As filed with the Securities and Exchange Commission on April 29, 1996
Registration No. 2-14767
811-0865
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 X
Pre-Effective Amendment No.
Post-Effective Amendment No. 63 X
and/or
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 X
Amendment No. 18 X
(Check appropriate box or boxes.)
LEXINGTON GROWTH AND INCOME FUND, INC.
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(Exact name of Registrant as specified in Charter)
Park 80 West Plaza Two
Saddle Brook, New Jersey 07663
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(Address of principal executive offices)
Registrant's Telephone Number: (201) 845-7300
Lisa Curcio, Secretary
Lexington Growth and Income Fund, Inc.
Park 80 West Plaza Two, Saddle Brook, New Jersey 07663
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(Name and address of agent for service)
With a copy to:
Carl Frischling, Esq.
Kramer, Levin, Naftalis, Nessen, Kamin & Frankel
919 Third Avenue, New York, New York 10022
----------------------------------------
It is proposed that this filing will become effective April 29,
1996 pursuant to Paragraph (b) of Rule 485.
The Registrant has registered an indefinite number of shares under
the Securities Act of 1933, pursuant to Section 24(f) of the Investment
Company Act of 1940. A Rule 24f-2 Notice for the Registrant's fiscal
year ended December 31, 1995 was filed on February 26, 1996.
<PAGE>
LEXINGTON GROWTH AND INCOME FUND, INC.
REGISTRATION STATEMENT ON FORM N-1A
CROSS REFERENCE SHEET
PART A
Items in Part A Prospectus
of Form N-1A Prospectus Caption Page Number
- ------------ ------------------ -----------
1. Cover Page Cover Page
2. Synopsis *
3. Condensed Financial Information 2
4. General Description of Registrant 3
5. Management of the Fund 5
6. Capital Stock and Other Securities 12
7. Purchase of Securities Being Offered 5
8. Redemption or Repurchase 6
9. Legal Proceedings *
Note * Omitted since answer is negative or inapplicable
<PAGE>
LEXINGTON GROWTH AND INCOME FUND, INC.
STATEMENT OF ADDITIONAL STATEMENT OF ADDITIONAL
PART B INFORMATION CAPTION INFORMATION PAGE NUMBER
- ------ ----------------------- -----------------------
10. Cover Page Cover Page
11. Table of Contents Cover Page
12. General Information and History 12 (Part A)
13. Investment Objectives and Policies 2
14. Management of the Registrant 16
15. Control Persons and Principal Holders 3
of Securities
16. Investment Advisory and Other Services 3
17. Brokerage Allocation and Other Practices 5
18. Capital Stock and Other Securities 12 (Part A)
19. Purchase, Redemption and Pricing of 5,6 (Part A)
securities being offered
20. Tax Status 9
21. Underwriters 3
22. Calculation of Yield Quotations on Money *
Market Funds
23. Financial Statements 19
PART C
- ------
Information required to be included in Part C is set
forth under the appropriate Item, so numbered, in Part C
to this Registration Statement.
* Not Applicable
<PAGE>
PROSPECTUS
April 29, 1996
Lexington Growth and Income
Fund, Inc.
P.O. Box 1515 / Park 80 West Plaza Two, Saddle Brook, New Jersey 07663
Toll Free: Service - 1-800-526-0056
Institutional/Financial Adviser Services - 1-800-367-9160
24 Hour Account Information - 1-800-526-0052
A NO-LOAD MUTUAL FUND THAT IS FULLY MANAGED. ITS PRINCIPAL INVESTMENT OBJECTIVE
IS LONG TERM APPRECIATION OF CAPITAL. INCOME RETURN IS A SECONDARY OBJECTIVE.
- --------------------------------------------------------------------------------
Lexington Growth and Income Fund, Inc. (the "Fund") is a no load
open-end diversified management investment company. The Fund's
principal investment objective is long term appreciation of capital.
Income is a secondary objective.
Shareholders may invest, reinvest or redeem shares at any time
without charge or penalty.
Lexington Management Corporation ("LMC") is the Investment Adviser
of the Fund. Lexington Funds Distributor, Inc. ("LFD") is the
Distributor of shares of the Fund.
This Prospectus concisely sets forth information about the Fund
that you should know before investing. It should be read and retained
for future reference.
A Statement of Additional Information dated April 29, 1996, which
provides a further discussion of certain areas in this Prospectus and
other matters that may be of interest to some investors, has been
filed with the Securities and Exchange Commission and is incorporated
herein by reference. For a free copy, call the appropriate telephone
number above or write to the address listed above.
Mutual fund shares are not deposits or obligations of (or endorsed
or guaranteed by) any bank, nor are they federally insured or
otherwise protected by the Federal Deposit Insurance Corporation
("FDIC"), the Federal Reserve Board or any other agency. Investing in
mutual funds involves investment risks, including the possible loss of
principal, and their value and return will fluctuate.
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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.
- --------------------------------------------------------------------------------
Investors Should Read and Retain this Prospectus for Future Reference
<PAGE>
FEE TABLE
Annual Fund Operating Expenses:
(as a percentage of average net assets)
Management fees ..................................................... 0.71%
12b-1 fees .......................................................... 0.25%
Other fees .......................................................... 0.13%
-----
Total Fund Operating Expenses ........................................... 1.09%
=====
<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) 5% annual return and (2) redemption at the end of each period $11.11 $34.66 $60.08 $132.87
</TABLE>
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
indirectly. (For more complete descriptions of the various costs and expenses,
see "How to Purchase Shares" and "Investment Adviser and Distributor" below.)
The Expenses and Example (except the 12b-1 fees) appearing in the table above
are based on the Fund's expenses for the period from January 1, 1995 to December
31, 1995. The 12b-1 fees shown in the table reflect the maximum amount which may
be paid under the Distribution Plan. See "Distribution Plan." The Example shown
in the table above should not be considered a representation of past or future
expenses and actual expenses may be greater or less than those shown.
FINANCIAL HIGHLIGHTS
The following Financial Highlights information for each of the years in the
five year period ended December 31, 1995 has been audited by KPMG Peat Marwick
LLP, Independent Auditors, whose report thereon appears in the Statement of
Additional Information. This information should be read in conjunction with the
financial statements and related notes thereto included in the Statement of
Additional Information. The Fund's annual report, which contains additional
information, is available upon request and without charge.
- --------------------------------------------------------------------------------
Selected Per Share Data for a share outstanding throughout the period
<TABLE>
<CAPTION>
Year Ended December 31,
------------------------------------------------------------------------------------------------
1995 1994 1993 1992 1991 1990 1989 1988 1987 1986
---- ---- ---- ---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net asset value,
beginning of period ............ $14.36 $16.16 $16.25 $16.39 $14.24 $16.19 $14.39 $13.58 $19.16 $18.62
------ ------ ------ ------ ------ ------ ------ ------ ------ ------
Income (loss) from
investment operations:
Net investment income .......... 0.22 0.17 0.21 0.23 0.35 0.60 0.50 0.46 0.43 0.47
Net realized and unrealized gain
(loss) on investments ........ 3.00 (0.68) 1.94 1.79 3.17 (2.25) 3.44 0.80 0.02 3.06
------ ------ ------ ------ ------ ------ ------ ------ ------ ------
Total income (loss)
from investment operations ..... 3.22 (0.51) 2.15 2.02 3.52 (1.65) 3.94 1.26 0.45 3.53
------ ------ ------ ------ ------ ------ ------ ------ ------ ------
Less distributions:
Dividends from
net investment income ........ (0.22) (0.16) (0.21) (0.32) (0.35) (0.30) (0.60) (0.45) (0.51) (0.66)
Distributions from
net realized capital gains ... (1.65) (0.91) (2.03) (1.84) (1.02) - (1.54) - (5.52) (2.33)
Distributions in excess of
net realized gains
(temporary book-tax difference). - (0.22) - - - - - - - -
------ ------ ------ ------ ------ ------ ------ ------ ------ ------
Total distributions .............. (1.87) (1.29) (2.24) (2.16) (1.37) (0.30) (2.14) (0.45) (6.03) (2.99)
------ ------ ------ ------ ------ ------ ------ ------ ------ ------
Net asset value, end of period ... $15.71 $14.36 $16.16 $16.25 $16.39 $14.24 $16.19 $14.39 $13.58 $19.16
====== ====== ====== ====== ====== ====== ====== ====== ====== ======
Total return ..................... 22.57% (3.11%) 13.22% 12.36% 24.87% (10.27%) 27.56% 9.38% 0.15% 20.52%
Ratio to average net assets:
Expenses ....................... 1.09% 1.15% 1.29% 1.20% 1.13% 1.04% 1.02% 1.10% 0.96% 0.95%
Net investment income .......... 1.38% 1.06% 1.20% 2.57% 2.19% 3.91% 2.82% 3.20% 2.37% 2.52%
Portfolio turnover ...............159.94% 63.04% 93.90% 88.13% 80.33% 67.39% 64.00% 81.10% 95.28% 81.95%
Net assets, end of period
(000's omitted) ...............$138,901 $124,289 $134,508 $126,241 $121,263 $104,664 $128,329 $111,117 $112,780 $124,678
</TABLE>
2
<PAGE>
DESCRIPTION OF THE FUND
The Fund is an open-end diversified management investment company. It is
called a no-load Fund because its shares are sold without a sales charge.
INVESTMENT OBJECTIVE
The Fund's principal investment objective is long term appreciation of
capital. Income is a secondary objective. The Fund normally will invest its
assets in publicly traded common stocks and senior securities convertible into
common stocks of domestic and foreign companies. It intends however, when it
deems it appropriate for defensive purposes, to make investments in varying
amounts of senior securities such as bonds, debentures, and preferred stocks.
The Fund attempts to achieve its objective by investing principally in publicly
traded common stocks, bonds, debentures and preferred stock (which may be
convertible into or which carries the right to be converted into common stock),
and secondarily in securities as described above which offer attractive current
yields and the potential for capital appreciation.
INVESTMENT POLICY AND RESTRICTIONS
The Fund's principal investment objective is long term appreciation of
capital. Income return is a secondary objective. The Fund will not: (i) issue
senior securities; (ii) underwrite securities of other issuers; (iii) purchase
or sell real estate, commodity contracts or commodities (however, the Fund may
purchase interests in real estate investment trusts whose securities are
registered under the Securities Act of 1933 and are readily marketable); (iv)
make loans to other persons except (a) through the purchase of a portion or
portions of publicly distributed bonds, notes, debentures and evidences of
indebtedness authorized by its investment policy, or (b) through investments in
"repurchase agreements" (which are arrangements under which the Fund acquires a
debt security subject to an obligation of the seller to repurchase it at a fixed
price within a short period), provided that no more than 10% of the Fund's
assets may be invested in repurchase agreements which mature in more than seven
days; (v) purchase the securities of another investment company or investment
trust except in the open market where no profit results to a sponsor or dealer,
other than the customary broker's commission; (vi) purchase any security on
margin or effect a short sale of a security; (vii) buy securities from or sell
securities to any of its officers and directors or its investment adviser or
principal distributor as principal; (viii) contract to sell any security or
evidence of interest therein except to the extent that the same shall be owned
by the Fund; (ix) retain securities of an issuer when one or more of the
officers and directors of the Fund or the investment adviser or a person owning
more than 10% of the stock of either, own beneficially more than 0.5% of the
securities of such issuer and the persons owning more than 0.5% of such
securities together own beneficially more than 5% of the securities of such
issuer; (x) invest more than 5% of the value of its total assets in the
securities of any one issuer nor acquire more than 10% of the outstanding voting
securities of any one issuer; (xi) invest in companies for the purpose of
exercising management or control; or (xii) concentrate its investments in a
particular industry; thus the Fund will not purchase a security if the immediate
effect of such purchase would be to increase the Fund's holdings in such
industry above 25% of the Fund's assets. The 5% diversification limitation set
forth in subparagraph (x) above does not apply to obligations issued or
guaranteed as to principal and interest by the United States government, nor
does it apply to bank certificates of deposit, which are not classified by the
Fund as securities for the purposes of this limitation.
The Fund shareholder vote required for modification of its investment
policies or restrictions is the lesser of: (a) 67% or more of the voting
securities present at a meeting if the holders of more than 50% are present or
represented by proxy; or (b) more than 50% of the voting securities.
