisor, the Company, through the Advisor, shall deliver to
Provident Oral Instructions specifying with respect to each such purchase: (a)
the name of the issuer and the title of the securities, (b) the number of shares
or the principal amount purchased and accrued interest, if any, (c) the date of
purchase and settlement, (d) the purchase price per unit, (e) the total amount
payable upon such purchase and (f) the name of the person from whom or the
broker through whom the purchase was made. Provident shall upon receipt of
securities purchased by or for the Company pay out of the moneys held for the
account of the Company the total amount payable to the person from whom or the
broker through whom the purchase was made, provided that the same conforms to
the total amount payable as set forth in such Oral Instructions.
14. Sales of Securities. Promptly after each decision to sell
securities by the Advisor or exercise of an option written by the Company, the
Company, through the Advisor, shall deliver to Provident Oral Instructions,
specifying with respect to each such sale: (a) the name of the issuer and the
title of the security, (b) the number of shares or principal amount sold, and
accrued interest, if any, (c) the date of sale, (d) the sale price per unit, (e)
the total amount payable to the Company upon such sale, and (f) the name of the
broker through whom or the person to whom the sale was made. Provident shall
deliver the securities upon receipt of the total amount payable to the
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<PAGE> 19
Company upon such sale, provided that the same conforms to the total amount
payable as set forth in such Oral Instructions. Subject to the foregoing,
Provident may accept payment in such form as shall be satisfactory to it, and
may deliver securities and arrange for payment in accordance with the customs
prevailing among dealers in securities.
15. Records. The books and records pertaining to the Company which
are in the possession of Provident shall be the property of the Company. Such
books and records shall be prepared and maintained as required by the 1940 Act
and other applicable securities laws and regulations. The Company, or the
Company's authorized representatives, shall have access to such books and
records at all times during Provident's normal business hours. Upon the
reasonable request of the Company, copies of any such books and records shall
be provided by Provident to the Company or the Company's authorized
representative at the Company's expense.
16. Reports.
(a) Provident shall furnish the Company the following reports:
(1) such periodic and special reports as the Company may
reasonably request;
(2) a monthly statement summarizing all transactions and
entries for the account of the Company, listing the portfolio
securities belonging to the Company with the adjusted average
cost of each
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<PAGE> 20
issue and the market value at the end of such month, and stating
the cash account of the Company including disbursements;
(3) the reports to be furnished to the Company pursuant
to Rule 17f-4; and
(4) such other information as may be agreed upon from
time to time between the Company and Provident.
(b) Provident shall transmit promptly to the Company any proxy
statement, proxy materials, notice of a call or conversion or similar
communications received by it as Custodian of the Property.
17. Cooperation with Accountants. Provident shall cooperate with the
Company's independent public accountants and shall take all reasonable action in
the performance of its obligations under this Agreement to assure that the
necessary information is made available to such accountants for the expression
of their opinion, as such may be required from time to time by the Company.
18. Confidentiality. Provident agrees on behalf of itself and its
employees to treat confidentially all records and other information relative to
the Company and its prior, present, or potential Shareholders, except, after
prior notification to and approval in writing by the Company, which approval
shall not be unreasonably withheld and may not be withheld where Provident may
be exposed to civil or criminal contempt proceedings for
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<PAGE> 21
failure to comply, when requested to divulge such information by duly
constituted authorities, or when so requested by the Company.
19. Right to Receive Advice.
(a) Advice of Company. If Provident shall be in doubt as to any
action to be taken or omitted by it, it may request, and shall receive, from the
Company directions or advice, including Oral or Written Instructions where
appropriate.
(b) Advice of Counsel. If Provident shall be in doubt as to any
question of law involved in any action to be taken or omitted by Provident, it
may request advice at its own cost from counsel of its own choosing (who may be
counsel for the Advisor, the Company or Provident, at the option of Provident).
(c) Conflicting Advice. In case of conflict between directions,
advice or Oral or Written Instructions received by Provident pursuant to
subparagraph (a) of this paragraph and advice received by Provident pursuant to
subparagraph (b) of this paragraph, Provident shall be entitled to rely on and
follow the advice received pursuant to the latter provision alone.
(d) Protection of Provident. Provident shall be protected in any
action or inaction which it takes in reliance on any directions, advice or Oral
or Written Instructions received pursuant to subparagraphs (a) or (b) of this
paragraph which Provident, after receipt of any such directions, advice or Oral
or Written Instructions, in good faith believes to be consistent
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<PAGE> 22
with such directions, advice or Oral or Written Instructions, as the case may
be. However, nothing in this paragraph shall be construed as imposing upon
Provident any obligation (i) to seek such directions, advice or Oral or Written
Instructions, or (ii) to act in accordance with such directions, advice or Oral
or Written Instructions when received, unless, under the terms of another
provision of this Agreement, the same is a condition to Provident's properly
taking or omitting to take such action. Nothing in this Subsection shall excuse
Provident when an action or omission on the part of Provident constitutes
willful misfeasance, bad faith, gross negligence or reckless disregard by
Provident of any duties or obligations under this Agreement.
20. Compliance with Governmental Rules and Regulations. The Company
assumes full responsibility for ensuring that the Company complies with all
applicable requirements of the 1933 Act, the 1934 Act, the 1940 Act, and any
laws, rules and regulations of governmental authorities having jurisdiction
except insofar as Provident has assumed a specific responsibility for compliance
hereunder.
21. Compensation. As compensation for the services rendered by
Provident during the term of this Agreement, the Company will pay to Provident
monthly fees that shall be agreed upon from time to time in writing by Provident
and the Company.
22. Indemnification. The Company, as sole owner of the Property,
agrees to indemnify and hold harmless Provident and its nominees from all taxes,
charges, expenses, assessments,
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<PAGE> 23
claims and liabilities (including, without limitation, liabilities arising
under the 1933 Act, the 1934 Act, the 1940 Act, and any state and foreign
securities and blue sky laws, all as or to be amended from time to time) and
expenses, including (without limitation) attorneys' fees and disbursements,
arising directly or indirectly (a) from the fact that securities included in
the Property are registered in the name of any such nominee or (b) without
limiting the generality of the foregoing clause (a) from any action or thing
which Provident takes or does or omits to take or do (i) at the request or on
the direction of or in reliance on the advice of the Company or (ii) upon Oral
or Written Instructions, provided, that neither Provident nor any of its
nominees shall be indemnified against any liability to the Company or to its
Shareholders (or any expenses incident to such liability) arising out of
Provident's or such nominee's own willful misfeasance, bad faith, negligence or
reckless disregard of its duties or responsibilities specifically described in
this Agreement. In the event of any advance of cash for any purpose made by
Provident resulting from Oral or Written Instructions of the Company, or in the
event that Provident or its nominee shall incur or be assessed any taxes,
charges, expenses, assessments, claims or liabilities in connection with the
performance of this Agreement, except such as may arise from its or its
nominee's own negligent action, negligent failure to act or willful misconduct,
any Property at any time held for the account of the Company shall be security
therefor.
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<PAGE> 24
23. Responsibility of Provident. Provident shall be under no duty to
take any action on behalf of the Company except as specifically set forth herein
or as may be specifically agreed to by Provident in writing. In the performance
of its duties hereunder, Provident shall be obligated to exercise care and
diligence and to act in good faith and to use its best efforts within reasonable
limits to insure the accuracy and completeness of all services performed under
this Agreement. Provident shall be responsible for its own negligent failure to
perform its duties under this Agreement, but to the extent that duties,
obligations and responsibilities are not specifically set forth in this
Agreement, Provident shall not be liable for any act or omission which does not
constitute willful misfeasance, bad faith or gross negligence on the part of
Provident or reckless disregard of such duties, obligations and
responsibilities. Without limiting the generality of the foregoing or of any
other provision of this Agreement, Provident in connection with its duties under
this Agreement shall not be under any duty or obligation to inquire into and
shall not be liable for or in respect of (a) the validity or invalidity or
authority or lack thereof of any Oral or Written Instruction, notice or other
instrument which conforms to the applicable requirements of this Agreement, if
any, and which Provident reasonably believes to be genuine; (b) the validity or
invalidity of the issuance of any securities included or to be included in the
Property, the legality or illegality of the purchase of such securities, or the
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<PAGE> 25
propriety or impropriety of the amount paid therefor; (c) the legality or
illegality of the sale (or exchange) of any Property or the propriety or
impropriety of the amount for which such Property is sold (or exchanged); or
(d) delays or errors or loss of data occurring by reason of circumstances
beyond Provident's control, including acts of civil or military authority,
national emergencies, labor difficulties, fire, mechanical breakdown, flood or
catastrophe, acts of God, insurrection, war, riots or failure of the mails,
transportation, communication or power supply, nor shall Provident be under any
duty or obligation to ascertain whether any Property at any time delivered to
or held by Provident may properly be held by or for the Company.
24. Collections. All collections of monies or other property in
respect, or which are to become part, of the Property (but not the safekeeping
thereof upon receipt by Provident) shall be at the sole risk of the Company. In
any case in which Provident does not receive any payment due the Company within
a reasonable time after Provident has made proper demands for the same, it shall
so notify the Company in writing, including copies of all demand letters, any
written responses thereto, and memoranda of all oral responses thereto and to
telephonic demands, and await instructions from the Company. Provident shall not
be obliged to take legal action for collection unless and until reasonably
indemnified to its satisfaction. Provident shall also notify the Company as soon
as reasonably practicable whenever income due on securities is not collected in
due course.
-25-
<PAGE> 26
25. Duration and Termination. This Agreement shall continue until
termination by the Company or by Provident in either case on sixty (60) days
written notice. Upon any termination of this Agreement, pending appointment of a
successor to Provident or vote of the Shareholders of the Company to dissolve or
to function without a custodian of its cash, securities or other property,
Provident shall not deliver cash, securities or other property of the Company to
the Company, but may deliver them to a bank or trust company of its own
selection, having an aggregate capital, surplus and undivided profits, as shown
by its last published report, of not less than twenty million dollars
($20,000,000) as a custodian for the Company to be held under terms similar to
those of this Agreement.
26. Notices. All notices and other communications, including Written
Instructions (collectively referred to as "Notice" or "Notices" in this
paragraph), hereunder shall be in writing or by confirming telegram, cable,
telex or facsimile sending device. Notices shall be addressed (a) if to
Provident at Provident's address, Airport Business Center, International Court
2, 200 Stevens Drive, Lester, Pennsylvania 19113, marked for the attention of
the Custodian Services Department (or its successor); (b) if to the Company, at
the address of the Company; or (c) if to neither of the foregoing, at such other
address as shall have been notified to the sender of any such Notice or other
communication. If the location of the sender of a Notice and the address of the
addressee thereof are, at the time of
-26-
<PAGE> 27
sending, more than 100 miles apart, the Notice may be sent by first-class mail,
in which case it shall be deemed to have been received five days after it is
sent, or if sent by confirming telegram, cable, telex or facsimile sending
device, it shall be deemed to have been received immediately, and, if the
location of the sender of a Notice and the address of the addressee thereof
are, at the time of sending, not more than 100 miles apart, the Notice may be
sent by first-class mail, in which case it shall be deemed to have been
received three days after it is sent, or if sent by messenger, it shall be
deemed to have been received on the day it is delivered. All postage, cable,
telegram, telex and facsimile sending device charges arising from the sending
of a Notice hereunder shall be paid by the sender.