In addition to the above fundamental investment restrictions, the Fund has
undertaken not to: a) invest an aggregate of more than 5% of its total assets in
the securities of unseasoned issuers and equity securities of issuers which are
not readily marketable; b) purchase any class of securities of an issuer if such
purchase would cause the Fund to own at the time of the purchase more than 10%
of any such class of securities of an issuer; c) invest in puts, calls,
straddles, spreads, and any combination thereof; d) invest in
3
<PAGE>
interests in oil, gas or other mineral exploration or development programs; e)
pledge, mortgage or hypothecate the assets of the greater than 15% of the gross
assets of the Fund taken at cost; or f) invest more than 20% of its assets in
foreign companies.
The Fund has authority to borrow money from a bank not in excess of the
lesser of: (a) 5% of the gross assets of the Fund at the current market value at
the time of such borrowing; or (b) 10% of the gross assets of the Fund taken at
cost. Any such borrowing may be undertaken only as a temporary measure for
extraordinary or emergency purposes. This borrowing power has not been exercised
by the Fund's management.
Although the Fund has the right to pledge, mortgage or hypothecate its
assets, in order to comply with a state statute, the Fund will not, as a matter
of operating policy while offering shares in such state, pledge, mortgage or
hypothecate its portfolio securities to the extent that at any time the
percentage of pledged securities will exceed 10% of the offering price of the
Fund's shares.
The Fund's investment portfolio may include repurchase agreements ("repos")
with banks and dealers in U.S. Government securities. A repurchase agreement
involves the purchase by the Fund of an investment contract from a bank or a
dealer in U.S. Government securities which contract is secured by debt
securities whose value is equal to or greater than the value of the repurchase
agreement including the agreed upon interest. The agreement provides that the
institution will repurchase the underlying securities at an agreed upon time and
price. The total amount received on repurchase would exceed the price paid by
the Fund, reflecting an agreed upon rate of interest for the period from the
date of the repurchase agreement to the settlement date, and would not be
related to the interest rate on the underlying securities. The difference
between the total amount to be received upon the repurchase of the securities
and the price paid by the Fund upon their acquisition is accrued daily as
interest. If the institution defaults on the repurchase agreement, the Fund will
retain possession of the underlying securities. In addition, if bankruptcy
proceedings are commenced with respect to the seller, realization on the
collateral by the Fund may be delayed or limited and the Fund may incur
additional costs. In such case the Fund will be subject to risks associated with
changes in the market value of the collateral securities. The Fund intends to
limit repurchase agreements to transactions with institutions believed by the
adviser to present minimal credit risk.
Risk Considerations
Investments in foreign securities may involve risks and considerations not
present in domestic investments. Since foreign securities generally are
denominated and pay interest or dividends in foreign currencies, the value of
the assets of the Fund as measured in United States dollars will be affected
favorably or unfavorably by changes in the relationship of the United States
dollar and other currency rates. The Fund may incur costs in connection with the
conversion or transfer of foreign currencies. In addition, there may be less
publicly available information about foreign companies than United States
companies. Foreign companies may not be subject to accounting, auditing, and
financial reporting standards, practices and requirements comparable to those
applicable to United States companies. Foreign securities markets, while growing
in volume, have for the most part substantially less volume than United States
securities markets and securities of foreign companies are generally less liquid
and at times their prices may be more volatile than securities of comparable
United States companies. Foreign stock exchanges, brokers and listed companies
are generally subject to less government supervision and regulation than in the
United States. The customary settlement time for foreign securities may be
longer than the 5 day customary settlement time for United States securities.
Although the Fund will try to invest in companies and governments of countries
having stable political environments, there is the possibility of expropriation
or confiscatory taxation, seizure or nationalization or foreign government
restrictions or other adverse political, social or diplomatic developments that
could affect investment in these nations.
Income from foreign securities held by the Fund may, and in some cases will
be reduced by a withholding tax at the source or other foreign taxes. A
shareholder of the Fund will, subject to certain restrictions, be entitled to
claim a creditor deduction for United States Federal income tax purposes for the
shareholder's pro rata share of such foreign taxes paid by the Fund. (See
Dividends, Capital Gains, Distributions and Tax Matters).
4
<PAGE>
PORTFOLIO TURNOVER
In the selection of various securities, long-term potential will take
precedence over short term market fluctuations. While management maintains the
flexibility to sell portfolio securities regardless of how long they have been
held by the Fund, it is anticipated that the Fund's annual portfolio turnover
rate will not exceed 100%. A rate of 100% could occur for example, if all of the
securities held by the Fund were replaced within a period of one year. High
portfolio turnover rates can result in corresponding increases in brokerage
costs. For the fiscal year ending December 31, 1995 the portfolio turnover rate
was 159.94%.
MANAGEMENT OF THE FUND
The business affairs of the Fund are managed under the direction of its
Board of Directors. There are currently nine Directors (of whom six are
non-affiliated persons) who meet five times each year. The Statement of
Additional Information contains additional information regarding the directors
and officers of the Fund.
PORTFOLIO MANAGER
The Fund is managed by an investment management team. Alan H. Wapnick, Vice
President is the lead manager.
Mr. Wapnick is a Senior Vice President of LMC and Director of Domestic
Investment Equity Strategy and is responsible for portfolio management. He has
26 years investment experience. Prior to joining LMC in 1986, Mr. Wapnick was an
equity analyst with Merrill Lynch, J. & W. Seligman, Dean Witter and most
recently Union Carbide Corporation. Mr. Wapnick is a graduate of Dartmouth
College and received a Master's Degree in Business Administration from Columbia
University.
INVESTMENT ADVISER, DISTRIBUTOR AND ADMINISTRATOR
Lexington Management Corporation, ("LMC") P.O. Box 1515/Park 80 West Plaza
Two, Saddle Brook, New Jersey 07663, is the investment adviser of the Fund.
Lexington Funds Distributor, Inc. ("LFD") is the distributor of shares of the
Fund.
LMC, established in 1938, currently manages over $3.0 billion in assets. LMC
serves as investment adviser to other investment companies and private and
institutional investment accounts. Included among these clients are persons and
organizations which own significant amounts of capital stock of LMC's parent.
The clients pay fees which LMC considers comparable to the fees paid by
similarly served clients.
LMC is paid an investment advisory fee at the annual rate of 0.75% of the
average daily net assets of the Fund up to $100 million and 0.60% of such assets
in excess of $100 million up to $150 million. For the fiscal year ended December
31, 1995, the Fund paid advisory fees to LMC of $935,397.
LMC also acts as administrator to the Fund and performs certain
administrative and internal accounting services, including but not limited to,
maintaining general ledger accounts, regulatory compliance, preparation of
financial information for semiannual and annual reports, preparing registration
statements, calculating net asset values, shareholder communications and
supervision of the custodian, transfer agent and provides facilities for such
services. The Fund shall reimburse LMC for its actual cost in providing such
services, facilities and expenses.
LMC and LFD are wholly-owned subsidiaries of Lexington Global Asset
Managers, Inc., a Delaware corporation with offices at Park 80 West Plaza Two,
Saddle Brook, New Jersey 07663. Descendants of Lunsford Richardson, Sr., their
spouses, trusts and other related entities have a majority voting control of
outstanding shares of Lexington Global Asset Managers, Inc. See "Investment
Adviser and Distributor" in the Statement of Additional Information.
HOW TO PURCHASE SHARES
Initial Investment-Minimum $1,000. By Mail: Send a check payable to Lexington
Growth and Income Fund, Inc., along with a completed New Account Application to
State Street Bank and Trust Company (the "Agent"). See the back cover of this
Prospectus for the Agent's address.
5
<PAGE>
Subsequent Investments-Minimum $50. By Mail: Send a check payable to Lexington
Growth and Income Fund, Inc., to the Agent, accompanied by either the detachable
form which is part of the confirmation of a prior transaction or a letter
indicating the dollar amount of the investment and identifying the Fund, account
number and registration.
Broker-Dealers: You may invest in shares of the Fund through broker-dealers who
are members of the National Association of Securities Dealers, Inc., and other
financial institutions and who have selling agreements with LFD. Broker-dealers
and financial institutions who process such purchase and sale transactions for
their customers may charge a transaction fee for these services. The fee may be
avoided by purchasing shares directly from the Fund.
The Open Account: By investing in the Fund, a shareholder appoints the Agent, as
his agent, to establish an open account to which all shares purchased will be
credited, together with any dividends and capital gain distributions which are
paid in additional shares (see "Dividend, Distribution and Reinvestment
Policy"). Stock certificates will be issued for full shares only when requested
in writing. Unless payment for shares is made by certified or cashier's check or
federal funds wire, certificates will not be issued for 30 days. In order to
facilitate redemptions and transfers, most shareholders elect not to receive
certificates.
After an Open Account is established, payments can be provided for by
"Lex-O-Matic" or other authorized automatic bank check program accounts (checks
drawn on the investor's bank periodically for investment in the Fund). A
shareholder may arrange to make additional purchases of shares automatically on
a monthly or quarterly basis with the Automatic Investing Plan, "Lex-O-Matic".
The investments of $50 or more are automatically deducted from a checking
account on or about the 15th day of each month. The institution must be an
Automated Clearing House (ACH) member. Should an order to purchase shares of a
fund be cancelled because your automated transfer does not clear, you will be
responsible for any resulting loss incurred by that fund. The shareholder
reserves the right to discontinue the Lex-O-Matic program provided written
notice is given ten days prior to the scheduled investment date. Further
information regarding this service can be obtained from Lexington by calling
1-800-526-0056.
On payroll deduction accounts administered by a employer and on payments
into qualified pension or profit sharing plans and other continuing purchase
programs, there are no minimum purchase requirements.
DETERMINATION OF NET ASSET VALUE
The net asset value of the shares of the Fund is determined as of the close
of trading on each day the New York Stock Exchange is open, by dividing the
value of the Fund's securities plus any cash and other assets (including accrued
dividends and interest) less all liabilities (including accrued expenses) by the
number of shares outstanding, the result being adjusted to the nearest whole
cent. A security listed or traded on a recognized stock exchange is valued at
the last sale price prior to the time when assets are valued on the principal
exchange on which the security is traded. If no sale is reported at that time,
the mean between the current bid and asked price will be used. However, when LMC
deems it appropriate, prices obtained for the day of valuation from a third
party pricing service will be used. For over-the-counter securities the mean
between the bid and asked prices is used. Short-term securities having maturity
of 60 days or less are valued at amortized cost when it is determined by the
Fund's Board of Directors that amortized cost reflects the fair value of such
securities. Securities for which market quotations are not readily available and
other assets are valued by the Fund management in good faith under the direction
of the Fund's Board of Directors.
Generally, trading in foreign securities markets is substantially completed
each day at various times prior to the close of the New York Stock Exchange. The
values of foreign securities used in computing the net asset value of the shares
of the Fund are determined as of the earlier of such market close or the closing
time of the New York Stock Exchange (the "Exchange"). Foreign currency exchange
rates are also generally determined prior to the close of the Exchange.
Occasionally, events affecting the value of such securities and such exchange
rates may occur between the times at which they are determined and the close of
the Exchange, which will not be reflected in the computation of net asset value,
if, during such periods, events occur which materially affect the value of such
securities, the securities will be valued at their fair market value as
determined by the investment adviser and approved in good faith by the
Directors.
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<PAGE>
In order to determine net asset value per share, the aggregate value of
portfolio securities is added to the value of the Fund's other assets, such as
cash and receivables; the total of the assets thus obtained, less liabilities,
is then divided by the number of shares outstanding.
Terms of Offering: If an order to purchase shares is cancelled because the
investor's check does not clear, the purchaser will be responsible for any loss
incurred by the Fund. To recover any such loss the Fund reserves the right to
redeem shares owned by the purchaser, seek reimbursement directly from the
purchaser and may prohibit or restrict the purchaser in placing future orders in
any of the Lexington Funds.
The Fund reserves the right to reject any order, and to waive or lower the
investment minimums with respect to any person or class of persons, including
shareholders of the Fund's special investment programs. An order to purchase
shares is not binding on the Fund until it has been confirmed by the Agent.