27. Further Actions. Each party agrees to perform such further acts
and execute such further documents as are necessary to effectuate the purposes
hereof.
28. Amendments. This Agreement or any part hereof may be changed only
by an instrument in writing signed by the party against which enforcement of
such change is sought.
29. Delegation. On thirty (30) days prior written notice to the
Company, Provident may assign its rights and delegate its duties hereunder to
any wholly-owned direct or indirect subsidiary of Provident National Bank or PNC
Financial Corp, provided that (i) the delegate agrees with Provident to comply
with all relevant provisions of the 1940 Act; and (ii) Provident and such
delegate shall promptly provide such
-27-
<PAGE> 28
information as the Company may request, and respond to such questions as the
Company may ask, relative to the delegation, including (without limitation) the
capabilities of the delegate. Such delegate shall be bound by the terms of this
Agreement as though an original party hereto. Provident shall unconditionally
guarantee the performance of the delegate under the terms and conditions of
this Agreement.
30. Counterparts. This Agreement may be executed 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.
31. Miscellaneous.
(a) Provident hereby acknowledges that the Company is a business
trust and that it must look solely to the Company's Property for the enforcement
of any claims against the Company, as neither the Trustees, officers, agents or
Shareholders of the Company assume any personal liabilities in connection with
the business or assume any personal liability for obligations entered into on
its behalf.
(b) This Agreement embodies the entire agreement and
understanding between the parties hereto, and supersedes all prior agreements
and understandings relating to the subject matter hereof, provided that the
parties hereto may embody in one or more separate documents their agreement, if
any, with respect to delegated and/or Oral Instructions and compensation. The
captions in this Agreement are included for convenience of
-28-
<PAGE> 29
reference only and in no way define or delimit any of the provisions hereof or
otherwise affect their construction or effect. This Agreement shall be deemed
to be a contract made in Pennsylvania and governed by Pennsylvania law. If any
provision of this Agreement shall be held or made invalid by a court decision,
statute, rule or otherwise, the remainder of this Agreement shall not be
affected thereby. This Agreement shall be binding and shall inure to the
benefit of the parties hereto and their respective successors.
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be executed by their officers designated below on the day and year
first above written.
[SEAL] TRUST FOR FEDERAL SECURITIES
Attest: By
---------------------------- ----------------------------------
Vice President & Treasurer
[SEAL] PROVIDENT NATIONAL BANK
Attest: By
---------------------------- ----------------------------------
-29-
<PAGE> 30
INDEX
<TABLE>
<CAPTION>
Paragraph Page
--------- ----
<S> <C> <C>
1. Appointment. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
2. Delivery of Documents. . . . . . . . . . . . . . . . . . . . . . . . 2
3. Definitions. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
4. Delivery and Registration of the Property. . . . . . . . . . . . . . 6
5. Receipt and Disbursement of Money. . . . . . . . . . . . . . . . . . 7
6. Receipt of Securities. . . . . . . . . . . . . . . . . . . . . . . . 8
7. Use of Book-Entry System. . . . . . . . . . . . . . . . . . . . . . 10
8. Instructions Consistent with Declaration etc. . . . . . . . . . . . 11
9. Transactions Not Requiring Instructions. . . . . . . . . . . . . . . 12
10. Transactions Requiring Instructions. . . . . . . . . . . . . . . . . 14
11. Segregated Accounts. . . . . . . . . . . . . . . . . . . . . . . . . 17
12. Dividends and Distributions. . . . . . . . . . . . . . . . . . . . . 17
13. Purchase of Securities. . . . . . . . . . . . . . . . . . . . . . . 18
14. Sales of Securities. . . . . . . . . . . . . . . . . . . . . . . . . 18
15. Records. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
16. Reports. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
17. Cooperation with Accountants. . . . . . . . . . . . . . . . . . . . 20
18. Confidentiality. . . . . . . . . . . . . . . . . . . . . . . . . . . 21
19. Right to Receive Advice. . . . . . . . . . . . . . . . . . . . . . . 21
20. Compliance with Governmental Rules and Regulations. . . . . . . . . 22
21. Compensation. . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
22. Indemnification. . . . . . . . . . . . . . . . . . . . . . . . . . . 23
23. Responsibility of Provident. . . . . . . . . . . . . . . . . . . . . 24
24. Collections. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
25. Duration and Termination. . . . . . . . . . . . . . . . . . . . . . 26
26. Notices. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
27. Further Actions. . . . . . . . . . . . . . . . . . . . . . . . . . . 27
28. Amendments. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
29. Delegation. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
30. Counterparts. . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
31. Miscellaneous. . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
</TABLE>
-30-
<PAGE> 1
EXHIBIT (8)(c)
ADDENDUM NO. 1 TO CUSTODIAN AGREEMENT
This Addendum, dated as of the 1st day of November, 1990, is entered
into between TRUST FOR FEDERAL SECURITIES (the "Company"), a Pennsylvania
business trust, and PROVIDENT NATIONAL BANK ("Provident"), a national banking
association.
WHEREAS, the Company and Provident have entered into a Custodian
Agreement dated June 1, 1989, ("Custodian Agreement"), pursuant to which the
Company appointed Provident to act as custodian to the Company for its FedFund
portfolio, its T- Fund portfolio, its Treasury Trust Fund portfolio, its Short
Government Fund portfolio, its Intermediate Government Fund Portfolio and its
Long Government Fund portfolio (each a "Fund");
WHEREAS, Paragraph 1 of the Custodian Agreement provides that in the
event the Company establishes one or more additional Funds with respect to which
it desires to retain Provident to act as the custodian under the Custodian
Agreement, the Company shall so notify Provident in writing and if Provident is
willing to render such services it shall notify the Company in writing, and the
compensation to be paid to Provident shall be that which is agreed to in writing
by the Company and Provident; and
WHEREAS, pursuant to Paragraph 1 of the Custodian Agreement, the Company
has notified Provident that it has established the Federal Trust Fund portfolio
("Federal Trust Fund") and that it desires to retain Provident to act as the
custodian therefor, and Provident has notified the Company that it is willing to
serve as custodian for Federal Trust Fund.
NOW THEREFORE, the parties hereto, intending to be legally bound, hereby
agree as follows:
1. Appointment. The Company hereby appoints Provident to act as
custodian to the Company for Federal Trust Fund for the period and on the terms
set forth in the Custodian Agreement. Provident hereby accepts such appointment
and agrees to render the services set forth in the Custodian Agreement, for the
compensation agreed to in writing by the Company and Provident pursuant to
Paragraph 21 of the Custodian Agreement.
2. Capitalized Terms. From and after the date hereof, the term "Fund"
as used in the Custodian Agreement shall be deemed to include Federal Trust
Fund. Capitalized terms used herein and not otherwise defined shall have the
meanings ascribed to them in the Custodian Agreement.
-1-
<PAGE> 2
3. Miscellaneous. Except to the extent supplemented hereby, the
Custodian Agreement shall remain unchanged and in full force and effect and is
hereby ratified and confirmed in all respects as supplemented hereby.
IN WITNESS WHEREOF, the undersigned have executed this Addendum as of
the date and year first above written.
TRUST FOR FEDERAL SECURITIES
By: /s/
-------------------------------
Title: Vice President
PROVIDENT NATIONAL BANK
By: /s/
-------------------------------
Title: Vice President
-2-
<PAGE> 1
EXHIBIT (8)(d)
ADDENDUM NO. 2 TO CUSTODIAN AGREEMENT
This Addendum, dated as of the 9th day of May, 1991, is entered into
between TRUST FOR FEDERAL SECURITIES (the "Company"), a Pennsylvania business
trust, and PROVIDENT NATIONAL BANK ("Provident"), a national banking
association.
WHEREAS, the Company and Provident have entered into a Custodian
Agreement dated June 1, 1989, as supplemented by Addendum No. 1 dated as of
November 1, 1990 (the "Custodian Agreement"), pursuant to which the Company
appointed Provident to act as custodian to the Company for its FedFund
portfolio, its T-Fund portfolio, its Federal Trust Fund portfolio, its Treasury
Trust Fund portfolio, its Short Government Fund portfolio, its Intermediate
Government Fund portfolio and its Long Government Fund portfolio (each a
"Fund");
WHEREAS, Paragraph 1 of the Custodian Agreement provides that in the
event the Company establishes one or more additional Funds with respect to which
it desires to retain Provident to act as the custodian under the Custodian
Agreement, the Company shall so notify Provident in writing and if Provident is
willing to render such services it shall notify the Company in writing, and the
compensation to be paid to Provident shall be that which is agreed to in writing
by the Company and Provident; and
WHEREAS, pursuant to Paragraph 1 of the Custodian Agreement, the Company
has notified Provident that it has established the FedCash portfolio ("FedCash")
and T-Cash portfolio ("T-Cash"), and that it desires to retain Provident to act
as the custodian therefor, and Provident has notified the Company that it is
willing to serve as custodian for FedCash and T-Cash.
NOW THEREFORE, the parties hereto, intending to be legally bound, hereby
agree as follows:
1. Appointment. The Company hereby appoints Provident to act as
custodian to the Company for FedCash and T-Cash for the period and on the terms
set forth in the Custodian Agreement. Provident hereby accepts such appointment
and agrees to render the services set forth in the Custodian Agreement, for the
compensation agreed to in writing by the Company and Provident pursuant to
Paragraph 21 of the Custodian Agreement.
2. Capitalized Terms. From and after the date hereof, the term "Fund"
as used in the Custodian Agreement shall be deemed to include FedCash and
T-Cash. Capitalized terms used herein and not otherwise defined shall have the
meanings ascribed to them in the Custodian Agreement.
-1-
<PAGE> 2
3. Miscellaneous. Except to the extent supplemented hereby, the
Custodian Agreement shall remain unchanged and in full force and effect and is
hereby ratified and confirmed in all respects as supplemented hereby.
IN WITNESS WHEREOF, the undersigned have executed this Addendum as of
the date and year first above written.
TRUST FOR FEDERAL SECURITIES
By: /s/
-------------------------------
Title: Vice President & Treasurer
PROVIDENT NATIONAL BANK
By: /s/
-------------------------------
Title: Vice President
-2-
<PAGE> 1
EXHIBIT(9)(a)
TRUST FOR FEDERAL SECURITIES
ADMINISTRATION AGREEMENT
AGREEMENT dated as of January 18, 1993 between TRUST FOR FEDERAL
SECURITIES, a Pennsylvania business trust (the "Company"), PROVIDENT FINANCIAL
PROCESSING CORPORATION, a Delaware corporation, and MFD Group, Inc. ("MFD"), a
Delaware corporation (collectively, the "Administrators").