Account Statements: The Agent will send shareholders either purchasing or
redeeming shares of the Fund, a confirmation of the transaction indicating the
date the purchase or redemption was accepted, the number of shares purchased or
redeemed, the purchase or redemption price per share, and the amount purchased
or redemption proceeds. A statement is also sent to shareholders whenever a
distribution is paid, or when a change in the registration, address, or dividend
option occurs. Shareholders are urged to retain their account statements for tax
purposes.
HOW TO REDEEM SHARES
By Mail: Send to the Agent (see the back cover of this Prospectus for the
address): (1) a written request for redemption, signed by each registered owner
exactly as the shares are registered including the name of the Fund, account
number and exact registration; (2) stock certificates for any shares to be
redeemed which are held by the shareholder; (3) signature guarantees, when
required, and (4) the additional documents required for redemptions by
corporations, executors, administrators, trustees, and guardians. Redemptions by
mail will not become effective until all documents in proper form have been
received by the Agent. If a shareholder has any questions regarding the
requirements for redeeming shares, he should call the Fund at the toll free
number on the back cover prior to submitting a redemption request. If a
redemption request is sent to the Fund in New Jersey, it will be forwarded to
the Agent and the effective date of redemption will be the date received by the
Agent.
Checks for redemption proceeds will normally be mailed within three business
days, but will not be mailed until all checks in payment for the shares to be
redeemed have been cleared.
Signature Guarantee: Signature guarantees are required in connection with (a)
redemptions by mail involving $25,000 or more; (b) all redemptions by mail,
regardless of the amount involved, when the proceeds are to be paid to someone
other than the registered owners; (c) changes in instructions as to where the
proceeds of redemptions are to be sent, and (d) share transfer requests.
The Agent requires that the guarantor be either a commercial bank which is a
member of the Federal Deposit Insurance Corporation, a trust company, a savings
and loan association, a savings bank, a credit union, a member firm of a
domestic stock exchange, or a foreign branch of any of the foregoing. A notary
public is not an acceptable guarantor.
With respect to redemption requests submitted by mail, the signature
guarantees must appear either: (a) on the written request for redemption, (b) on
a separate instrument of assignment ("stock power") specifying the total number
of shares to be redeemed, or (c) on all stock certificates tendered for
redemption and, if shares held by the Agent are also being redeemed, on the
letter or stock power.
Redemption Price: The redemption price will be the net asset value per share of
the Fund next determined after receipt by the Agent of a redemption request in
proper form (see "Determination of Net Asset Value" in the Statement of
Additional Information).
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<PAGE>
The right of redemption may be suspended (a) for any period during which the
New York Stock Exchange is closed or the Securities and Exchange Commission
("SEC") determines that trading on the Exchange is restricted, (b) when there is
an emergency as determined by the SEC as a result of which it is not reasonably
practicable for the Fund to dispose of securities owned by it or to determine
fairly the value of its net assets, or (c) for such other periods as the SEC may
by order permit for the protection of shareholders of the Fund. Due to the
proportionately high cost of maintaining smaller accounts, the Fund reserves the
right to redeem all shares in an account with a value of less than $500 (except
retirement plan accounts) and mail the proceeds to the shareholder. Shareholders
will be notified before these redemptions are to be made and will have 30 days
to make an additional investment to bring their accounts up to the required
minimum.
SHAREHOLDER SERVICES
Transfer: Shares of the Fund may be transferred to another owner. A signature
guarantee of the registered owner is required on the letter of instruction or
accompanying stock power.
Systematic Withdrawal Plan: Shareholders may elect to withdraw cash in fixed
amounts from their accounts at regular intervals. The minimum investment to
establish a Systematic Withdrawal Plan is $10,000. If the proceeds are to be
mailed to someone other than the registered owner, a signature guarantee is
required.
Group Sub-Accounting: To minimize recordkeeping by fiduciaries, corporations,
and certain other investors, the minimum initial investment may be waived.
EXCHANGE PRIVILEGE
Shares of the Fund may be exchanged for shares of the following Lexington
Funds on the basis of relative net asset value per share next determined at the
time of the exchange. In the event shares of one or more of these funds being
exchanged by a single investor have a value in excess of $500,000, the shares of
the Fund will not be purchased until the third business day following the
redemption of the shares being exchanged in order to enable the redeeming fund
to utilize normal securities settlement procedures in transferring the proceeds
of the redemption to the Fund. Exchanges may not be made until all checks in
payment for the shares to be exchanged have been cleared.
The Lexington Funds currently available for exchange are:
LEXINGTON WORLDWIDE EMERGING MARKETS FUND, INC. (NASDAQ Symbol: LEXGX)/Seeks
long-term growth of capital primarily through investment in equity
securities of companies domiciled in, or doing business in, emerging
countries and emerging markets.
LEXINGTON GLOBAL FUND, INC. (NASDAQ Symbol: LXGLX)/Seeks long-term growth of
capital primarily through investment in common stocks of companies
domiciled in foreign countries and the United States.
LEXINGTON INTERNATIONAL FUND, INC. (NASDAQ Symbol: LEXIX)/Seeks long-term growth
of capital through investment in common stocks of companies domiciled
in foreign countries. Shares of the Fund are not presently available
for sale in Vermont.
LEXINGTON CROSBY SMALL CAP ASIA GROWTH FUND, INC./Seeks long-term capital
appreciation through investment in companies domiciled in the Asia
Region with a market capitalization of less than $1 billion.
LEXINGTON TROIKA DIALOG RUSSIA FUND, INC./Seeks long-term capital appreciation
through investment primarily in the equity securities of Russian
companies. The Fund is expected to be available in June, 1996 and has
a $5,000 minimum investment.
8
<PAGE>
LEXINGTON RAMIREZ GLOBAL INCOME FUND (NASDAQ Symbol: LEBDX)/Seeks high current
income by investing in a combination of foreign and domestic
high-yield, lower rated debt securities. Capital appreciation is a
secondary objective.
LEXINGTON GOLDFUND, INC. (NASDAQ Symbol: LEXMX)/Seeks capital appreciation and
such hedge against loss of buying power as may be obtained through
investment in gold bullion and equity securities of companies engaged
in mining or processing gold throughout the world. Shares are not
presently available for sale in Wisconsin.
LEXINGTON SMALLCAP VALUE FUND, INC./Seeks long-term capital appreciation through
investment in common stocks of companies domiciled in the United
States with a market capitalization of less than $1 billion.
LEXINGTON CORPORATE LEADERS TRUST FUND (NASDAQ Symbol: LEXCX)/Seeks long-term
capital growth and income through investment in an equal number of
shares of the common stocks of a fixed list of American blue chip
corporations.
LEXINGTON GROWTH AND INCOME FUND, INC. (NASDAQ Symbol: LEXRX)/Seeks long-term
capital appreciation through investments in stocks of large, ably
managed and well financed companies. Income is a secondary objective.
LEXINGTON CONVERTIBLE SECURITIES FUND. (NASDAQ Symbol: CNCVX)/Seeks total return
by providing capital appreciation, current income and conservation of
capital through investments in a diversified portfolio of securities
convertible into shares of common stock. Shares of the Fund are not
presently available for sale in Vermont.
LEXINGTON GNMA INCOME FUND, INC. (NASDAQ Symbol: LEXNX)/Seeks a high level of
current income, consistent with liquidity and safety of principal,
through investment primarily in mortgage-backed GNMA Certificates.
LEXINGTON MONEY MARKET TRUST (NASDAQ Symbol: LMMXX)/Seeks a high level of
current income consistent with preservation of capital and liquidity
through investments in interest bearing short term money market
instruments.
LEXINGTON TAX FREE MONEY FUND, INC. (NASDAQ Symbol: LTFXX)/Seeks current income
exempt from Federal income taxes while maintaining liquidity and
stability of principal through investment in short-term municipal
securities.
Shareholders in any of these funds may exchange all or part of their shares
for shares of one or more of the other funds, subject to the conditions
described herein. The Exchange Privilege enables a shareholder in any of these
funds to acquire shares in a fund with a different investment objective when the
shareholder believes that a shift between funds is an appropriate investment
decision. Shareholders contemplating an exchange should obtain and review the
prospectus of the fund to be acquired.
If an exchange involves investing in a Lexington Fund not already owned and
a new account has to be established, the dollar amount exchanged must meet the
initial investment of the Fund being purchased. If, however, an account already
exists in the Fund being bought, there is a $500 minimum exchange required.
Shareholders must provide the account number of the existing account.
Any exchange between mutual funds is, in effect, a redemption of shares in
one Fund and a purchase in the other Fund. Shareholders should consider the
possible tax effects of an exchange.
TELEPHONE EXCHANGE PROVISIONS-Exchange instructions may be given in writing or
by telephone. Telephone exchanges may only be made if a Telephone Authorization
form has been previously executed and filed with LFD. Telephone exchanges are
permitted only after a minimum of 7 days have elapsed from the date of a
previous exchange. Exchanges may not be made until all checks in payment for the
shares to be exchanged have been cleared.
Telephonic exchanges can only involve shares held on deposit at the Agent;
shares held in certificate form by the shareholder cannot be included. However,
outstanding certificates can be returned to the Agent and qualify for these
services. Any new account established with the same registration will also have
the privilege of exchange by telephone in the Lexington Funds.
9
<PAGE>
All accounts involved in a telephonic exchange must have the same
registration and dividend option as the account from which the shares were
transferred and will also have the privilege of exchange by telephone in the
Lexington Funds in which these services are available.
By checking the box on the New Account Application authorizing telephone
exchange services, a shareholder constitutes and appoints LFD, distributor of
the Lexington Group of Mutual Funds as the true and lawful attorney to surrender
for redemption or exchange any and all non-certificated shares held by the Agent
in account(s) designated, or in any other account with the Lexington Funds,
present or future, which has the identical registration with full power of
substitution in the premises, authorizes and directs LFD to act upon any
instruction from any person by telephone for exchange of shares held in any of
these accounts, to purchase shares of any other Lexington Fund that is
available, provided the registration and mailing address of the shares to be
purchased are identical to the registration of the shares being redeemed, and
agrees that neither LFD, the Agent, nor the Fund(s) will be liable for any loss,
expense or cost arising out of any requests effected in accordance with this
authorization which would include requests effected by imposters or persons
otherwise unauthorized to act on behalf of the account. LFD, the Agent and the
Fund, will employ reasonable procedures to confirm that instructions
communicated by telephone are genuine and if they do not employ reasonable
procedures they may be liable for any losses due to unauthorized or fraudulent
instructions. The following identification procedures may include,
but are not limited to, the following: account number, registration and address,
taxpayer identification number and other information particular to the account.
In addition, all exchange transactions will take place on recorded telephone
lines and each transaction will be confirmed in writing by the Fund. LFD
reserves the right to cease to act as agent subject to the above appointment
upon thirty (30) days' written notice to the address of record. If other than an
individual, it is certified that certain persons have been duly elected and are
now legally holding the titles given and that the said corporation, trust,
unincorporated association, etc. is duly organized and existing and has power to
take action called for by this continuing Authorization.
Exchange Authorization forms, Telephone Authorization forms and prospectuses
of the other funds may be obtained from LFD.
The Distributor has made arrangements with certain dealers to accept
instructions by telephone to exchange shares of the Fund for shares of one of
the other Lexington funds at net asset value as described above. Under this
procedure, the dealer must agree to indemnify the Distributor and the Lexington
funds from any loss or liability that any of them might incur as a result of the
acceptance of such telephone exchange orders. A properly signed Exchange
Authorization must be received by the Distributor within five days of the
exchange request. In each such exchange, the registration of the shares of the
fund being acquired must be identical to the registration of the shares of the
fund exchanged. Shares in certificate form are not eligible for this type of
exchange. LFD reserves the right to reject any telephone exchange request. Any
telephone exchange orders so rejected may be processed by mail.
This exchange offer is available only in states where shares of the fund
being acquired may legally be sold and may be modified or terminated at any time
by the Fund. Broker-dealers who process exchange orders on behalf of their
customers may charge a fee for their services. Such fee may be avoided by making
requests for exchange directly to the Fund or Agent.