WHEREAS, the Company is registered as an open-end, diversified
management investment company under the Investment Company Act of 1940, as
amended (the "1940 Act"); and
WHEREAS, the Company desires to retain the Administrators to provide,
as co-administrators, certain administration services for each class and
subclass of units of beneficial interest ("shares") in each of the Company's
investment portfolios (individually, a "Fund," collectively, the "Funds") as
listed on Appendix A (as such Appendix may, from time to time, be supplemented
(or amended)) and the Administrators are willing to furnish such services;
NOW, THEREFORE, in consideration of the premises and mutual covenants
herein contained and intending to be legally bound, it is agreed between the
parties hereto as follows:
1. APPOINTMENT OF ADMINISTRATORS. The Company hereby appoints each
of the Administrators jointly to provide administration services to each class
and subclass of shares in each of the Company's Funds on the terms and for the
period set forth in this Agreement. The Administrators accept such appointment
and agree to perform the services and duties set forth in Section 3 below in
return for the compensation provided in Section 5 below. In the event that the
Company establishes additional classes or investment portfolios other than the
Funds listed on Appendix A with respect to which it desires to retain the
Administrators to act as co-administrators hereunder, the Company shall notify
the Administrators, whereupon such Appendix A shall be supplemented (or amended)
and such portfolio shall become a Fund hereunder and shall be subject to the
provisions of this Agreement to the same extent as the Funds (except to the
extent that said provisions, including the compensation payable on behalf of
such new Fund, may be modified in writing by the Company and Administrators at
the time).
<PAGE> 2
2. DELIVERY OF DOCUMENTS. The Company has furnished each of the
Administrators with copies, properly certified or authenticated, of each of the
following documents and will deliver to it all future amendments and
supplements, if any:
a. The Company's Declaration of Trust, filed with the Secretary
of State of the Commonwealth of Pennsylvania on May 14, 1975, as amended (the
"Charter");
b. The Company's By-Laws, as amended and supplemented
("By-Laws");
c. Resolutions of the Company's Board of Trustees authorizing the
execution and delivery of this Agreement;
d. The Company's most recent amendment to its Registration
Statement under the Securities Act of 1933, as amended, and under the 1940 Act
on Form N-1A as filed with the Securities and Exchange Commission (the
"Commission") relating to its Funds (the Registration Statement, as presently in
effect and as amended or supplemented from time to time, is herein called the
"Registration Statement");
e. The Company's most recent Prospectuses and Statements of
Additional Information and all amendments and supplements thereto (such
Prospectuses and Statements of Additional Information and supplements thereto,
as presently in effect and as from time to time amended and supplemented, are
herein called the "Prospectuses"); and
f. The Company's restated Shareholder Services Plan and related
form of shareholder servicing agreement.
3. SERVICES AND DUTIES. The Administrators enter into the following
covenants jointly and severally with respect to their services and duties:
a. Subject to the supervision and control of the Company's Board
of Trustees, the Administrators shall assist in supervising all aspects of the
Funds' operations, other than those investment advisory and accounting functions
which are to be performed by the Company's investment adviser pursuant to the
Advisory Agreement and those advisory and other services to be performed by any
sub-adviser or the custodian pursuant to the Company's Sub-Advisory Agreement
and Custodian Agreement, as amended from time to time, services to be performed
by the distributor pursuant to the Company's Distribution Agreement and the
transfer agent pursuant to the Company's Transfer Agency Agreement, as amended
from time to time. In this regard, the Administrators' responsibilities include:
-2-
<PAGE> 3
(1) Providing personnel and supervising a facility in Wilmington,
Delaware (or in such other location as the Company shall reasonably request)
to receive purchase and redemption orders via the Company's toll-free
in-WATS telephone lines and transmitting such requests to the Company's
transfer agent as promptly as practicable;
(2) Providing for the preparing, supervising and mailing of
confirmations for all purchase and redemption orders to shareholders of
record;
(3) Providing and supervising the operation of an automated data
processing system to process purchase and redemption orders (the
Administrators assume responsibility for the accuracy of the data
transmitted for processing or storage);
(4) Maintaining a procedure external to the transfer agent's system to
reconstruct lost purchase and redemption data;
(5) Providing daily information and distributing written communications
concerning the Funds to their shareholders of record; handling shareholder
problems and calls; distributing weekly dividend letters and monthly
listings of each money market Fund's portfolio securities to all its
shareholders of record; and, at a shareholder's request, dividend letters
and monthly listings of each non-money market Fund's portfolio securities;
(6) Supervising the services of individuals ("shareholder
representatives") provided by MFD whose principal responsibility and
function shall be to preserve and strengthen the Company's relationships
with its shareholders;
(7) Administering all activities concerning the installation,
maintenance, monitoring and inventory control of micro-computer equipment
that may be leased (on lease terms authorized by the Company) by the
Administrators and placed in the offices of certain shareholders of the
Company to facilitate shareholder access to the Company and related
shareholder services (herein called the "Computer Access Program"). The
Administrators shall provide the directors of the Company with such reports,
statistics and other information as they may from time to time reasonably
request in order to evaluate the Computer Access Program administered by the
Administrators pursuant to this Section 3(a)(7) and the Administrators'
determination as to the costs which are reimbursable by each of the Funds
under Section 4. If this Agreement is not renewed or is terminated, or if
the Computer Access Program is
-3-
<PAGE> 4
discontinued, for any reason, the Company shall have the option to assume
lessee's rights and obligations under its leases for the micro-computer
equipment and under any related maintenance, insurance or other agreements;
and
(8) Monitoring the Company's arrangements with respect to services
provided by certain institutional shareholders ("Service Organizations")
under its restated Shareholder Services Plan, including monitoring and
reviewing the services rendered by Service Organizations to their
customers who beneficially own shares, pursuant to agreements between the
Company and such Service Organizations ("Servicing Agreements"); reviewing
the qualifications of Service Organizations wishing to enter into
Servicing Agreements with the Company; assisting in the execution and
delivery of Servicing Agreements; reporting to the Company's Board of
Trustees with respect to the amounts paid or payable by the Company from
time to time under the Servicing Agreements and the nature of the
services provided by Service Organizations; and maintaining appropriate
records in connection with such duties.
b. The Administrators shall prepare or review, and provide advice
with respect to, all sales literature (advertisements, brochures and shareholder
communications) for each of the Funds and any class or subclass thereof.
c. The Administrators shall participate to the extent requested
by the Company and its counsel in the periodic updating of the Company's
Registration Statement; compile data and accumulate information for and
coordinate with the Company's Treasurer the preparation of reports to
shareholders of record and the Commission (e.g., Annual and Semi-Annual Reports
on Form N-SAR), it being understood that the preparation and filing of timely
Notices pursuant to Rule 24f-2 shall be performed by the Company's Treasurer
with the assistance and advice of the Company's counsel; and file with the
Commission and other federal and state agency, subject to the approval of the
Company's Treasurer, reports and documents including, without limitation, Annual
and Semi-Annual Reports on Form N-SAR and federal and state tax returns and
required tax filings other than those required to be filed by the Company's
custodian or transfer agent.
d. For so long as the Company maintains an office in Wilmington,
Delaware, the Administrators shall pay the Company on the first day of each
month during such period an amount not to exceed $1,500 (or such lesser amount
as is appropriate in the event that the combined annual expenses of the Company,
Portfolios for Diversified Investment, Municipal Fund for California Investors,
Inc., Municipal Fund for New York Investors, Inc., Municipal Fund for Temporary
Investment,
-4-
<PAGE> 5
Temporary Investment Fund, Inc. and The PNC(R) Fund (collectively, herein
called the "Companies") in maintaining their offices in Wilmington, Delaware
total less than $18,000 divided by the number of Companies which have
maintained an office in Wilmington, Delaware during the previous month).
e. The Administrators, after consultation with the distributor
and counsel for the Company, shall determine the jurisdictions in which the
Company's shares shall be registered or qualified for sale. The Administrators
shall be responsible for maintaining the registration or qualification of shares
for sale under the securities laws of any state and for preparing compliance
filings pursuant to state securities laws with the advice of the Company's
counsel. Payment of share registration fees and any fees for qualifying or
continuing the qualification of the Company or any Fund as a dealer or broker
shall be made by the Company or Fund involved.
f. Monitor, and assist in developing compliance procedures for
each of the classes of the Company's Funds, which will include without
limitation, procedures to monitor compliance with each Fund's investment
objective, policies and limitations, tax matters, and applicable laws and
regulations.
g. The Administrators shall assist in monitoring of regulatory
and legislative developments which may affect the Company; assist in counseling
the Company with respect to regulatory examinations or investigations of the
Company; and work with the Company's counsel in connection with regulatory
matters or litigation.
h. In compliance with the requirements of Rule 31a-3 under the
1940 Act, the Administrators agree that all records which they maintain for the
Company are the property of the Company and further agree to surrender promptly
to the Company any of such records upon the Company's request. The
Administrators further agree to preserve for the periods prescribed by Rule
31a-2 under the 1940 Act the records required to be maintained by Rule 31a-1
under said Act.
i. If the expenses borne by any Fund in any fiscal year exceed
the applicable expense limitations imposed by the securities regulations of any
state in which the Fund's shares are registered or qualified for sale to the
public, the Administrators jointly and severally agree to reimburse such Fund
for a portion of any such excess expense in an amount equal to the portion that
the administration fees otherwise payable by the Fund to the Administrators bear
to the total amount of the investment advisory and administration fees otherwise
payable by the Fund. The expense reimbursement obligation of the Administrators
is limited to the amount of their fees hereunder for such fiscal year, provided,
however, that notwithstanding the
-5-
<PAGE> 6
foregoing, the Administrators shall reimburse such Fund for a portion of any
such excess expenses in an amount equal to the proportion that the fees
otherwise payable to the Administrators bear to the total amount of investment
advisory and administration fees otherwise payable by the Fund regardless of
the amount of fees paid to the Administrators during such fiscal year to the
extent that the securities regulations of any state having jurisdiction over
the Fund so require. Such expense reimbursement, if any, will be estimated,
reconciled and paid on a monthly basis.
j. In performing all of their services and duties as
co-administrators, the Administrators will act in conformity with the Charter,
By-Laws, Prospectuses and resolutions and other instructions of the Company's
Board of Trustees and will comply with the requirements of the 1940 Act and
other applicable federal or state law.
4. EXPENSES ASSUMED AS ADMINISTRATORS. The Administrators will bear
all expenses incurred by them in performing their services and duties as
co-administrators, except as otherwise expressly provided herein. Other expenses
to be incurred in the operation of the Funds, including taxes, interest,
brokerage fees and commissions, if any, salaries and fees of officers and
directors who are not officers, directors, shareholders or employees of the
Administrators, or the Company's investment adviser or distributor for the
Funds, Commission fees and state Blue Sky qualification fees, advisory and
administration fees, charges of custodians, transfer and dividend disbursing
agents' fees, certain insurance premiums, outside auditing and legal expenses,
costs of maintaining corporate existence, typesetting and printing of
prospectuses for regulatory purposes and for distribution to current
shareholders of the Funds, costs of shareholders' reports and corporate meetings
and any extraordinary expenses, will be borne by the Company, provided, however,
that the Company will not bear, directly or indirectly, the cost of any activity
which is primarily intended to result in the sale of shares of the Funds.