TAX-SHELTERED RETIREMENT PLANS
The Fund offers a Prototype Pension and Profit Sharing Plan, including a
Keogh Plan, IRA's, SEP-IRA's and IRA Rollover Accounts, 401(k) Salary Reduction
Plans, Section 457 Deferred Compensation Plans and 403(b)(7) Plans. Plan support
services are available through the Shareholder Services Department of LMC at
1-800-526-0056. (See "Tax-Sheltered Retirement Plans" in the Statement of
Additional Information.)
DIVIDEND, DISTRIBUTION AND REINVESTMENT POLICY
The Fund intends to pay quarterly dividends from investment income after the
close of each quarter, if earned and as declared by its Board of Directors. The
Board of Directors may, at its discretion, elect to retain or declare and pay
distributions from any realized security profits.
10
<PAGE>
Any dividends and distribution payments will be reinvested at net asset
value, without sales charge, in additional full and fractional shares of the
Fund unless and until the shareholder notifies the Agent in writing that he
wants to receive his payments in cash. This request must be received by the
Agent at least seven days before the dividend record date. Upon receipt by the
Agent of such written notice, all further payments will be made in cash until
written notice to the contrary is received. An account of such shares owned by
each shareholder will be maintained by the Agent. Shareholders whose accounts
are maintained by the Agent will have the same rights as other shareholders with
respect to shares so registered (see "How to Purchase Shares-The Open Account").
DISTRIBUTION PLAN
The Board of Directors of the Fund has adopted a Distribution Plan (the
"Plan") in accordance with Rule 12b-1 under the Investment Company Act of 1940,
after having concluded that there is a reasonable likelihood that the Plan will
benefit the Fund and its shareholders. The Plan provides that the Fund may pay
distribution fees, including payments to the Distributor, at an annual rate not
to exceed 0.25% of its average daily net assets for distribution services.
Distribution payments will be made as follows: The Fund either directly or
through the Adviser, may make payments periodically (i) to the Distributor or to
any broker-dealer (a "Broker") who is registered under the Securities Exchange
Act of 1934 and a member in good standing of the National Association of
Securities Dealers, Inc. and who has entered into a Selected Dealer Agreement
with the Distributor, (ii) to other persons or organizations ("Servicing
Agents") who have entered into shareholder processing and service agreements
with the Adviser or with the Distributor, with respect to Fund shares owned by
shareholders for which such Broker is the dealer or holder of record or such
servicing agent has a servicing relationship, or (iii) for expenses associated
with distribution of Fund shares, including the compensation of the sales
personnel of the Distributor; payments of no more than an effective annual rate
of 0.25%, or such lesser amounts as the Distributor determines appropriate.
Payments may also be made for any advertising and promotional expenses relating
to selling efforts, including but not limited to the incremental costs of
printing, prospectuses, statements of additional information, annual reports and
other periodic reports for distribution to persons who are not shareholders of
the Fund; the costs of preparing and distributing any other supplemental sales
literature; costs of radio, television, newspaper and other advertising;
telecommunications expenses, including the cost of telephones, telephone lines
and other communications equipment, incurred by or for the Distributor in
carrying out its obligations under the Distribution Agreement. LMC, at no
additional cost to the Fund, may pay to Shareholder Service Agents, additional
amounts from past profits for administrative services.
TAX MATTERS
The Fund intends to qualify as a regulated investment company by satisfying
the requirements under Subchapter M of the Internal Revenue Code of 1986, as
amended (the "Code"), including requirements with respect to diversification of
assets, distribution of income and sources of income. It is the Fund's policy to
distribute to shareholders all of its investment income (net of expenses) and
any capital gains (net of capital losses) so that, in addition to satisfying the
distribution requirement of Subchapter M, the Fund will not be subject to
federal income tax or the 4% excise tax.
Distributions by the Fund of its net investment income and the excess, if
any, of its net short-term capital gain over its net long-term capital loss are
taxable to shareholders as ordinary income. These distributions are treated as
dividends for federal income tax purposes, but in any year only a portion
thereof (which cannot exceed the aggregate amount of qualifying dividends from
domestic corporations received by the Fund during the year) may qualify for the
70% dividends-received deduction for corporate shareholders. Because the Fund's
investment income may include interest and dividends from foreign corporations
and the Fund may have short-term capital gains, less than 100% of the ordinary
income dividends paid by the Fund may qualify for the dividends-received
deduction. Distributions by the Fund of the excess, if any, of its net long-term
capital gain over its net short-term capital loss are designated as capital gain
dividends and are taxable to shareholders as long-term capital gains, regardless
of the length of time the shareholder held his shares.
11
<PAGE>
Distributions to shareholders will be treated in the same manner for federal
income tax purposes whether received in cash or reinvested in additional shares
of the Fund. In general, distributions by the Fund are taken into account by the
shareholders in the year in which they are made. However, certain distributions
made during January will be treated as having been paid by the Fund and received
by the shareholders on December 31 of the preceding year. A statement setting
forth the federal income tax status of all distributions made or deemed made
during the year will be sent to shareholders promptly after the end of each
year. Shareholders purchasing shares of the Fund just prior to the ex-dividend
date will be taxed on the entire amount of the dividend received, even though
the net asset value per share on the date of such purchase reflected the amount
of such dividend.
Any loss realized upon a taxable disposition of shares within six months
from the date of their purchase will be treated as a long-term capital loss to
the extent of any capital gain dividends received on such shares. All or a
portion of any loss realized upon a taxable disposition of shares of the Fund
may be disallowed if other shares of the Fund are purchased within 30 days
before or after such disposition.
Under the back-up withholding rules of the Code, certain shareholders may be
subject to 31% withholding of federal income tax on distributions and redemption
payments made by the Fund. In order to avoid this back-up withholding, a
shareholder must provide the Fund with a correct taxpayer identification number
(which for most individuals is their Social Security number) or certify that it
is a corporation or otherwise exempt from or not subject to back-up withholding.
The new account application included with this Prospectus provides for
shareholder compliance with these certification requirements.
The foregoing discussion of federal income tax consequences is based on tax
laws and regulations in effect on the date of this Prospectus, and is subject to
change by legislative or administrative action. As the foregoing discussion is
for general information only, a prospective shareholder should also review the
more detailed discussion of federal income tax considerations relevant to the
Fund that is contained in the Statement of Additional Information. In addition,
each prospective shareholder should consult with his own tax adviser as to the
tax consequences of investments in the Fund, including the application of state
and local taxes which may differ from the federal income tax consequences
described above.
PERFORMANCE CALCULATION
The Fund will calculate performance on a total return basis for various
periods. The total return basis combines principal and dividend income changes
for the periods shown. Principal changes are based on the difference between the
beginning and closing net asset values for the period and assume reinvestment of
dividends paid by the Fund. Dividends are comprised of net realized capital
gains and net investment income.
Performance will vary from time to time and past results are not necessarily
representative of future results. It should be remembered that performance is a
function of portfolio management in selecting the type and quality of portfolio
securities and is affected by operating expenses.
Comparative performance information may be used from time to time in
advertising or marketing of the Fund's shares, including data from Lipper
Analytical Services, Inc. or major market indices such as the Dow Jones
Industrial Average Index and Standard & Poor's 500 Composite Stock Price Index.
Such comparative performance information will be stated in the same terms in
which the comparative data and indices are stated.
CUSTODIAN, TRANSFER AGENT AND DIVIDEND DISBURSING AGENT
Chase Manhattan Bank, N.A., 1211 Avenue of the Americas, New York, New York
10036 has been retained to act as the Custodian for the Funds' portfolio
securities including those to be held by foreign banks and foreign securities
depositories which qualify as eligible foreign custodians under the rules
adopted by the SEC and for the Fund's domestic securities and other assets.
12
<PAGE>
State Street Bank and Trust Company, 225 Franklin Street, Boston, Massachusetts
02110, is the transfer agent and dividend disbursing agent for the Fund. Neither
Chase Manhattan Bank, N.A. nor State Street Bank and Trust Company have any part
in determining the investment policies of the Fund or in determining which
portfolio securities are to be purchased or sold by the Fund or in the
declaration of dividends and distributions.
COUNSEL AND INDEPENDENT AUDITORS
Kramer, Levin, Naftalis, Nessen, Kamin & Frankel, 919 Third Avenue, New
York, New York 10022 will pass upon legal matters for the Fund in connection
with the shares offered by this Prospectus.
KPMG Peat Marwick LLP, 345 Park Avenue, New York, New York 10154, has been
selected as independent auditors for the Fund for the fiscal year ending
December 31, 1996.
OTHER INFORMATION
The Fund is an open end, diversified management investment company. The Fund
was originally organized as a New Jersey corporation on February 11, 1959 with
10,000,000 shares of capital stock, $1.00 par value. The Fund reorganized as a
corporation under the laws of the State of Maryland on May 11, 1988. The Fund,
formerly known as Lexington Research Fund, Inc. adopted its present name on
April 22, 1991. The Fund has authorized capital of 500,000,000 shares of common
stock, $0.001 par value. Each share of common stock has one vote and shares
equally in dividends and distributions when and if declared by the Fund and in
the Fund's net assets upon liquidation. All shares, when issued, are fully paid
and non-assessable. There are no preemptive, conversion or exchange rights. Fund
shares do not have cumulative voting rights and, as such, holders of at least
50% of the shares voting for Directors can elect all Directors and the remaining
shareholders would not be able to elect any Directors.
The Fund will not normally hold annual shareholder meetings except as
required by Maryland General Corporation Law or the Investment Company Act of
1940. However, meetings of shareholders may be called at any time by the
Secretary upon the written request of shareholders holding in the aggregate not
less than 25% of the outstanding shares, such request specifying the purposes
for which such meeting is to be called. In addition, the Directors will promptly
call a meeting of shareholders for the purpose of voting upon the question of
removal of any Director when requested to do so in writing by the recordholders
of not less than 10% of the Fund's outstanding shares. The Fund will assist
shareholders in any such communication between shareholders and Directors.
The Code of Ethics adopted by each of the Adviser and the Fund prohibits all
affiliated personnel from engaging in personal investment activities which
compete with or attempt to take advantage of the Fund's planned portfolio
transactions. The objective of each Code of Ethics is that the operations of the
Adviser and Fund be carried out for the exclusive benefit of the Fund's
shareholders. All organizations maintain careful monitoring of compliance with
the Code of Ethics.
A Registration Statement (herein called the "Registration Statement"), of
which this Prospectus is a part, has been filed with the Securities and Exchange
Commission, Washington, D.C. under the Securities Act of 1933, as amended.
No person has been authorized to give any information or to make any
representations other than those contained in this Prospectus and in the Fund's
official sales literature in connection with the offer of the Fund's shares,
and, if given or made, such other information or representations must not be
relied upon as having been authorized by the Fund. This Prospectus does not
constitute an offer in any State in which, or to any person to whom, such
offering may not lawfully be made. A "Statement of Additional Information," to
which reference is made in this Prospectus, provides a further discussion of
certain areas in the Prospectus and other matters which may be of interest to
some investors and is available by request without cost as indicated herein. The
Prospectus and the Statement of Additional Information omit certain information
contained in the Registration Statement, to which reference is made, filed with
the SEC. Items which are thus omitted, including contracts and other documents
referred to or summarized herein and therein, may be obtained from the SEC upon
payment of the prescribed fees.
13
<PAGE>
(Right column)
L E X I N G T O N
LEXINGTON
GROWTH
AND
INCOME
FUND, INC.
(filled box)
(filled box) No sales charge
(filled box) No redemption fee
(filled box) Free telephone
exchange privilege
(filled box)
The Lexington Group
of
No-Load
Investment Companies
P R O S P E C T U S
APRIL 29, 1996
(Left column)
Investment Adviser
- -------------------------------------------------------
LEXINGTON MANAGEMENT CORPORATION
P.O. Box 1515/Park 80 West Plaza Two
Saddle Brook, N.J. 07663
Distributor
- -------------------------------------------------------
LEXINGTON FUNDS DISTRIBUTOR, INC.
P.O. Box 1515/Park 80 West Plaza Two
Saddle Brook, N.J. 07663
All shareholder requests for services of any kind
should be sent to:
Transfer Agent
- -------------------------------------------------------
STATE STREET BANK AND TRUST COMPANY
c/o National Financial Data Services
Lexington Funds
1004 Baltimore
Kansas City, Missouri 64105
or call toll free:
Service: 1-800-526-0056
Institutional/Financial Adviser Services: 1-800-367-9160
24 Hour Account Information: 1-800-526-0052
Table of Contents Page
- -------------------------------------------------------
Fee Table .......................................... 2
Financial Highlights ............................... 2
Description of the Fund ............................ 3
Investment Objective ............................... 3
Investment Policy and Restrictions ................. 3
Portfolio Turnover ................................. 5
Management of the Fund ............................. 5
Portfolio Manager .................................. 5
Investment Adviser, Distributor and Administrator .. 5
How to Purchase Shares ............................. 5
Determination of Net Asset Value ................... 6
How to Redeem Shares ............................... 7
Shareholder Services ............................... 8
Exchange Privilege ................................. 8
Tax-Sheltered Retirement Plans ..................... 10
Dividend, Distribution and Reinvestment Policy ..... 10
Distribution Plan .................................. 11
Tax Matters ........................................ 11
Performance Calculation ............................ 12
Custodian, Transfer Agent and
Dividend Disbursing Agent ........................ 12
Counsel and Independent Auditors ................... 13
Other Information .................................. 13
<PAGE>
LEXINGTON GROWTH AND INCOME FUND, INC.
STATEMENT OF ADDITIONAL INFORMATION
April 29, 1996
This statement of additional information which is not a prospectus, should
be read in conjunction with the current prospectus of Lexington Growth and
Income Fund, Inc. (the "Fund") dated April 29, 1996, as it may be revised from
time to time. To obtain a copy of the Fund's prospectus at no charge, please
write to the Fund at P.O. Box 1515/Park 80 West - Plaza Two, Saddle Brook, New
Jersey 07663 or call the following toll-free numbers:
Shareholder Services: - 1-800-526-0056
Institutional/Financial Adviser Services: - 1-800-367-9160
24-Hour Account Information: - 1-800-526-0052
Lexington Management Corporation ("LMC") serves as the Fund's investment
adviser. Lexington Funds Distributor, Inc. ("LFD") is the Fund's distributor.
TABLE OF CONTENTS
Page
Investment Policy and Restrictions ......................................... 2
Investment Adviser, Distributor and Administrator .......................... 3
Portfolio Turnover and Brokerage Allocations ............................... 4
Tax Sheltered Retirement Plans ............................................. 4
Dividend, Distribution and Reinvestment Policy ............................. 5
Distribution Plan .......................................................... 5
Tax Matters ................................................................ 6
Management of the Fund ..................................................... 11
Financial Statements ....................................................... 14
1
<PAGE>
INVESTMENT POLICY AND RESTRICTIONS
The Fund's principal investment objective is long term appreciation of
capital. Income return is a secondary objective. The Fund shall not: (i) issue
senior securities; (ii) underwrite securities of other issuers; (iii) purchase
or sell real estate, commodity contracts or commodities (however, the Fund may
purchase interests in real estate investment trusts whose securities are
registered under the Securities Act of 1933 and are readily marketable); (iv)
make loans to other persons except (a) through the purchase of a portion or
portions of publicly distributed bonds, notes, debentures and evidences of
indebtedness authorized by its investment policy, or (b) through investments in
"repurchase agreements" (which are arrangements under which the Fund acquires a
debt security subject to an obligation of the seller to repurchase it at a fixed
price within a short period), provided that no more than 10% of the Fund's
assets may be invested in repurchase agreements which mature in more than seven
days; (v) purchase the securities of another investment company or investment
trust except in the open market where no profit results to a sponsor or dealer,
other than the customary broker's commission; (vi) purchase any security on
margin or effect a short sale of a security; (vii) buy securities from or sell
securities to any of its officers and directors of the investment adviser or
principal distributor as principal; (viii) contract to sell any security or
evidence of interest therein except to the extent that the same shall be owned
by the Fund; (ix) retain securities of an issuer when one or more of the
officers and directors of the Fund or the investment adviser or a person owning
more than 10% of the stock of either, own beneficially more than 0.5% of the
securities of such issuer and the persons owning more than 0.5% of such
securities together own beneficially more than 5% of the securities of such
issuer; (x) invest more than 5% of the value of its total assets in the
securities of any one issuer nor acquire more than 10% of the outstanding voting
securities of any one issuer; (xi) invest in companies for the purpose of
exercising management or control; or (xii) concentrate its investments in a
particular industry; thus the Fund will not purchase a security if the immediate
effect of such purchase would be to increase the Fund's holdings in such
industry above 25% of the Fund's assets.
The Fund shareholder vote required for modification of its investment
policies or restrictions is the lesser of: (a) 67% or more of the voting
securities present at a meeting if the holders of more than 50% are present or
represented by proxy; or (b) more than 50% of the voting securities.
In addition to the above fundamental investment restrictions, the Fund has
undertaken not to: a) invest an aggregate of more than 5% of its total assets in
the securities of unseasoned issuers and equity securities of issuers which are
not readily marketable; b) purchase any class of securities of an issuer if such
purchase would cause the Fund to own at the time of the purchase more than 10%
of any such class of securities of an issuer; c) invest in puts, calls,
straddles, spreads, and any combination thereof; d) invest in interests in oil,
gas or other mineral exploration or development programs; or e) pledge, mortgage
or hypothecate the assets of the Fund to an extent greater than 15% of the gross
assets of the Fund taken at cost.
The Fund has authority to borrow money from a bank not in excess of the
lesser of: (a) 5% of the gross assets of the Fund at the current market value at
the time of such borrowing; or (b) 10% of the gross assets of the Fund taken at
cost. Any such borrowing may be undertaken only as a temporary measure for
extraordinary or emergency purposes. This borrowing power has not been exercised
by the Fund's management.
Although the Fund has the right to pledge, mortgage or hypothecate its
assets, in order to comply with a state statute, the Fund will not, as a matter
of operating policy while offering shares in such state, pledge, mortgage or
hypothecate its portfolio securities to the extent that at any time the
percentage of pledged securities will exceed 10% of the offering price of the
Fund's shares.
The Fund's investment portfolio may include repurchase agreements ("repos")
with banks and dealers in U.S. Government securities. A repurchase agreement
involves the purchase by the Fund of an investment contract from a bank or a
dealer in U.S. Government securities which contract is secured by debt
securities whose value is equal to or greater than the value of the repurchase
agreement including the agreed upon interest. The agreement provides that the
institution will repurchase the underlying securities at an agreed upon time and
price. The total amount received on repurchase would exceed the price paid by
the Fund, reflecting an agreed upon rate of interest for the period from the
date of the repurchase agreement to the settlement date, and would not be
related to the interest rate on the underlying securities. The difference
between the total amount to be received upon the repurchase of the securities
and the price paid by the Fund upon their acquisition is accrued daily as
interest. If the institution defaults on the repurchase agreement, the Fund will
retain possession of the underlying securities. In addition, if bankruptcy
proceedings are commenced with respect to the seller, realization on the
collateral by the Fund may be delayed or limited and the Fund may incur
additional costs. In such case the Fund will be subject to risks associated with
changes in the market value of the collateral securities. The Fund intends to
limit repurchase agreements to transactions with institutions believed by LMC to
present minimal credit risk. The 5% diversification limitation set forth in
subparagraph (x) above does not apply to obligations issued or guaranteed as to
principal and interest by the United States Government, nor does it apply to
bank certificates of deposit, which are not classified by the Fund as securities
for the purposes of this limitation.
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INVESTMENT ADVISER, DISTRIBUTOR AND ADMINISTRATOR
LMC, P.O. Box 1515/Park 80 West Plaza Two, Saddle Brook, N.J. 07663, is the
investment adviser to the Fund, and, as such, advises and makes recommendations
to the Fund with respect to its investments and investments policies.
LMC is paid an investment advisory fee at the annual rate of 0.75% of the
net assets of the Fund up to $100 million; 0.60% of such value in excess of $100
million up to $150 million; 0.50% of such value in excess of $150 million up to
$250 million; and 0.40% of such value in excess of $250 million. This fee is
computed on the basis of the Fund's daily net assets and is payable on the last
business day of each month.
Under the terms of the advisory agreement LMC also pays the Fund's expenses
for office rent, utilities, telephone, furniture and supplies utilized for the
Fund's principal office and the salaries and payroll expense of officers and
directors of the Fund who are employees of LMC or its affiliates in carrying out
its duties under the investment advisory agreement. The Fund pays all its other
expenses, including custodian and transfer agent fees, legal and registration
fees, audit fees, printing of prospectuses, shareholder reports and
communications required for regulatory purposes or for distribution to existing
shareholders, computation of net asset value, mailing of shareholder reports and
communications, portfolio brokerage, taxes and independent directors' fees, and
furnishes LFD, at printers overrun cost paid by LFD, such copies of its
prospectus, annual, semi-annual and other reports and shareholder communication
as may be reasonably required for sales purposes.
LMC must also reimburse the Fund to the extent that all of the Fund's other
expenses (including the investment advisory fee) exclusive of interest and taxes
exceeding 2.5% of the first $30 million of the Fund's average daily net assets,
plus 2.0% of the next $70 million, plus 1.5% of the Fund's average daily net
assets of $100 million. In the event that the Fund's expenses exceed such
limitation at any month end, the investment advisory fee paid by the Fund for
such month is reduced accordingly. For the fiscal year ended December 31, 1995
no expense reimbursement was required.
LMC's services are provided and its investment advisory fee is paid pursuant
to an agreement which will automatically terminate if assigned and which may be
terminated by either party upon 60 days' notice. The terms of the agreement and
any renewal thereof must be approved annually by a majority of the Fund's Board
of Directors, including a majority of directors who are not parties to the
Agreement or "interested persons" of such parties, as such term is defined under
the Investment Company Act of 1940, as amended.
LMC serves as investment adviser to other investment companies and private
and institutional investment accounts. Included among these clients are persons
and organizations which own significant amounts of capital stock of LMC's parent
(see below). These clients pay fees which LMC considers comparable to the fee
levels for similarly served clients.
LMC's accounts are managed independently with reference to the applicable
investment objectives and current security holdings, but on occasion more than
one fund or counsel account may seek to engage in transactions in the same
security at the same time. To the extent practicable, such transactions will be
effected on a pro-rata basis in proportion to the respective amounts of
securities to be bought and sold for each portfolio, and the allocated
transactions will be averaged as to price. While this procedure may adversely
affect the price or volume of a given Fund transaction, LMC believes that the
ability of the Fund to participate in combined transactions may generally
produce better executions overall.
Fund Advisory Fee Paid to LMC:
Fiscal Year Investment Advisory
Ended Fees Paid to LMC
----------- -------------------
1993 .................................... $950,002
1994 .................................... 947,752
1995 .................................... 935,397
Of the directors, executive officers or employees ("affiliated persons") of
the Fund, Messrs. Corniotes, DeMichele, Faust, Hisey, Kantor, Lavery, Luehs,
Petruski and Wapnick and Mmes. Carnicelli, Carr, Curcio, Gilfillan and Mosca
(see "Management of the Fund") may also be deemed affiliates of LMC by virtue of
being officers, directors or employees thereof. As of April 1, 1996, all
officers and directors of the Fund as a group owned of record and beneficially
less than 1% of the capital stock of the Fund.
LMC also acts as administrator to the Fund and performs certain
administrative and internal accounting services, including but not limited to,
maintaining general ledger accounts, regulatory compliance, preparation of
financial information for semiannual and annual reports, preparing registration
statements, calculating net asset values, shareholder communications and
supervision of the custodian of, transfer agent and provides facilities for such
services. The Fund shall reimburse LMC for its actual cost in providing such
services, facilities and expenses.
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LMC and LFD are wholly-owned subsidiaries of Lexington Global Asset
Managers, Inc., a Delaware corporation with offices at Park 80 West Plaza Two,
Saddle Brook, New Jersey 07663. Descendants of Lunsford Richardson, Sr., their
spouses, trusts and other related entities have a majority voting control of
outstanding shares of Lexington Global Asset Managers, Inc.
LFD also serves as distributor for Fund shares under a Distribution
Agreement which is subject to annual approval by a majority of the Fund's Board
of Directors, including a majority of directors who are not "interested
persons".