Notwithstanding the above, the Company shall assume the Administrators' rights
and liabilities and obligations, as lessee, under the leases for the
micro-computer equipment referred to in Section 3(a)(7) from the date of the
termination (or any expiration without renewal) of this Agreement, or the
discontinuance of the Computer Access Program, until the conclusion of the first
year of each lease.
5. COMPENSATION. For the services provided and the expenses assumed
as Administrators pursuant to Section 4 above, the Company will:
-6-
<PAGE> 7
a. (1) pay the Administrators jointly a fee with respect to the
FedFund, T-Fund, FedCash, T-Cash, Federal Trust Fund and Treasury Trust Fund
portfolios, computed daily and payable monthly from the assets belonging to
FedFund, T- Fund, FedCash, T-Cash, Federal Trust Fund and Treasury Trust Fund
(in proportion to each such portfolio's average net assets), at the following
annual rate: .175% of the first $1 billion of the combined average net assets of
the FedFund, T-Fund, FedCash, T-Cash, Federal Trust Fund and Treasury Trust
Fund, plus .15% or the next $1 billion of their combined average net assets,
plus .125% of the next $1 billion of their combined average net assets, plus .1%
of the next $1 billion of their combined average net assets, plus .095% of the
next $1 billion of their combined average net assets, plus .09% of the next $1
billion of their combined average net assets, plus .085% of the next $1 billion
of their combined average net assets, plus .080% of their combined average net
assets, over $8 billion.
(2) pay the Administrators jointly a fee with respect to the
Short Government Fund, computed daily and payable monthly from the assets
belonging to Short Government Fund, at the annual rate of .20% of the average
net assets of Short Government Fund.
(3) pay the Administrators jointly a fee with respect to the
Intermediate Government Fund, computed daily and payable monthly from the assets
belonging to Intermediate Government Fund, at the annual rate of .20% of the
average net assets of Intermediate Government Fund.
(4) pay the Administrators jointly a fee with respect to the
Long Government Fund, computed daily and payable monthly from the assets
belonging to Long Government Fund, at the annual rate of .20% of the average net
assets of Long Government Fund.
b. The Company will also reimburse the Administrators monthly for
their reasonable out-of-pocket expenses incurred in leasing, installing,
maintaining and monitoring the micro-computer equipment and administering the
Computer Access Program pursuant to the provisions of Section 3(a)(7) above,
provided that the Administrators will not be reimbursed for any costs: (i) which
exceed the current budget for the Computer Access Program approved by the
Company's Board of Trustees; (ii) which directly or indirectly finance any
activity primarily intended to result in the sale of shares; or (iii) which the
Administrators have not reasonably determined are in the best interests of the
Company and its shareholders.
c. For the purpose of determining fees payable to the
Administrators, the value of each Fund's net assets shall be computed as
required by its Prospectuses, generally accepted
-7-
<PAGE> 8
accounting principles and resolutions of the Company's Board of Trustees. The
fee attributable to each Fund shall be the several (and not joint or joint and
several) obligation of each such Fund.
d. The Administrators will from time to time employ or associate
with themselves such person or persons as they may believe to be fitted to
assist them in the performance of this Agreement. Such person or persons may be
officers and employees who are employed by both the Company and either of the
Administrators. The compensation of such person or persons shall be paid by the
Administrators, and no obligation shall be incurred on behalf of the Company in
such respect.
6. PROPRIETARY AND CONFIDENTIAL INFORMATION. The Administrators
agree on behalf of themselves and their employees to treat confidentially and as
proprietary information of the Company all records and other information
relative to the Company and its Funds and prior, present or potential
shareholders, and not to use such records and information for any purpose other
than performance of their responsibilities and duties hereunder, except after
prior notification to and approval in writing by the Company, which approval
shall not be unreasonably withheld and may not be withheld where the
Administrators may be exposed to civil or criminal contempt proceedings for
failure to comply, when requested to divulge such information by duly
constituted authorities, or when so requested by the Company.
7. LIMITATIONS OF LIABILITY. Neither Administrator shall be liable
for any error of judgment or mistake of law or for any loss suffered by the
Company in connection with the matters to which this Agreement relates, except
a loss resulting from willful misfeasance, bad faith or gross negligence on its
part in the performance of its duties or from reckless disregard by it of its
obligations and duties under this Agreement. Any person, even though also an
officer, director, employee or agent of either of the Administrators, who may be
or become an officer, employee or agent of the Company, shall be deemed, when
rendering services to the Company or acting on any business of the Company
(other than services or business in connection with the Administrators' duties
as co-administrator hereunder) to be rendering such services to or acting solely
for the Company and not as an officer, director, employee or agent or one under
the control or direction of the Administrators even though paid by either of
them. The Administrators agree that their liability under this Agreement, as set
forth herein, shall be joint and several.
8. DURATION AND TERMINATION. This Agreement shall
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<PAGE> 9
become effective upon its execution as of the date first written above and,
unless sooner terminated as provided herein, shall continue until March 31,
1994. Thereafter, if not terminated, this Agreement shall continue
automatically for successive terms of one year, provided that such continuance
is specifically approved at least annually (a) by a vote of a majority of those
members of the Company's Board of Trustees who are not parties to this
Agreement or "interested persons" of any such party, cast in person at a
meeting called for the purpose of voting on such approval, and (b) by the
Company's Board of Trustees or by vote of a "majority of the outstanding voting
securities" of the Company; provided, however, that this Agreement may be
terminated by the Company at any time, without the payment of any penalty, by
vote of a majority of the entire Board of Trustees or a vote of a "majority of
the outstanding voting securities" of the Company, on 60-days' written notice
to the Administrators, or by the Administrators at any time, without the
payment of any penalty, on 90-days' written notice to the Company. This
Agreement will automatically and immediately terminate in the event of its
assignment. (As used in this Agreement, the terms "majority of the outstanding
voting securities," "interested person" and "assignment" shall have the same
meaning as such terms have in the 1940 Act.)
9. AMENDMENT OF THIS AGREEMENT. No provision of this Agreement may
be changed, discharged or terminated orally, but only by an instrument in
writing signed by the party against which enforcement of the change, discharge
or termination is sought.
10. NOTICES. Notices of any kind to be given to the Company hereunder
by the Administrators shall be in writing and shall be duly given if mailed or
delivered to the Company at Bellevue Park Corporate Center, Suite 152, 103
Bellevue Parkway, Wilmington, Delaware 19809, Attention: Mr. Edward J. Roach,
Treasurer, with a copy to Philadelphia National Bank Building, 1345 Chestnut
Street, Philadelphia Pennsylvania 19107-3496, Attention: W. Bruce McConnel, III,
Secretary, or at such other address or to such individual as shall be so
specified by the Company to the Administrators. Notices of any kind to be given
to the Administrators hereunder by the Company shall be in writing and shall be
duly given if mailed or delivered to MFD Group, Inc., 259 Radnor-Chester Road,
Suite 135, Radnor, Pennsylvania 19087, Attention: Monroe J. Haegele and to
Provident Financial Processing Corporation, Bellevue Park Corporate Center, 103
Bellevue Parkway, Wilmington, Delaware 19087, Attention: Vincent J. Ciavardini,
or at such other address or to such other individual as shall be so specified by
an Administrator to the Company.
11. MISCELLANEOUS. a. The captions in this Agreement are included for
convenience of reference only and in no way
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<PAGE> 10
define or delimit any of the provisions hereof or otherwise affect their
construction or effect. If any provision of this Agreement shall be held or
made invalid by a court decision, statute, rule or otherwise, the remainder of
this Agreement shall not be affected thereby. This Agreement shall be binding
upon and shall inure to the benefit of the parties hereto and their respective
successors.
b. The names "Trust for Federal Securities" and "Trustees of
Trust for Federal Securities" refer specifically to the trust created and the
Trustees, as trustees but not individually or personally, acting from time to
time under a Declaration of Trust dated May 14, 1975, which is hereby referred
to and a copy of which is on file at the principal office of the Company. The
obligations of "Trust for Federal Securities" entered into in the name or on
behalf thereof by any of the Trustees, officers, representatives or agents are
not made individually, but in such capacities, and are not binding upon any of
the Trustees, shareholders, representatives or agents of the Company personally,
but bind only the Trust property (as defined in the Declaration of Trust), and
all persons dealing with any Fund or class of shares of the Company must look
solely to the Trust property belonging to such Fund or class for the enforcement
of any claims against the Company.
12. COUNTERPARTS. This Agreement may be executed in counterparts, all
of which together shall constitute one and the same instrument.
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<PAGE> 11
IN WITNESS WHEREOF, the parties hereto have caused this instrument to
be executed by their officers designated below as of the day and year first
above written.
TRUST FOR FEDERAL SECURITIES
By:
--------------------------------
PROVIDENT FINANCIAL PROCESSING
CORPORATION
By: /s/
--------------------------------
MFD GROUP, INC.
By:
--------------------------------
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<PAGE> 12
APPENDIX A
to the
ADMINISTRATION AGREEMENT
between
Trust for Federal Securities
and
Provident Financial Processing Corporation and
MFD Group, Inc.
- -------------------------------------------------------------------------------
FedFund (FedFund Shares and FedFund Dollar shares)
T-Fund (T-Fund shares and T-Fund Dollar shares)
FedCash (FedCash shares and FedCash Dollar shares)
T-Cash (T-Cash shares and T-Cash Dollar shares)
Federal Trust Fund (Federal Trust shares and Federal Trust Dollar shares)
Treasury Trust Fund (Treasury Trust shares and Treasury Trust Dollar shares)
Short Government Fund (Short Government shares and Short Government Dollar
shares)
Intermediate Government Fund (Intermediate Government shares and Intermediate
Government Dollar shares)
Long Government Fund (Long Government shares and Long Government
Dollar shares)
A-1
<PAGE> 1
EXHIBIT (9)(b)
May 9, 1991
Trust for Federal Securities
Bellevue Park Corporate Center
103 Bellevue Parkway, Suite 152
Wilmington, DE 19809
Re: Trust for Federal Securities - Transfer Agency Fees
Gentlemen:
This letter constitutes our agreement, and supersedes any prior
agreement, with respect to compensation to be paid to Provident Financial
Processing Corporation ("PFPC") under the terms of a Transfer Agency Agreement
between you (the "Company") and PFPC dated June 1, 1989, as supplemented by
Addenda Nos. 1 and 2 dated November 1, 1990 and May 9, 1991, respectively, with
respect to the FedFund, T-Fund, FedCash, T-Cash, Federal Trust Fund, Treasury
Trust Fund, Short Government Fund, Intermediate Government Fund and Long
Government Fund portfolios of the Company (the "Funds"). Pursuant to Paragraph
16 of that Agreement, and in consideration of the services to be provided to
you, you will pay PFPC the following:
1. In the case of each account and sub-account in the Funds
maintained by PFPC or a duly designated sub-transfer agent, $12.00 per year;
2. In the case of each purchase or redemption transaction made by an
account in the Funds during the month (other than a purchase transaction made in
connection with the reinvestment of dividends on behalf of a shareholder), $1.00
per transaction; and
3. Payments to PFPC on account of sub-accounting services provided
by others shall not exceed the amount paid by PFPC to others for such services.