PORTFOLIO TURNOVER AND BROKERAGE ALLOCATIONS
In the selection of various securities, long-term potential will take
precedence over short term market fluctuations. While management maintains the
flexibility to sell portfolio securities regardless of how long they have been
held by the Fund, it is anticipated that the Fund's annual portfolio turnover
rate will not exceed 100%. A rate of 100% could occur for example if all of the
securities held by the Fund were replaced within a period of one year. High
portfolio turnover rates can result in corresponding increases in brokerage
costs.
Portfolio turnover is calculated by dividing the dollar value of the
portfolio purchases or sales during the year, whichever is less, by the
securities or short term notes. The turnover rate for each of the last three
fiscal years was: 1993, 93.90%; 1994, 63.04% and 1995, 159.94%.
The Fund's foremost consideration in selecting a broker is to obtain the
best price and execution of orders. From time to time, the Fund may seek
executions of stock exchange listed stocks on markets other than the stock
exchanges on a net or commission basis. In over-the-counter transactions, orders
are placed with the principal market maker for the security being purchased or
sold, unless a better price could be obtained by placing the order with another
broker.
Persons responsible for brokerage allocation are not obligated to obtain the
least expensive execution. The commission paid to a broker is only part of the
overall cost of an execution and accordingly, the Fund does not intend to apply
a rigid commission formula in determining execution costs. The Fund shall not
pay an exchange member, broker or dealer a commission for effecting a securities
transaction in excess of the amount of commission another member, broker or
dealer would have charged in effecting that transaction unless LMC, in
connection with such transaction, shall make a good faith determination that the
amount of commission charged was reasonable in relation to the value of the
brokerage and research services provided by such member, broker or dealer,
viewed in terms of either that particular transaction or the Fund's overall
transactions.
Brokerage transactions for the Fund have not been allocated to brokers
affiliated with Fund officers or directors or its investment adviser. Brokerage
commissions paid for each of the last three fiscal years were: 1993, $406,084;
1994, $209,559 and 1995, $520,808.
TAX SHELTERED RETIREMENT PLANS
The Fund makes available a variety of Prototype Pension and Profit Sharing
Plans including a 401(k) Salary Reduction Plan and a 403(b)(7) Plan. Plan
services are available by contacting the Shareholder Services Department of the
Distributor at 1-800-526-0056.
INDIVIDUAL RETIREMENT ACCOUNT (IRA): Individuals may make tax deductible
contributions to their own Individual Retirement Accounts established under
Section 408 of the Internal Revenue Code (the "Code"). Married investors filing
a joint return neither of whom is an active participant in an employer sponsored
retirement plan, or who have an adjusted gross income of $40,000 or less
($25,000 or less for single taxpayers) may continue to make a $2,000 ($2,250 for
spousal IRA's) annual deductible IRA contribution. For adjusted gross incomes
over $40,000 ($25,000 for single taxpayers), the IRA deduction limit is
generally phased out ratably over the next $10,000 of adjusted gross income,
subject to a minimum $200 deductible contribution. Investors who are not able to
deduct a full $2,000 ($2,250 spousal) IRA contribution because of the
limitations may make a non-deductible contribution to their IRA to the extent a
deductible contribution is not allowed. Federal income tax on accumulations
earned on non-deductible contributions is deferred until such time as these
amounts are deemed distributed to an investor. Rollovers are also permitted
under the Plan. The Disclosure statement required by the Internal Revenue
Service ("IRS") is provided by the Fund.
The minimum initial investment to establish a tax-sheltered plan through the
Fund is $250 for both Keogh Plans and IRA Plans. Subsequent investments are
subject to a minimum of $50 for each account.
SELF-EMPLOYED RETIREMENT PLAN (HR-10): Self-employed individuals may make
tax deductible contributions to a prototype defined contribution pension plan or
profit sharing plan. There are, however, a number of special rules
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which apply when self-employed individuals participate in such plans. Currently
purchase payments under a self-employed plan are deductible only to the extent
of the lesser of (i) $30,000 or (ii) 25% of the individuals earned annual income
(as defined in the Code) and in applying these limitations not more than
$200,000 of "earned income" may be taken into account.
CORPORATE PENSION AND PROFIT SHARING PLANS: The Fund makes available a
Prototype Defined Contribution Pension Plan and a Prototype Profit Sharing Plan.
All purchases and redemptions of Fund shares pursuant to any one of the
Fund's tax sheltered plans must be carried out in accordance with the provisions
of the Plan. Accordingly, all plan documents should be reviewed carefully before
adopting or enrolling in the plan. Investors should especially note that a
penalty tax of 10% may be imposed by the IRS on early withdrawals under
corporate, Keogh or IRA Plans. It is recommended by the IRS that an investor
consult a tax adviser before investing in the Fund through any of these plans.
An investor participating in any of the Fund's special plans has no obligation
to continue to invest in the Fund and may terminate the Plan with the Fund at
any time. Except for expenses of sales and promotion, executive and
administrative personnel, and certain services which are furnished by LMC, the
cost of the plans generally is borne by the Fund; however, each IRA Plan is
subject to an annual maintenance fee of $10.00 charged by the Agent.
DIVIDEND, DISTRIBUTION AND REINVESTMENT POLICY
The Fund intends to pay quarterly dividends from investment income after the
close of each quarter, if earned and as declared by its Board of Directors. The
Board of Directors may, at its discretion, elect to retain or declare and pay
distributions from any realized security profits.
Any dividends and distribution payments will be reinvested at net asset
value, without sales charge, in additional full and fractional shares of the
Fund unless and until the shareholder notifies State Street Bank and Trust
Company (the "Agent") in writing that he wants to receive his payments in cash.
This request must be received by the Agent at least seven days before the
dividend record date. Upon receipt by the Agent of such written notice, all
further payments will be made in cash until written notice to the contrary is
received. An account of such shares owned by each shareholder will be maintained
by the Agent.
Shareholders whose accounts are maintained by the Agent will have the same
rights as other shareholders with respect to shares so registered (see "How to
Purchase Shares - The Open Account" in the Prospectus).
DISTRIBUTION PLAN
The Fund has adopted a Distribution Plan (the "Plan") in accordance with
Rule 12b-1 under the Investment Company Act of 1940, which provides that the
Fund may pay distribution fees including payments to the Distributor, at an
annual rate not to exceed 0.25% of its average daily net assets for distribution
services.
Distribution payments will be made as follows: The Fund either directly or
through the Adviser, may make payments periodically (i) to the Distributor or to
any broker-dealer (a "Broker") who is registered under the Securities Exchange
Act of 1934 and a member in good standing of the National Association of
Securities Dealers, Inc. and who has entered into a Selected Dealer Agreement
with the Distributor, (ii) to other persons or organizations ("Servicing
Agents") who have entered into shareholder processing and service agreements
with the Adviser or with the Distributor, with respect to Fund shares owned by
shareholders for which such Broker is the dealer or holder of record or such
servicing agent has a servicing relationship, or (iii) for expenses associated
with distribution of Fund shares, including the compensation of the sales
personnel of the Distributor; payments of no more than an effective annual rate
of 0.25%, or such lesser amounts as the Distributor determines appropriate.
Payments may also be made for any advertising and promotional expenses relating
to selling efforts, including but not limited to the incremental costs of
printing prospectuses, statements of additional information, annual reports and
other periodic reports for distribution to persons who are not shareholders of
the Fund; the costs of preparing and distributing any other supplemental sales
literature; costs of radio, television, newspaper and other advertising;
telecommunications expenses, including the cost of telephones, telephone lines
and other communications equipment, incurred by or for the Distributor in
carrying out its obligations under the Distribution Agreement.
Quarterly, in each year that this Plan remains in effect, the Fund's
Treasurer shall prepare and furnish to the Directors of the Fund a written
report, complying with the requirements of Rule 12b-1, setting forth the amounts
expended by the Fund under the Plan and purposes for which such expenditures
were made.
The Plan shall become effective upon approval of the Plan, the form of
Selected Dealer Agreement and the form of Shareholder Service Agreement, by the
majority votes of both (a) the Fund's Directors and the Qualified Directors (as
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defined below), cast in person at a meeting called for the purpose of voting on
the Plan and (b) the outstanding voting securities of the Fund, as defined in
Section 2(a)(42) of the 1940 Act.
The Plan shall remain in effect for one year from its adoption date and may
be continued thereafter if this Plan and all related agreements are approved at
least annually a majority vote of the Directors of the Fund, including a
majority of the Qualified Directors cast in person at a meeting called for the
purpose of voting on such Plan and agreements. This Plan may not be amended in
order to increase materially the amount to be spent for distribution assistance
without shareholder approval. All material amendments to this Plan must be
approved by a vote of the Directors of the Fund, and of the Qualified Directors
(as hereinafter defined), cast in person at a meeting called for the purpose of
voting thereon.
The Plan may be terminated at any time by a majority vote of the Directors
who are not interested persons (as defined in Section 2(a)(19) of the 1940 Act)
of the Fund and have no direct or indirect financial interest in the operation
of the Plan or in any agreements related to the Plan (the "Qualified Directors")
or by vote of a majority of the outstanding voting securities of the Fund, as
defined in Section 2(a)(42) of the 1940 Act.
While this Plan shall be in effect, the selection and nomination of the
"non-interested" Directors of the Fund shall be committed to the discretion of
the Qualified Directors then in office.
TAX MATTERS
The following is only a summary of certain additional tax considerations
generally affecting the Fund and its shareholders that are not described in the
Prospectus. No attempt is made to present a detailed explanation of the tax
treatment of the Fund or its shareholders, and the discussions here and in the
Prospectus are not intended as substitutes for careful tax planning.
Qualification as a Regulated Investment Company
The Fund has elected to be taxed as a regulated investment company under
Subchapter M of the Internal Revenue Code of 1986, as amended (the "Code"). As a
regulated investment company, the Fund is not subject to federal income tax on
the portion of its net investment income (i.e., taxable interest, dividends and
other taxable ordinary income, net of expenses) and capital gain net income
(i.e., the excess of capital gains over capital losses) that it distributes to
shareholders, provided that it distributes at least 90% of its investment
company taxable income (i.e., net investment income and the excess of net
short-term capital gain over net long-term capital loss) for the taxable year
(the "Distribution Requirement"), and satisfies certain other requirements of
the Code that are described below. Distributions by the Fund made during the
taxable year or, under specified circumstances, within twelve months after the
close of the taxable year, will be considered distributions of income and gains
of the taxable year and can therefore satisfy the Distribution Requirement.
In addition to satisfying the Distribution Requirement, a regulated
investment company must: (1) derive at least 90% of its gross income from
dividends, interest, certain payments with respect to securities loans, gains
from the sale or other disposition of stock or securities or foreign currencies
(to the extent such currency gains are directly related to the regulated
investment company's principal business of investing in stock or securities) and
other income (including but not limited to gains from options, futures or
forward contracts) derived with respect to its business of investing in such
stock, securities or currencies (the "Income Requirement"); and (2) derive less
than 30% of its gross income (exclusive of certain gains on designated hedging
transactions that are offset by realized or unrealized losses on offsetting
positions) from the sale or other disposition of stock, securities or foreign
currencies (or options, futures or forward contracts thereon) held for less than
three months (the "Short-Short Gain Test"). However, foreign currency gains,
including those derived from options, futures and forwards, will not in any
event be characterized as Short-Short Gain if they are directly related to the
regulated investment company's investments in stock or securities (or options or
futures thereon). Because of the Short-Short Gain Test, the Fund may have to
limit the sale of appreciated securities that it has held for less than three
months. However, the Short-Short Gain Test will not prevent the Fund from
disposing of investments at a loss, since the recognition of a loss before the
expiration of the three-month holding period is disregarded for this purpose.
Interest (including original issue discount) received by the Fund at maturity or
upon the 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 the Short-Short Gain Test. However, 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.
In general, gain or loss recognized by the Fund on the disposition of an
asset will be a capital gain or loss. However, gain recognized on the
disposition of a debt obligation purchased by the Fund at a market discount
(generally, at a price less than its principal amount) will be treated as
ordinary income to the extent of the portion of the market discount which
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accrued during the period of time the Fund held the debt obligation. In
addition, under the rules of Code Section 988, gain or loss recognized on the
disposition of a debt obligation denominated in a foreign currency or an option
with respect thereto (but only to the extent attributable to changes in foreign
currency exchange rates), and gain or loss recognized on the disposition of a
foreign currency forward contract, futures contract, option or similar financial
instrument, or of foreign currency itself, except for regulated futures
contracts or non-equity options subject to Code Section 1256 (unless the Fund
elects otherwise), will generally be treated as ordinary income or loss.
Treasury Regulations permit a regulated investment company, in determining
its investment company taxable income and net capital gain (i.e., the excess of
net long-term capital gain over net short-term capital loss) for any taxable
year, to elect (unless it has made a taxable year election for excise tax
purposes as discussed below) to treat all or any part of any net capital loss,
any net long-term capital loss or any net foreign currency loss incurred after
October 31 as if it had been incurred in the succeeding year.
In addition to satisfying the requirements described above, the Fund must
satisfy an asset diversification test in order to qualify as a regulated
investment company. Under this test, at the close of each quarter of the Fund's
taxable year, at least 50% of the value of the Fund's assets must consist of
cash and cash items, U.S. Government securities, securities of other regulated
investment companies, and securities of other issuers (as to which the Fund has
not invested more than 5% of the value of the Fund's total assets in securities
of such issuer and as to which the Fund does not hold more than 10% of the
outstanding voting securities of such issuer), and no more than 25% of the value
of its total assets may be invested in the securities of any one issuer (other
than U.S. Government securities and securities of other regulated investment
companies), or in two or more issuers which the Fund controls and which are
engaged in the same or similar trades or businesses.
If for any taxable year the Fund does not qualify as a regulated investment
company, all of its taxable income (including its net capital gain) will be
subject to tax at regular corporate rates without any deduction for
distributions to shareholders, and such distributions will be taxable to the
shareholders as ordinary dividends to the extent of the Fund's current and
accumulated earnings and profits. Such distributions generally will be eligible
for the dividends-received deduction in the case of corporate shareholders.
Excise Tax on Regulated Investment Companies
A 4% non-deductible excise tax is imposed on a regulated investment company
that fails to distribute in each calendar year an amount equal to 98% of
ordinary taxable income for the calendar year and 98% of capital gain net income
for the one-year period ended on October 31 of such calendar year (or, at the
election of a regulated investment company having a taxable year ending November
30 or December 31, for its taxable year (a "taxable year election")). The
balance of such income must be distributed during the next calendar year. For
the foregoing purposes, a regulated investment company is treated as having
distributed any amount on which it is subject to income tax for any taxable year
ending in such calendar year.
For purposes of the excise tax, a regulated investment company shall: (1)
reduce its capital gain net income (but not below its net capital gain) by the
amount of any net ordinary loss for the calendar year; and (2) exclude foreign
currency gains and losses incurred after October 31 of any year (or after the
end of its taxable year if it has made a taxable year election) in determining
the amount of ordinary taxable income for the current calendar year (and,
instead, include such gains and losses in determining ordinary taxable income
for the succeeding calendar year).
The Fund intends to make sufficient distributions or deemed distributions of
its ordinary taxable income and capital gain net income prior to the end of each
calendar year to avoid liability for the excise tax. However, investors should
note that the Fund may in certain circumstances be required to liquidate
portfolio investments to make sufficient distributions to avoid excise tax
liability.
Fund Distributions
The Fund anticipates distributing substantially all of its investment
company taxable income for each taxable year. Such distributions will be taxable
to shareholders as ordinary income and treated as dividends for federal income
tax purposes, but they will qualify for the 70% dividends-received deduction for
corporate shareholders only to the extent discussed below.
The Fund may either retain or distribute to shareholders its net capital
gain for each taxable year. The Fund currently intends to distribute any such
amounts. If net capital gain is distributed and designated as a capital gain
dividend, it will be taxable to shareholders as long-term capital gain,
regardless of the length of time the shareholder has held his shares or whether
such gain was recognized by the Fund prior to the date on which the shareholder
acquired his shares.
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Conversely, if the Fund elects to retain its net capital gain, the Fund will
be taxed thereon (except to the extent of any available capital loss carryovers)
at the 35% corporate tax rate. If the Fund elects to retain its net capital
gain, it is expected that the Fund also will elect to have shareholders of
record on the last day of its taxable year treated as if each received a
distribution of his pro rata share of such gain, with the result that each
shareholder will be required to report his pro rata share of such gain on his
tax return as long-term capital gain, will receive a refundable tax credit for
his pro rata share of tax paid by the Fund on the gain, and will increase the
tax basis for his shares by an amount equal to the deemed distribution less the
tax credit.
Ordinary income dividends paid by the Fund with respect to a taxable year
will qualify for the 70% dividends-received deduction generally available to
corporations (other than corporations, such as S corporations, which are not
eligible for the deduction) to the extent of the amount of qualifying dividends
received by the Fund from domestic corporations for the taxable year. A dividend
received by the Fund will not be treated as a qualifying dividend (1) if it has
been received with respect to any share of stock that the Fund has held for less
than 46 days (91 days in the case of certain preferred stock), excluding for
this purpose under the rules of Code Section 246(c)(3) and (4): (i) any day more
than 45 days (or 90 days in the case of certain preferred stock) after the date
on which the stock becomes ex-dividend and (ii) any period during which the Fund
has an option to sell, is under a contractual obligation to sell, has made and
not closed a short sale of, is the grantor of a deep-in-the-money or otherwise
nonqualified option to buy, or has otherwise diminished its risk of loss by
holding other positions with respect to, such (or substantially identical)
stock; (2) to the extent that the Fund is under an obligation (pursuant to a
short sale or otherwise) to make related payments with respect to positions in
substantially similar or related property; or (3) to the extent the stock on
which the dividend is paid is treated as debt-financed under the rules of Code
Section 246A. Moreover, the dividends-received deduction for a corporate
shareholder may be disallowed or reduced (1) if the corporate shareholder fails
to satisfy the foregoing requirements with respect to its shares of the Fund or
(2) by application of Code Section 246(b) which in general limits the
dividends-received deduction to 70% of the shareholder's taxable income
(determined without regard to the dividends-received deduction and certain other
items).
Alternative minimum tax ("AMT") is imposed in addition to, but only to the
extent it exceeds, the regular tax and is computed at a maximum marginal rate of
28% for noncorporate taxpayers and 20% for corporate taxpayers on the excess of
the taxpayer's alternative minimum taxable income ("AMTI") over an exemption
amount. In addition, under the Superfund Amendments and Reauthorization Act of
1986, a tax is imposed for taxable years beginning after 1986 and before 1996 at
the rate of 0.12% on the excess of a corporate taxpayer's AMTI (determined
without regard to the deduction for this tax and the AMT net operating loss
deduction) over $2 million. For purposes of the corporate AMT and the
environmental superfund tax (which are discussed above), the corporate
dividends-received deduction is not itself an item of tax preference that must
be added back to taxable income or is otherwise disallowed in determining a
corporation's AMTI. However, corporate shareholders will generally be required
to take the full amount of any dividend received from the Fund into account
(without a dividends-received deduction) in determining its adjusted current
earnings, which are used in computing an additional corporate preference item
(i.e., 75% of the excess of a corporate taxpayer's adjusted current earnings
over its AMTI (determined without regard to this item and the AMT net operating
loss deduction)) includable in AMTI.
Investment income that may be received by the Fund from sources within
foreign countries may be subject to foreign taxes withheld at the source. The
United States has entered into tax treaties with many foreign countries which
entitle the Fund to a reduced rate of, or exemption from, taxes on such income.
It is impossible to determine the effective rate of foreign tax in advance since
the amount of the Fund's assets to be invested in various countries is not
known.
Distributions by the Fund that do not constitute ordinary income dividends
or capital gain dividends will be treated as a return of capital to the extent
of (and in reduction of) the shareholder's tax basis in his shares; any excess
will be treated as gain from the sale of his shares, as discussed below.
Distributions by the Fund will be treated in the manner described above
regardless of whether such distributions are paid in cash or reinvested in
additional shares of the Fund (or of another fund). Shareholders receiving a
distribution in the form of additional shares will be treated as receiving a
distribution in an amount equal to the fair market value of the shares received,
determined as of the reinvestment date. In addition, if the net asset value at
the time a shareholder purchases shares of the Fund reflects undistributed net
investment income or recognized capital gain net income, or unrealized
appreciation in the value of the assets of the Fund, distributions of such
amounts will be taxable to the shareholder in the manner described above,
although such distributions economically constitute a return of capital to the
shareholder.
Ordinarily, shareholders are required to take distributions by the Fund into
account in the year in which the distributions are made. However, dividends
declared in October, November or December of any year and payable to
shareholders of record on a specified date in such a month will be deemed to
have been received by the shareholders
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(and made by the Fund) on December 31 of such calendar year if such dividends
are actually paid in January of the following year. Shareholders will be advised
annually as to the U.S. federal income tax consequences of distributions made
(or deemed made) during the year.
The Fund will be required in certain cases to withhold and remit to the U.S.
Treasury 31% of distributions and the proceeds of redemption of shares, paid to
any shareholder (1) who has provided either an incorrect tax identification
number or no number at all, (2) who is subject to backup withholding by the IRS
for failure to report the receipt of interest or dividend income properly, or
(3) who has failed to certify to the Fund that it is not subject to backup
withholding or that it is a corporation or other "exempt recipient."
Sale or Redemption of Shares
A shareholder will recognize gain or loss on the sale or redemption of
shares of the Fund in an amount equal to the difference between the proceeds of
the sale or redemption and the shareholder's adjusted tax basis in the shares.
All or a portion of any loss so recognized may be disallowed if the shareholder
purchases other shares of the Fund within 30 days before or after the sale or
redemption. In general, any gain or loss arising from (or treated as arising
from) the sale or redemption of shares of the Fund will be considered capital
gain or loss and will be long-term capital gain or loss if the shares were held
for longer than one year. However, any capital loss arising from the sale or
redemption of shares held for six months or less will be treated as a long-term
capital loss to the extent of the amount of capital gain dividends received on
such shares. For this purpose, the special holding period rules of Code Section
246(c)(3) and (4) (discussed above in connection with the dividends-received
deduction for corporations) generally will apply in determining the holding
period of shares. Long-term capital gains of noncorporate taxpayers are
currently taxed at a maximum rate 11.6% lower than the maximum rate applicable
to ordinary income. Capital losses in any year are deductible only to the extent
of capital gains plus, in the case of a noncorporate taxpayer, $3,000 of
ordinary income.
Foreign Shareholders
Taxation of a shareholder who, as to the United States, is a nonresident
alien individual, foreign trust or estate, foreign corporation, or foreign
partnership ("foreign shareholder"), depends on whether the income from the Fund
is "effectively connected" with a U.S. trade or business carried on by such
shareholder.
If the income from the Fund is not effectively connected with a U.S. trade
or business carried on by a foreign shareholder, ordinary income dividends paid
to a foreign shareholder will be subject to U.S. withholding tax at the rate of
30% (or lower treaty rate) upon the gross amount of the dividend. Such a foreign
shareholder would generally be exempt from U.S. federal income tax on gains
realized on the sale of shares of the Fund, capital gain dividends and amounts
retained by the Fund that are designated as undistributed capital gains.
If the income from the Fund is effectively connected with a U.S. trade or
business carried on by a foreign shareholder, then ordinary income dividends,
capital gain dividends, and any gains realized upon the sale of shares of the
Fund will be subject to U.S. federal income tax at the rates applicable to U.S.
citizens or domestic corporations.
In the case of foreign noncorporate shareholders, the Fund may be required
to withhold U.S. federal income tax at a rate of 31% on distributions that are
otherwise exempt from withholding tax (or taxable at a reduced treaty rate)
unless the shareholder furnishes the Fund with proper notification of its
foreign status.
The tax consequences to a foreign shareholder entitled to claim the benefits
of an applicable tax treaty may differ from those described herein. Foreign
shareholders are urged to consult their own tax advisers with respect to the
particular tax consequences to them of an investment in the Fund, including the
applicability of foreign taxes.