The Transfer Agency fees shall be calculated and paid monthly, on basis
of all accounts open during the month for which fees are calculated. The fee for
the period from the day of the year this agreement is entered into until the end
of the year shall be pro-rated according to the proportion which such period
bears to the full annual period.
<PAGE> 2
Trust for Federal Securities
May 9, 1991
Page 2
In addition to the foregoing, you will reimburse PFPC for its payment
of the following expenses: toll-free telephone lines (if required by you),
forms, wire fees for receipts and disbursements, associated costs for installing
and servicing the remote network and terminals, envelopes, checks, postage,
hardware and telephone lines for remote terminals (if required by you),
transcript fees, certificate issuance fees, microfiche and microfilm, and proxy
solicitation expenses (if required by you ). The fees attributable to each Fund
shall be the several (and not joint or joint and several) obligation of each
such Fund.
If the foregoing accurately sets forth our agreement and you intend to
be legally bound thereby, please execute a copy of this letter and return it to
us.
Very truly yours,
PROVIDENT FINANCIAL PROCESSING
CORPORATION
By: /s/ Marie S. Gipple
--------------------------
Title: Vice President
ACCEPTED: TRUST FOR FEDERAL SECURITIES
By: /s/ Edward J. Roach
-----------------------------------
Title: Vice President & Treasurer
Date: May 9, 1991
<PAGE> 1
EXHIBIT (9)(c)
TRANSFER AGENCY AGREEMENT
THIS AGREEMENT is made as of the 1st day of June, 1989 between
TRUST FOR FEDERAL SECURITIES, a Pennsylvania business trust (the "Company"),
and PROVIDENT FINANCIAL PROCESSING CORPORATION (the "Transfer Agent"), a
Delaware corporation which is an indirect, wholly-owned subsidiary of PNC
Financial Corp.
R E C I T A L
WHEREAS, the Company is registered as an open-end, diversified
management investment company under the Investment Company Act of 1940, as
amended (the "1940 Act");
WHEREAS, the Company currently offers shares of series
representing interests in six separate investment portfolios, known as FedFund,
T-Fund, Treasury Trust Fund, Short Government Fund, Intermediate Government
Fund and Long Government Fund (each a "Fund"), and classes of shares in each
such Fund;
WHEREAS, the Transfer Agent has served as the Company's
transfer agent, registrar and dividend disbursing agent as delegatee pursuant
to an Amended and Restated Custodian and Services Agreement dated as of
November 19, 1979 as amended on January 16, 1981, November 30, 1981, March 22,
1982, July 2, 1982, January 12, 1984, November 1, 1984, and May 9, 1986; and
WHEREAS, the Company desires to continue to retain the
Transfer Agent to serve as the Company's transfer agent,
<PAGE> 2
registrar, and dividend disbursing agent, and the Transfer Agent is willing to
furnish such services;
NOW THEREFORE, in consideration of the premises and mutual
covenants herein contained, it is agreed between the parties hereto as follows:
1. Appointment. The Company hereby appoints the
Transfer Agent to serve as transfer agent, registrar and dividend disbursing
agent for the Company with respect to the shares of the Company, no par value
("Shares") for a period and on the terms set forth in this Agreement. The
Transfer Agent accepts such appointment and agrees to furnish the services
herein set forth in return for the compensation as provided in Paragraph 16 of
this Agreement. The Company has, and may from time to time continue to issue
additional Funds and classes of such Funds or classify and reclassify Shares of
such current or future Funds or classes. The Transfer Agent shall identify to
each such Fund or class property belonging to such Fund or class and in such
reports, confirmations and notices to the Company called for under this
Agreement shall identify the Fund or class to which such report, confirmation
or notice pertains. In the event that the Company establishes additional Funds
or classes, the Company shall notify the Transfer Agent in writing. If the
Transfer Agent is willing to render such services, it shall notify the Company
in writing, whereupon such Fund or class shall become a Fund or class
hereunder, and the compensation payable by such new
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<PAGE> 3
Fund or class to the Transfer Agent will be agreed to in writing at the time,
pursuant to Paragraph 16 hereof.
2. Delivery of Documents. The Company has furnished the
Transfer Agent with copies properly certified or authenticated of each of the
following:
(a) Resolutions of the Company's Board of
Trustees authorizing the appointment of the Transfer Agent as transfer agent
and registrar and dividend disbursing agent for the Company and approving this
Agreement;
(b) Appendix A identifying and containing the
signatures of the Company's President and Treasurer and other persons
authorized to issue Oral Instructions and to sign Written Instructions, as
hereinafter defined, on behalf of the Company and to execute stock certificates
representing Shares;
(c) The Company's Amended and Restated
Declaration of Trust established on February 28, 1980, as amended June 20,
1980, March 2, 1987 and all further amendments thereto (such Declaration of
Trust, as presently in effect and as it shall from time to time be amended, is
herein called the "Declaration");
(d) The Company's Code of Regulations ("By-Laws")
compiled as of December 1, 1982 and amended January 28, 1988 and all amendments
thereto (such By-Laws, as presently in effect and as they shall from time to
time be amended, are herein called the "By-Laws");
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<PAGE> 4
(e) Copies of all documents relating to any
voluntary investor service plans sponsored by the Company, including periodic
investment plans such as Individual Retirement Accounts;
(f) The Advisory Agreement between Provident
Institutional Management Corporation (the "Advisor") and the Company dated as
of March 11, 1987 with all addenda (such Advisory Agreement as presently in
effect and with any existing and future addenda is herein called the "Advisory
Agreement");
(g) The Sub-Advisory Agreement between Provident
National Bank ("Provident") and the Advisor dated as of March 11, 1987 with all
addenda (such Sub-Advisory Agreement as presently in effect and with any
existing and future addenda is herein called the "Sub-Advisory Agreement");
(h) The Custodian Agreement between Provident and
the Company dated as of June 1, 1989 (the "Custodian Agreement");
(i) The Administration Agreement between The
Boston Company Advisors, Inc. and the Company with all addenda (such
Administration Agreement as presently in effect and with any existing or future
addenda is herein called the "Administration Agreement");
(j) The Distribution Agreement between the
Company and Shearson Lehman Hutton Inc. ("Shearson") dated September 7, 1988
relating to a Fund of the Company (the "Distribution Agreement");
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<PAGE> 5
(k) The Company's most recent Post-Effective
Amendment to its Registration Statement on Form N-1A under the Securities Act
of 1933, as amended (the "1933 Act") (File No. 2-53808) and under the 1940 Act
as filed with the SEC on August 30, 1988 relating to Shares, and all Amendments
thereto, as well as such prior Registration Statements or Amendments as the
Transfer Agent may request; and
(l) The Company's most recent prospectuses
(prospectus herein is deemed to include the Statement of Additional
Information) relating to Shares (such prospectuses, as presently in effect and
all amendments and supplements thereto are herein called the "Prospectus").
The Company will furnish the Transfer Agent from time to time
with copies, properly certified and authenticated, of all amendments of or
supplements to the foregoing, if any.
3. Definitions.
(a) "Authorized Person". As used in this
Agreement, the term "Authorized Person" means the President and Treasurer of
the Company and any other person, whether or not any such person is an officer
or employee of the Company, duly authorized by the Board of Trustees of the
Company to give Oral and Written Instructions on behalf of the Company and
listed on the Certificate annexed hereto as Appendix A or any amendment thereto
as may be received by the Transfer Agent from time to time.
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<PAGE> 6
(b) "Oral Instructions". As used in this
Agreement, the term "Oral Instructions" means oral instructions actually
received by the Transfer Agent from an Authorized Person or from a person
reasonably believed by the Transfer Agent to be an Authorized Person. The
Company agrees to deliver to the Transfer Agent, at the time and in the manner
specified in Paragraph 4(b) of this Agreement, Written Instructions confirming
Oral Instructions.
(c) "Written Instructions". As used in this
Agreement, the term "Written Instructions" means written instructions delivered
by hand, mail, tested telegram, cable, telex or facsimile sending device, and
received by the Transfer Agent and signed by an Authorized Person.
4. Instructions Consistent with Declaration, etc.
(a) Unless otherwise provided in this Agreement,
the Transfer Agent shall act only upon Oral or Written Instructions. Although
the Transfer Agent may know of the provisions of the Declaration and By-Laws of
the Company, the Transfer Agent may assume that any Oral or Written
Instructions received hereunder are not in any way inconsistent with any
provisions of such Declaration or By-Laws or any vote, resolution or proceeding
of the Shareholders, or of the Board of Trustees, or of any committee thereof.
(b) The Transfer Agent shall be entitled to rely
upon any Oral Instructions and any Written Instructions actually received by
the Transfer Agent pursuant to this Agreement. The
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<PAGE> 7
Company agrees to forward to the Transfer Agent Written Instructions confirming
Oral Instructions in such manner that the Written Instructions are received by
the Transfer Agent by the close of business of the same day that such Oral
Instructions are given to the Transfer Agent. The Company agrees that the fact
that such confirming Written Instructions are not received by the Transfer
Agent shall in no way affect the validity of the transactions or enforceability
of the transactions authorized by the Company by giving Oral Instructions. The
Company agrees that the Transfer Agent shall incur no liability to the Company
in acting upon Oral Instructions given to the Transfer Agent hereunder
concerning such transactions, provided the Transfer Agent reasonably believes
such instructions have been received from an Authorized Person.
5. Transactions Not Requiring Instructions. In the
absence of contrary Written Instructions, the Transfer Agent is authorized to
take the following actions:
(a) Issuance of Shares. Upon receipt of a
purchase order from Shearson for the purchase of Shares and sufficient
information to enable the Transfer Agent to establish a Shareholder account,
and after confirmation of receipt or crediting of Federal funds for such order
from the Company's Custodian, the Transfer Agent shall issue and credit the
account of the investor or other record holder with Shares in the manner
described in the Prospectus.
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<PAGE> 8
(b) Transfer of Shares; Uncertificated
Securities. Where a Shareholder does not hold a certificate representing the
number of Shares in his account and does provide the Transfer Agent with
instructions for the transfer of such Shares which include a signature
guaranteed by a national bank or registered broker/dealer and such other
appropriate documentation to permit a transfer, then the Transfer Agent shall
register such Shares and shall deliver them pursuant to instructions received
from the transferor, pursuant to the rules and regulations of the SEC, and the
law of the Commonwealth of Pennsylvania relating to the transfer of Shares.
(c) Certificates. If at any time the Company
issues certificates representing Shares, the following provisions will apply:
(i) The Company will supply the
Transfer Agent with a sufficient supply of certificates representing
Shares, in the form approved from time to time by the Board of
Trustees of the Company, and, from time to time, shall replenish such
supply upon request of the Transfer Agent. Such certificates shall be
properly signed, manually or by facsimile signature, by the duly
authorized officers of the Company, whose names and positions shall be
set forth on Appendix A, and shall bear the seal or facsimile thereof
of the Company, and notwithstanding the death, resignation or removal
of any officer of the Company, such executed certificates bearing the
manual or facsimile
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<PAGE> 9
signature of such officer shall remain valid and may be issued to
Shareholders until the Transfer Agent is otherwise directed by Written
Instructions.
(ii) In the case of the loss or
destruction of any certificate representing Shares, no new certificate
shall be issued in lieu thereof, unless there shall first have been
furnished an appropriate bond of indemnity issued by the surety
company approved by the Transfer Agent.
(iii) Upon receipt of signed
certificates, which shall be in proper form for transfer, and upon
cancellation or destruction thereof, the Transfer Agent shall
countersign, register and issue new certificates for the same number
of Shares and shall deliver them pursuant to instructions received
from the transferor, the rules and regulations of the SEC, and the law
of the Commonwealth of Pennsylvania relating to the transfer of
Shares.
(iv) Upon receipt of the
certificates, which shall be in proper form for transfer, together
with the Shareholder's instructions to hold such certificates for
safekeeping, the Transfer Agent shall reduce such Shares to
uncertificated status, while retaining the appropriate registration in
the name of the Shareholder upon the transfer books.
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<PAGE> 10
(v) Upon receipt of written
instructions from a Shareholder of uncertificated securities for a
certificate in the number of Shares in his account, the Transfer Agent
will issue such stock certificates and deliver them to the
Shareholder.
(d) Redemption of Shares. Upon receipt of a
redemption order from Shearson, Transfer Agent shall redeem the number of
Shares indicated thereon from the redeeming Shareholder's account and receive
from the Company's Custodian and disburse to the redeeming Shareholder the
redemption proceeds therefor, or arrange for direct payment of redemption
proceeds to such Shareholder by the Company's Custodian, in accordance with
such procedures and controls as are mutually agreed upon from time to time by
and among the Company, the Transfer Agent and the Company's Custodian.
6. Authorized Shares. The Company's authorized capital
stock consists of an unlimited number of Shares. The Company agrees to notify
the Transfer Agent promptly of any termination of the Company's declaration
under Rule 24f-2 of the 1940 Act.
7. Dividends and Distributions. The Company shall
furnish the Transfer Agent with appropriate evidence of action by the Company's
Board of Trustees authorizing the declaration and payment of dividends and
distributions as described in the Prospectus. After deducting any amount
required to be withheld by any applicable tax laws, rules and regulations or
other
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<PAGE> 11
applicable laws, rules and regulations, the Transfer Agent shall in accordance
with the instructions in proper form from a Shareholder and the provisions of
the Company's Declaration and Prospectus, issue and credit the account of the
Shareholder with Shares, or, pay such dividends or distribution in the manner
described in the Prospectus. In lieu of receiving from the Company's Custodian
and paying to Shareholders cash dividends or distributions, the Transfer Agent
may arrange for the direct payment of cash dividends and distributions to
Shareholders by the Company's Custodian, in accordance with such procedures and
controls as are mutually agreed upon from time to time by and among the
Company, the Transfer Agent and the Company's Custodian.
The Transfer Agent shall prepare, file with the Internal
Revenue Service and other appropriate taxing authorities, and address and mail
to Shareholders such returns and information relating to dividends and
distributions paid by the Company as are required to be so prepared, filed and
mailed by applicable laws, rules and regulations, or such substitute form of
notice as may from time to time be permitted or required by the Internal
Revenue Service. On behalf of the Company, the Transfer Agent shall mail
certain requests for Shareholders' certifications under penalties of perjury
and pay on a timely basis to the appropriate Federal authorities any taxes to
be withheld on dividends and distributions paid by the Company, all as required
by applicable Federal tax laws and regulations.
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<PAGE> 12
8. Communications with Shareholders.
(a) Communications to Shareholders. The
Transfer Agent will address and mail all communications by the Company to its
Shareholders, including reports to Shareholders, confirmations of purchases and
sales of Company Shares, monthly statements, dividend and distribution notices
and proxy material for its meetings of Shareholders. The Transfer Agent will
receive and tabulate the proxy cards for the meetings of the Company's
Shareholders.
(b) Correspondence. The Transfer Agent will
answer such correspondence from Shareholders, securities brokers and others
relating to its duties hereunder and such other correspondence as may from time
to time be mutually agreed upon between the Transfer Agent and the Company.
9. Records. The Transfer Agent shall maintain records
of the accounts for each Shareholder showing the following information:
(a) name, address and United States Tax
Identification or Social Security number;
(b) number and class of Shares held and number
and class of Shares for which certificates, if any, have been issued, including
certificate numbers and denominations;
(c) historical information regarding the account
of each Shareholder, including dividends and distributions paid and the date
and price for all transactions on a Shareholder's account;
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<PAGE> 13
(d) any stop or restraining order placed against
a Shareholder's account;
(e) any correspondence relating to the current
maintenance of a Shareholder's account;
(f) information with respect to withholdings;
and,
(g) any information required in order for the
Transfer Agent to perform any calculations contemplated or required by this
Agreement.
The books and records pertaining to the Company which are in
the possession of the Transfer Agent shall be the property of the 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. The
Company, or the Company's authorized representatives, shall have access to such
books and records at all times during the Transfer Agent's normal business
hours. Upon the reasonable request of the Company, copies of any such books
and records shall be provided by the Transfer Agent to the Company or the
Company's authorized representative at the Company's expense.
10. Ongoing Functions. The Transfer Agent will perform
the following functions on an ongoing basis:
(a) furnish state-by-state registration reports
to the Company;
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<PAGE> 14
(b) calculate Account Executive load or
compensation payment and provide such information to the Company, if any;
(c) calculate dealer commissions for the Company,
if any;
(d) provide toll-free lines for direct
Shareholder use, plus customer liaison staff with on-line inquiry capacity;
(e) mail duplicate confirmations to dealers of
their clients' activity, whether executed through the dealer or directly with
the Transfer Agent, if any;
(f) provide detail for underwriter or broker
confirmations and other participating dealer Shareholder accounting, in
accordance with such procedures as may be agreed upon between the Company and
the Transfer Agent;
(g) provide Shareholder lists and statistical
information concerning accounts to the Company;
(h) provide timely notification of Company
activity and such other information as may be agreed upon from time to time
between the Transfer Agent and the Company, PIMC and the Custodian, to the
Company, the Custodian or PIMC; and
(i) install or cause to be installed,
micro-computer systems in the offices of certain Shareholders and shall provide
or cause to be provided, communication networks in connection with the use of
such systems by Shareholders (the "Computer Access Program") pursuant to
directives given by The
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<PAGE> 15
Boston Company Advisors, Inc. with respect to the Computer Access Program in
accordance with the Company's Administration Agreement.
11. Cooperation with Accountants. The Transfer Agent
shall cooperate with the Company's independent public accountants and shall
take all reasonable action in the performance of its obligations under this
Agreement to assure that the necessary information is made available to such
accountants for the expression of their opinion as such may be required by the
Company from time to time.
12. Confidentiality. The Transfer Agent agrees on behalf
of itself and its employees to treat confidentially all records and other
information relative to the Company and its prior, present or potential
Shareholders, except, after prior notification to and approval in writing by
the Company, which approval shall not be unreasonably withheld and may not be
withheld where the Transfer Agent may be exposed to civil or criminal contempt
proceedings for failure to comply, when requested to divulge such information
by duly constituted authorities, or when so requested by the Company.
13. Equipment Failures. In the event of equipment
failures beyond the Transfer Agent's control, the Transfer Agent shall, at no
additional expense to the Company, take reasonable steps to minimize service
interruptions but shall have no liability with respect thereto. The foregoing
obligation shall not extend to computer terminals located outside of premises
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<PAGE> 16
maintained by the Transfer Agent. The Transfer Agent shall enter into and
shall maintain in effect with appropriate parties one or more agreements making
reasonable provision for emergency use of electronic data processing equipment
to the extent appropriate equipment is available.
14. Right to Receive Advice.
(a) Advice of Company. If the Transfer Agent
shall be in doubt as to any action to be taken or omitted by it, it may
request, and shall receive, from the Company directions or advice, including
Oral or Written Instructions where appropriate.
(b) Advice of Counsel. If the Transfer Agent
shall be in doubt as to any question of law involved in any action to be taken
or omitted by the Transfer Agent, it may request advice at its own cost from
counsel of its own choosing (who may be counsel for the Advisor, the Company or
the Transfer Agent at the option of the Transfer Agent).
(c) Conflicting Advice. In case of conflict
between directions, advice or Oral or Written Instructions received by the
Transfer Agent pursuant to subparagraph (a) of this Paragraph and advice
received by the Transfer Agent pursuant to subparagraph (b) of this Paragraph,
the Transfer Agent shall be entitled to rely on and follow the advice received
pursuant to the latter provision alone.
(d) Protection of the Transfer Agent. The
Transfer Agent shall be protected in any action or inaction which it takes in
reliance on any directions, advice or Oral or Written
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<PAGE> 17
Instructions received pursuant to subparagraphs (a) or (b) of this Paragraph
which the Transfer Agent, after receipt of any such directions, advice or Oral
or Written Instructions, in good faith believes to be consistent with such
directions, advice or Oral or Written Instructions, as the case may be.
However, nothing in this Paragraph shall be construed as imposing upon the
Transfer Agent any obligation (i) to seek such directions, advice or Oral or
Written Instructions, or (ii) to act in accordance with such directions, advice
or Oral or Written Instructions when received, unless, under the terms of
another provision of this Agreement, the same is a condition to the Transfer
Agent's properly taking or omitting to take such action. Nothing in this
subparagraph shall excuse the Transfer Agent when an action or omission on the
part of the Transfer Agent constitutes willful misfeasance, bad faith, gross
negligence or reckless disregard by the Transfer Agent of its duties and
obligations under this Agreement.
15. Compliance with Governmental Rules and Regulations.
The Company assumes full responsibility for ensuring that the Company complies
with all applicable requirements of the 1933 Act, the 1934 Act, the 1940 Act,
and any laws, rules and regulations of governmental authorities having
jurisdiction except insofar as the Transfer Agent has assumed a specific
responsibility for compliance hereunder.
16. Compensation. As compensation for the services
rendered by the Transfer Agent during the term of this Agreement,
-17-
<PAGE> 18
the Company will pay to the Transfer Agent monthly fees that shall be agreed to
from time to time by the Company and the Transfer Agent, plus certain of the
Transfer Agent's expenses relating to such services, as shall be agreed to from
time to time by the Company and the Transfer Agent.
17. Indemnification. The Company agrees to indemnify and
hold harmless the Transfer Agent and its nominees and sub-contractors from all
taxes, charges, expenses, assessments, claims and liabilities (including,
without limitation, liabilities arising under the 1933 Act, the 1934 Act, the
1940 Act, and any state and foreign securities and blue sky laws, all as or to
be amended from time to time) and expenses, including (without limitation)
attorneys' fees and disbursements, arising directly or indirectly from any
action or thing which the Transfer Agent takes or does or omits to take or do
(i) at the request or on the direction of or in reliance on the advice of the
Company or (ii) upon Oral or Written Instructions, provided, that neither the
Transfer Agent nor any of its nominees or sub-contractors shall be indemnified
against any liability to the Company or to its Shareholders (or any expenses
incident to such liability) arising out of the Transfer Agent's or such
nominee's or such sub-contractor's own willful misfeasance, bad faith or
negligence or reckless disregard of its duties in connection with the
performance of its duties and obligations specifically described in this
Agreement.
-18-
<PAGE> 19
18. Responsibility of the Transfer Agent. The Transfer
Agent shall be under no duty to take any action on behalf of the Company except
as specifically set forth herein or as may be specifically agreed to by the
Transfer Agent in writing. In the performance of its duties hereunder, the
Transfer Agent shall be obligated to exercise care and diligence and to act in
good faith and to use its best efforts within reasonable limits to insure the
accuracy and completeness of all services performed under this Agreement. The
Transfer Agent shall be responsible for its own negligent failure to perform
its duties under this Agreement, but to the extent that duties, obligations and
responsibilities are not expressly set forth in this Agreement, the Transfer
Agent shall not be liable for any act or omission which does not constitute
willful misfeasance, bad faith or gross negligence on the part of the Transfer
Agent or reckless disregard of such duties, obligations and responsibilities.
Without limiting the generality of the foregoing or of any other provision of
this Agreement, the Transfer Agent in connection with its duties under this
Agreement shall not be under any duty or obligation to inquire into and shall
not be liable for or in respect of (a) the validity or invalidity or authority
or lack thereof of any Oral or Written Instruction, notice or other instrument
which conforms to the applicable requirements of this Agreement, if any, and
which the Transfer Agent reasonably believes to be genuine, or (b) delays or
errors or loss of data occurring by reason of circumstances
-19-
<PAGE> 20
beyond the Transfer Agent's control, including acts of civil or military
authority, national emergencies, labor difficulties, fire, mechanical breakdown
(except as provided in Paragraph 13), flood or catastrophe, acts of God,
insurrection, war, riots or failure of the mails, transportation, communication
or power supply.
19. Duration and Termination. This Agreement shall
continue until termination by the Company or by the Transfer Agent on sixty
(60) days written notice.
20. Registration as a Transfer Agent. The Transfer Agent
represents that it is currently registered with the appropriate Federal agency
for the registration of transfer agents, and that it will remain so registered
for the duration of this Agreement. The Transfer Agent agrees that it will
promptly notify the Company in the event of any material change in its status
as a registered transfer agent. Should the Transfer Agent fail to be
registered with the OCC as a transfer agent at any time during this Agreement,
the Company may, on written notice to the Transfer Agent, immediately terminate
this Agreement.
21. Notices. All notices and other communications,
including Written Instructions (collectively referred to as "Notice" or
"Notices" in this Paragraph), hereunder shall be in writing or by confirming
telegram, cable, telex or facsimile sending device. Notices shall be addressed
(a) if to the Transfer Agent at P.O. Box 8950, Wilmington, Delaware 19899; (b)
if to the Company, at the address of the Company; or (c) if to
-20-
<PAGE> 21
neither of the foregoing, at such other address as shall have been notified to
the sender of any such Notice or other communication. If the location of the
sender of a Notice and the address of the addressee thereof are, at the time of
sending, more than 100 miles apart, the Notice may be sent by first-class mail,
in which case it shall be deemed to have been received five days after it is
sent, or if sent by confirming telegram, cable, telex or facsimile sending
device, it shall be deemed to have been received immediately, and, if the
location of the sender of a Notice and the address of the addressee thereof
are, at the time of sending, not more than 100 miles apart, the Notice may be
sent by first-class mail, in which case it shall be deemed to have been
received three days after it is sent, or if sent by messenger, it shall be
deemed to have been received on the day it is delivered. All postage, cable,
telegram, telex and facsimile sending device charges arising from the sending
of a Notice hereunder shall be paid by the sender.
22. Further Actions. Each party agrees to perform such
further acts and execute such further documents as are necessary to effectuate
the purposes hereof.
23. Amendments. This Agreement or any part hereof may be
changed only by an instrument in writing signed by the party against which
enforcement of such change is sought.
24. Delegation of Duties. On thirty (30) days prior
written notice to the Company, the Transfer Agent may assign its rights and
delegate its duties hereunder to any wholly-owned
-21-
<PAGE> 22
direct or indirect subsidiary of Provident National Bank or PNC Financial Corp,
provided that (i) the delegate agrees with the Transfer Agent to comply with
all relevant provisions of the 1940 Act; and (ii) the Transfer Agent and such
delegate shall promptly provide such information as the Company may request,
and respond to such questions as the Company may ask, relative to the
delegation, including (without limitation) the capabilities of the delegate.
Such delegate shall be bound by the terms of this Agreement as though an
original party hereto and the Transfer Agent shall unconditionally guarantee
the performance of the delegate under the terms and conditions of this
Agreement.
By its execution of this Agreement, the Company hereby
acknowledges that it has received the notice required by this Paragraph 24 in
respect of transfer agency services to be provided by NMF, Inc., a North
Carolina business corporation.
25. Counterparts. This Agreement may be executed 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.
26. Miscellaneous.
(a) The Transfer Agent hereby acknowledges that
the Company is a business trust and that it must look solely to the Company's
Property for the enforcement of any claims against the Company, as neither the
Trustees, officers, agents or Shareholders of the Company assume any personal
liability in
-22-
<PAGE> 23
connection with its business or assume any personal liability for obligations
entered into on its behalf;
(b) This Agreement embodies the entire agreement
and understanding between the parties hereto, and supersedes all prior
agreements and understandings relating to the subject matter hereof, provided
that the parties hereto may embody in one or more separate documents their
agreement, if any, with respect to Oral Instructions or compensation. The
captions in 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. This Agreement shall be deemed to be a contract
made in Delaware and governed by Delaware law. If any provision of this
Agreement shall be held or made invalid by a court decision, statute, rule or
otherwise, the remainder of this Agreement shall not be affected thereby. This
Agreement shall be binding and shall inure to the benefit of the parties hereto
and their respective successors.
-23-
<PAGE> 24
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be executed by their officers designated below on the day and year
first above written.
<TABLE>
<S> <C> <C>
[SEAL] TRUST FOR FEDERAL SECURITIES
Attest: /s/ Robert E. Putney By:/s/ Edward J. Roach
-------------------- -------------------------
[SEAL] PROVIDENT FINANCIAL PROCESSING CORPORATION
Attest: By: /s/ Marie Gipple
-------------------- ------------------------
</TABLE>
-24-
<PAGE> 25
INDEX
<TABLE>
<CAPTION>
Paragraph Page
--------- ----
<S> <C> <C>
1. Appointment . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
2. Delivery of Documents . . . . . . . . . . . . . . . . . . . . . . . 3
3. Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
4. Instructions Consistent with Declaration, etc. . . . . . . . . . . . 6
5. Transactions Not Requiring Instructions . . . . . . . . . . . . . . 7
6. Authorized Shares . . . . . . . . . . . . . . . . . . . . . . . . . 10
7. Dividends and Distributions . . . . . . . . . . . . . . . . . . . . 10
8. Communications with Shareholders . . . . . . . . . . . . . . . . . . 12
9. Records . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
10. Ongoing Functions . . . . . . . . . . . . . . . . . . . . . . . . . 13
11. Cooperation with Accountants . . . . . . . . . . . . . . . . . . . . 15
12. Confidentiality . . . . . . . . . . . . . . . . . . . . . . . . . . 15
13. Equipment Failures . . . . . . . . . . . . . . . . . . . . . . . . . 15
14. Right to Receive Advice . . . . . . . . . . . . . . . . . . . . . . 16
15. Compliance with Governmental Rules and Regulations . . . . . . . . . 17
16. Compensation . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
17. Indemnification . . . . . . . . . . . . . . . . . . . . . . . . . . 18
18. Responsibility of the Transfer Agent . . . . . . . . . . . . . . . . 19
19. Duration and Termination . . . . . . . . . . . . . . . . . . . . . . 20
20. Registration as a Transfer Agent . . . . . . . . . . . . . . . . . . 20
21. Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
22. Further Actions . . . . . . . . . . . . . . . . . . . . . . . . . . 21
23. Amendments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
24. Delegation of Duties . . . . . . . . . . . . . . . . . . . . . . . . 21
25. Counterparts . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
26. Miscellaneous . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
</TABLE>
-25-
<PAGE> 1
EXHIBIT (9)(d)
ADDENDUM NO. 1 TO TRANSFER AGENCY AGREEMENT
This Addendum, dated as of the 1st day of November, 1990, is entered
into between TRUST FOR FEDERAL SECURITIES (the "Company"), a Pennsylvania
business trust, and PROVIDENT FINANCIAL PROCESSING CORPORATION ("PFPC"), a
Delaware corporation which is an indirect, wholly owned subsidiary of PNC
Financial Corp.
WHEREAS, the Company and PFPC have entered into a Transfer Agreement
dated June 1, 1989, (the "Transfer Agency Agreement"), pursuant to which the
Company appointed PFPC to act as transfer agent, registrar and dividend
disbursing agent (the "Transfer Agent") to the Company for its FedFund
portfolio, its T-Fund portfolio, its Treasury Trust Fund portfolio, its Short
Government Fund portfolio, its Intermediate Government Fund portfolio and its
Long Government Fund portfolio (each a "Fund");
WHEREAS, Paragraph 1 of the Transfer Agency Agreement provides that in
the event the Company establishes one or more additional Funds with respect to
which it desires to retain PFPC to act as the Transfer Agent under the Transfer
Agency Agreement, the Company shall so notify PFPC in writing and if PFPC is
willing to render such services it shall notify the Company in writing, and the
compensation to be paid to PFPC shall be that which is agreed to in writing by
the Company and PFPC; and
WHEREAS, pursuant to Paragraph 1 of the Transfer Agency Agreement, the
Company has notified PFPC that it has established the Federal Trust Fund
portfolio ("Federal Trust Fund") and that it desires to retain PFPC to act as
the Transfer Agent therefor, and PFPC has notified the Company that it is
willing to serve as Transfer Agent for Federal Trust Fund.
NOW THEREFORE, the parties hereto, intending to be legally bound,
hereby agree as follows:
1. Appointment. The Company hereby appoints PFPC to act as Transfer
Agent to the Company for Federal Trust Fund for the period and on the terms set
forth in the Transfer Agency Agreement. PFPC hereby accepts such appointment and
agrees to render the services set forth in the Transfer Agency Agreement, for
the compensation agreed to in writing by the Company and PFPC pursuant to
Paragraph 16 of the Transfer Agency Agreement.
2. Capitalized Terms. From and after the date hereof, the term
"Fund" as used in the Transfer Agency Agreement shall be deemed to include
Federal Trust Fund.
-1-
<PAGE> 2
Capitalized terms used herein and not otherwise defined shall have the meanings
ascribed to them in the Transfer Agency Agreement.
3. Miscellaneous. Except to the extent supplemented hereby, the
Transfer Agency Agreement shall remain unchanged and in full force and effect
and is hereby ratified and confirmed in all respects as supplemented hereby.
IN WITNESS WHEREOF, the undersigned have executed this Addendum as of
the date and year first above written.
TRUST FOR FEDERAL SECURITIES
By: /s/ Edward J. Roach
------------------------
Title: Vice President
PROVIDENT FINANCIAL
PROCESSING CORPORATION
By: /s/ Marie S. Gipple
------------------------
Title: Vice President
-2-
<PAGE> 1
EXHIBIT (9)(e)
ADDENDUM NO. 2 TO TRANSFER AGENCY AGREEMENT
This Addendum, dated as of the 9th day of May, 1991, is entered into
between TRUST FOR FEDERAL SECURITIES (the "Company"), a Pennsylvania business
trust, and PROVIDENT FINANCIAL PROCESSING CORPORATION ("PFPC"), a Delaware
corporation which is an indirect, wholly owned subsidiary of PNC Financial Corp.
WHEREAS, the Company and PFPC have entered into a Transfer Agreement
dated June 1, 1989, as supplemented by Addendum No. 1 dated as of November 1,
1990 (the "Transfer Agency Agreement"), pursuant to which the Company appointed
PFPC to act as transfer agent, registrar and dividend disbursing agent (the
"Transfer Agent") to the Company for its FedFund portfolio, its T-Fund
portfolio, its Federal Trust Fund portfolio, its Treasury Trust Fund portfolio,
its Short Government Fund portfolio, its Intermediate Government Fund portfolio
and its Long Government Fund portfolio (each a "Fund");
WHEREAS, Paragraph 1 of the Transfer Agency Agreement provides that in
the event the Company establishes one or more additional Funds with respect to
which it desires to retain PFPC to act as the Transfer Agent under the Transfer
Agency Agreement, the Company shall so notify PFPC in writing and if PFPC is
willing to render such services it shall notify the Company in writing, and the
compensation to be paid to PFPC shall be that which is agreed to in writing by
the Company and PFPC; and
WHEREAS, pursuant to Paragraph 1 of the Transfer Agency Agreement, the
Company has notified PFPC that it has established the FedCash portfolio
("FedCash") and T-Cash portfolio ("T- Cash"), and that it desires to retain PFPC
to act as the Transfer gent therefor, and PFPC has notified the Company that it
is willing to serve as Transfer Agent for FedCash and T-Cash.
NOW THEREFORE, the parties hereto, intending to be legally bound,
hereby agree as follows:
1. Appointment. The Company hereby appoints PFPC to act as Transfer
Agent to the Company for FedCash and T-Cash for the period and on the terms set
forth in the Transfer Agency Agreement. PFPC hereby accepts such appointment and
agrees to render the services set forth in the Transfer Agency Agreement, for
the compensation agreed to in writing by the Company and PFPC pursuant to
Paragraph 16 of the Transfer Agency Agreement.
<PAGE> 2
2. Capitalized Terms. From and after the date hereof, the term "Fund"
as used in the Transfer Agency Agreement shall be deemed to include FedCash and
T-Cash. Capitalized terms used herein and not otherwise defined shall have the
meanings ascribed to them in the Transfer Agency Agreement.
3. Miscellaneous. Except to the extent supplemented hereby, the
Transfer Agency Agreement shall remain unchanged and in full force and effect
and is hereby ratified and confirmed in all respects as supplemented hereby.
IN WITNESS WHEREOF, the undersigned have executed this Addendum as of
te date and year first above written.
TRUST FOR FEDERAL SECURITIES
By:
--------------------------
Title:
PROVIDENT FINANCIAL
PROCESSING CORPORATION
By:
-------------------------
Title:
<PAGE> 1
EXHIBIT 11(a)
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the following with respect to Post-Effective Amendment No.
41 under the Securities Act of 1933 and the Investment Company Act of 1940 to
the registration Statement (No. 2-53808), as amended on Form N1-A of Trust for
Federal Securities (FedFund, T-Fund, FedCash, T-Cash, Federal Trust Fund, and
Treasury Trust Fund):
- The reference to our firm under the heading "Financial Highlights" in the
Prospectus of FedFund, T-Fund, FedCash, T-Cash, Federal Trust Fund, and
Treasury Trust Fund Portfolios and under the heading "Auditors" in the
Statement of Additional Information for FedFund and T-Fund Portfolios,
FedCash and T-Cash Portfolios, Federal Trust Fund and Treasury Trust
Fund Portfolios.
- The inclusion of our report dated December 8, 1995 accompanying the
financial statements in the Statement of Additional Information for
FedFund and T-Fund Portfolios, FedCash and T-Cash Portfolios, Federal
Trust Fund and Treasury Trust Fund Portfolios.
- The incorporation by reference of our report dated December 8, 1995 into
the Prospectus' of the FedFund and T-Fund Portfolios, FedCash and T-Cash
Portfolios, Federal Trust Fund and Treasury Fund Portfolios.
/s/ COOPERS & LYBRAND L.L.P.
COOPERS & LYBRAND L.L.P.
2400 Eleven Penn Center
Philadelphia, Pennsylvania
February 21, 1996
<PAGE> 1
Exhibit (11)(b)
CONSENT OF COUNSEL
Trust for Federal Securities
(FedFund, T-Fund, FedCash, T-Cash, Federal Trust Fund and Treasury
Trust Fund Portfolios)
We hereby consent to the use of our name and to the references to our
firm under the captions "Management of the Funds -- Trustees and Officers" and
"Counsel" in each Statement of Additional Information and under the caption
"Management of the Fund" in each Prospectus in Post-Effective Amendment No. 41
to the Registration Statement (File No. 2-53808) on Form N-1A of Trust for
Federal Securities (FedFund, T-Fund, FedCash, T-Cash, Federal Trust Fund,
Treasury Trust Fund and Short Government Fund Portfolios) under the Securities
Act of l933 and the Investment Company Act of l940, respectively.
/s/ Drinker Biddle & Reath
--------------------------------
DRINKER BIDDLE & REATH
Philadelphia, Pennsylvania
February 27, 1996
<TABLE> <S> <C>
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<CIK> 0000034913
<NAME> TRUST FOR FEDREAL SECURITIES
<SERIES>
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<NAME> FED CASH - MAIN CLASS
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> OCT-31-1995
<PERIOD-END> OCT-31-1995
<INVESTMENTS-AT-COST> 358333757
<INVESTMENTS-AT-VALUE> 358333757
<RECEIVABLES> 2059137
<ASSETS-OTHER> 67471
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 360460365
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 1855206
<TOTAL-LIABILITIES> 1855206
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 358685191
<SHARES-COMMON-STOCK> 358685191
<SHARES-COMMON-PRIOR> 385848855
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (80032)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 0
<NET-ASSETS> 358605159
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 27553298
<OTHER-INCOME> 0
<EXPENSES-NET> 891084
<NET-INVESTMENT-INCOME> 26662214
<REALIZED-GAINS-CURRENT> (22449)
<APPREC-INCREASE-CURRENT> 0
<NET-CHANGE-FROM-OPS> 26639765
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 26662214
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 3928025201
<NUMBER-OF-SHARES-REDEEMED> 4225466780
<SHARES-REINVESTED> 4123020
<NET-CHANGE-IN-ASSETS> (293318559)
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 599169
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 1442425
<AVERAGE-NET-ASSETS> 452256378
<PER-SHARE-NAV-BEGIN> 1.000
<PER-SHARE-NII> .057
<PER-SHARE-GAIN-APPREC> 0
<PER-SHARE-DIVIDEND> .057
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 1.000
<EXPENSE-RATIO> .18
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 0000034913
<NAME> TRUST FOR FEDERAL SECURITIES
<SERIES>
<NUMBER> 092
<NAME> FED CASH - DOLLAR CLASS
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> OCT-31-1995
<PERIOD-END> OCT-31-1995
<INVESTMENTS-AT-COST> 358333757
<INVESTMENTS-AT-VALUE> 358333757
<RECEIVABLES> 2059137
<ASSETS-OTHER> 67471
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 360460365
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 1855206
<TOTAL-LIABILITIES> 1855206
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 358685191
<SHARES-COMMON-STOCK> 358685191
<SHARES-COMMON-PRIOR> 385848855
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (80032)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 0
<NET-ASSETS> 358605159
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 27553298
<OTHER-INCOME> 0
<EXPENSES-NET> 891084
<NET-INVESTMENT-INCOME> 26662214
<REALIZED-GAINS-CURRENT> (22449)
<APPREC-INCREASE-CURRENT> 0
<NET-CHANGE-FROM-OPS> 26639765
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 26662214
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 3928025201
<NUMBER-OF-SHARES-REDEEMED> 4225466780
<SHARES-REINVESTED> 4123020
<NET-CHANGE-IN-ASSETS> (293318559)
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 599169
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 1442425
<AVERAGE-NET-ASSETS> 19177833
<PER-SHARE-NAV-BEGIN> 1.000
<PER-SHARE-NII> .054
<PER-SHARE-GAIN-APPREC> 0
<PER-SHARE-DIVIDEND> .054
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 1.000
<EXPENSE-RATIO> .43
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 0000034913
<NAME> TRUST FOR FEDERAL SECURITIES
<SERIES>
<NUMBER> 011
<NAME> FEDFUND - MAIN CLASS
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<FISCAL-YEAR-END> OCT-31-1995
<PERIOD-END> OCT-31-1995
<INVESTMENTS-AT-COST> 1589350691
<INVESTMENTS-AT-VALUE> 1589350691
<RECEIVABLES> 9032722
<ASSETS-OTHER> (37036)
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 1598346377
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 7994416
<TOTAL-LIABILITIES> 7994416
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 1590561551
<SHARES-COMMON-STOCK> 1590561551
<SHARES-COMMON-PRIOR> 1581884620
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (209590)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 0
<NET-ASSETS> 1590351961
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 92288610
<OTHER-INCOME> 0
<EXPENSES-NET> 3071532
<NET-INVESTMENT-INCOME> 89217078
<REALIZED-GAINS-CURRENT> (45794)
<APPREC-INCREASE-CURRENT> 0
<NET-CHANGE-FROM-OPS> 89171284
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 89217078
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 16892053417
<NUMBER-OF-SHARES-REDEEMED> 17013231572
<SHARES-REINVESTED> 18244413
<NET-CHANGE-IN-ASSETS> (102933742)
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 1992524
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 4783143
<AVERAGE-NET-ASSETS> 1466925188
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