Effect of Future Legislation; Local Tax Considerations
The foregoing general discussion of U.S. federal income tax consequences is
based on the Code and the Treasury Regulations issued thereunder as in effect on
the date of this Statement of Additional Information. Future legislative or
administrative changes or court decisions may significantly change the
conclusions expressed herein, and any such changes or decisions may have a
retroactive effect with respect to the transactions contemplated herein.
Rules of state and local taxation of ordinary income dividends and capital
gain dividends from regulated investment companies often differ from the rules
for U.S. federal income taxation described above. Shareholders are urged to
consult their tax advisers as to the consequences of these and other state and
local tax rules affecting investment in the Fund.
9
<PAGE>
PERFORMANCE CALCULATION
For purposes of quoting and comparing the performance of the Fund to that of
other mutual fund and to other relevant market indices in advertisements or in
reports to shareholders, performance may be stated in terms of total return.
Under the rules of the Securities and Exchange Commission ("SEC rules"), funds
advertising performance must include total return quotes calculated according to
the following formula:
P(1+T)n = ERV
Where: P = a hypothetical initial payment of $1000
T = average annual total return
n = number of years (1, 5 or 10)
ERV = ending redeemable value of a hypothetical $1,000 payment
made at the beginning of the 1, 5 or 10 year periods
at the end of the 1, 5 and 10 year periods
(or fractional portion thereof).
Under the foregoing formula, the time periods used in advertising will be
based on rolling calendar quarters, updated to the last day of the most recent
quarter prior to submission of the advertising for publication, and will cover
one, five, and ten year periods or a shorter period dating from the
effectiveness of the Fund's Registration Statement. In calculating the ending
redeemable value, all dividends and distributions by the Fund are assumed to
have been reinvested at the net asset value as described in the Prospectus on
the reinvestment dates during the period. The total return, or "T" in the
formula above, is computed by finding the average annual compounded rates of
return over the 1, 5 and 10 year periods (or fractional portion thereof) that
would equate the initial amount invested to the ending redeemable value. Any
recurring account charges that might in the future be imposed by the Fund would
be included at that time. Lexington Growth and Income Fund, Inc.'s total return
for the 1,5 and 10 years ended December 31, 1995 is a follows:
Average Annual
Period Total Return
------ ------------
1 year ended December 31, 1995 ............. 22.57%
5 years ended December 31, 1995 ............ 13.54%
10 years ended December 31, 1995 ........... 11.05%
The Fund may also from time to time include in such advertising a total
return figure that is not calculated according to the formula set forth above in
order to compare more accurately the performance of the Fund with other measures
of investment return. For example, in comparing the Fund's total return with
data published by Lipper Analytical Services, Inc., or with the performance of
the Standard & Poor's 500 Composite Stock Price Index or the Dow Jones
Industrial Average, the Fund calculates its aggregate total return for the
specified periods of time by assuming the reinvestment of each dividend or other
distribution at net asset value on the reinvestment date. Percentage increases
are determined by subtracting the initial value of the investment from the
ending value and by dividing the remainder by the beginning value.
CUSTODIAN, TRANSFER AGENT AND DIVIDEND DISBURSING AGENT
Chase Manhattan Bank, N.A., 1211 Avenue of the Americas, New York, New York
10036 has been retained to act as the Custodian for the Fund's portfolio
securities including those to be held by foreign banks and foreign securities
depositories which qualify as eligible foreign custodians under the rules
adopted by the S.E.C. and for the Fund's domestic securities and other assets.
State Street Bank and Trust Company, 225 Franklin Street, Boston, Massachusetts
02181, has been retained to act as the transfer agent and dividend disbursing
agent. Neither Chase Manhattan Bank, N.A. nor State Street Bank and Trust
Company have any part in determining the investment policies of the Fund or in
determining which portfolio securities are to be purchased or sold by the Fund
or in the declaration of dividends and distributions.
10
<PAGE>
MANAGEMENT OF THE FUND
The Fund's directors and executive officers and their principal occupations
are:
*+ROBERT M. DEMICHELE, President and Chairman. P.O. Box 1515 Saddle Brook, N.J.
07663. Chairman and Chief Executive Officer, Lexington Management
Corporation; Chairman and Chief Executive Officer, Lexington Funds
Distributor, Inc.; President and Director, Lexington Global Asset Managers,
Inc.; Director, Unione Italiana Reinsurance; Vice Chairman of Board of
Trustees, Union College; Director, Continental National Corporation;
Director, The Navigator's Group, Inc.; Chairman, Lexington Capital
Management, Inc.; Chairman, LCM Financial Services, Inc.; Director, Vanguard
Cellular Systems, Inc.; Chairman of the Board, Market Systems Research, Inc.
and Market Systems Research Advisors, Inc. (registered investment advisors).
Trustee, Smith Richardson Foundation.
*BEVERLEY C. DUER, P.E., Director. 340 East 72nd Street, New York, N.Y.
Private Investor. Formerly, Manager of Operations Research Department, CPC
International, Inc.
*+BARBARA R. EVANS, Director. 5 Fernwood Road, Summit, N.J. 07901. Private
Investor. Prior to May 1989, Assistant Vice President and Securities
Analyst, Lexington Management Corporation; prior to March 1987, Vice
President - Institutional Equity Sales, L.F. Rothschild, Unterberg, Towbin.
*+LAWRENCE KANTOR, Director and Vice President. P.O. Box 1515, Saddle Brook,
N.J. 07663. Executive Vice President, Managing Director and Director,
Lexington Management Corporation; Executive Vice President and Director,
Lexington Funds Distributor, Inc.; Executive Vice President and General
Manager-Mutual Funds, Lexington Global Asset Managers, Inc.
+DONALD B. MILLER, Director. 3689 Quail Ridge Drive, Boynton Beach, Florida
33436. Chairman, Horizon Media, Inc.; Trustee, Galaxy Funds; Director,
Maguire Group of Connecticut; prior to January 1989, President, C.E.O. and
Director, Media General Broadcast Services (advertising firm).
+JOHN G. PRESTON, Director, 3 Woodfield Road, Wellesley, Massachusetts.
Associate Professor of Finance, Boston College, Boston, Massachusetts.
+MARGARET W. RUSSELL, Director, 55 North Mountain Avenue, Montclair, N.J.
07042. Private Investor, formerly Community Affairs Director, Union Camp
Corporation.
+PHILIP C. SMITH, Director, 87 Lord's Highway, Weston, Connecticut 06883.
Private Investor; Director, Southwest Investors Income Fund, Inc.,
Government Income Fund, Inc., U.S. Trend Fund, Inc., Investors Cash Reserve
and Plimony Fund, Inc.(registered investment companies).
+FRANCIS A. SUNDERLAND, Director, 309 Quito Place, Castle Rock, Co. 80104.
Private Investor.
*+ALAN H. WAPNICK, Vice President. P.O. Box 1515, Saddle Brook, N.J. 07663.
Senior Vice President, Director of Domestic Equity Investment Strategy,
Lexington Management Corporation.
*+LISA CURCIO,Vice President and Secretary. P.O. Box 1515, Saddle Brook, N.J.
07663. Senior Vice President and Secretary, Lexington Management
Corporation; Vice President and Secretary, Lexington Funds Distributor,
Inc.; Secretary, Lexington Global Asset Managers, Inc.
+RICHARD M. HISEY, Vice President and Treasurer. P.O. Box 1515, Saddle Brook,
N.J. 07663. Chief Financial Officer, Managing Director and Director,
Lexington Management Corporation; Chief Financial Officer, Vice President
and Director, Lexington Funds Distributor, Inc.; Chief Financial Officer,
Market Systems Research Advisors, Inc.; Executive Vice President and Chief
Financial Officer, Lexington Global Asset Managers, Inc.
+RICHARD J. LAVERY, CLU ChFC, Vice President. P.O. Box 1515, Saddle Brook, N.J.
07663. Senior Vice President, Lexington Management Corporation; Vice
President, Lexington Funds Distributor, Inc.
*+JANICE A. CARNICELLI, Vice President. P.O. Box 1515, Saddle Brook, N.J. 07663.
*+CHRISTIE CARR, Assistant Treasurer. P.O. Box 1515, Saddle Brook, N.J. 07663.
Prior to October 1992, Senior Accountant, KPMG Peat Marwick.
+SIOBHAN GILFILLAN, Assistant Treasurer. P.O. Box 1515, Saddle Brook, N.J.
07663.
*+THOMAS LUEHS, Assistant Treasurer. P.O. Box 1515, Saddle Brook, N.J. 07663.
Prior to November, 1993, Supervisor Investment Accounting, Alliance Capital
Management, Inc.
*+SHERI MOSCA, Assistant Treasurer. P.O. Box 1515, Saddle Brook, N.J. 07663.
*+ANDREW PETRUSKI, Assistant Treasurer. P.O. Box 1515, Saddle Brook, N.J. 07662.
Prior to May 1994, Supervising Senior Accountant, NY Life Securities. Prior
to December 1990, Senior Accountant, Dreyfus Corporation.
11
<PAGE>
*+PETER CORNIOTES, Assistant Secretary, P.O. Box 1515, Saddle Brook, N.J. 07663.
Assistant Vice President and Assistant Secretary, Lexington Management
Corporation. Assistant Secretary, Lexington Funds Distributor.
*+ENRIQUE J. FAUST, Assistant Secretary. P.O. Box 1515, Saddle Brook, N.J.
07663. Prior to March 1994, Blue Sky Compliance Coordinator, Lexington Group
of Investment Companies.
*"Interested person" and/or "Affiliated person" of LMC as defined in the
Investment Company Act of 1940, as amended.
+Messrs. Corniotes, DeMichele, Duer, Faust, Hisey, Kantor, Lavery, Luehs,
Miller, Petruski, Preston, Smith, Sunderland and Wapnick and Mmes. Carnicelli,
Carr, Curcio, Evans, Gilfillan, Mosca, and Russell hold similar offices with
some or all of the other registered investment companies advised and/or
distributed by Lexington Management Corporation and Lexington Funds Distributor,
Inc.
The Board of Directors met 5 times during the twelve months ended December
31, 1995, and each of the Directors attended at least 75% of those meetings.
Remuneration of Directors and Certain Executive Officers
Each Director is reimbursed for expenses incurred in attending each meeting
of the Board of Directors or any committee thereof. Each Director who is not an
affiliate of the advisor is compensated for his or her services according to a
fee schedule which recognizes the fact that each Director also serves as a
Director of other investment companies advised by LMC. Each Director receives a
fee, allocated among all investment companies for which the Director serves.
Effective September 12, 1995 each Director receives annual compensation of
$24,000. Prior to September 12, 1995, the Directors who were not employed by the
Fund or its affiliates received annual compensation of $16,000.
Set forth below is information regarding compensation paid or accrued during
the period January 1, 1995 to December 31, 1995 for each Director:
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------
Aggregate Total Compensation From Number of
Name of Director Compensation from Fund and Fund Complex Directorships in Fund
Fund Complex
- --------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Robert M. DeMichele 0 $0 15
- --------------------------------------------------------------------------------------------------------
Beverley C. Duer $1456 22,616 15
- --------------------------------------------------------------------------------------------------------
Barbara R. Evans 0 0 14
- --------------------------------------------------------------------------------------------------------
Lawrence Kantor 0 0 14
- --------------------------------------------------------------------------------------------------------
Donald B. Miller $1456 $20,616 14
- --------------------------------------------------------------------------------------------------------
John G. Preston $1456 $20,616 14
- --------------------------------------------------------------------------------------------------------
Margaret Russell $1456 $19,560 13
- --------------------------------------------------------------------------------------------------------
Philip C. Smith $1456 $20,616 14
- --------------------------------------------------------------------------------------------------------
Francis A. Sunderland $1456 $19,560 13
- --------------------------------------------------------------------------------------------------------
</TABLE>
Retirement Plan for Eligible Directors/Trustees
Effective September 12, 1995, the Directors instituted a Retirement Plan for
Eligible Directors/Trustees (the "Plan") pursuant to which each Director/Trustee
(who is not an employee of any of the Funds, the Advisor, Administrator or
Distributor or any of their affiliates) may be entitled to certain benefits upon
retirement from the Board. Pursuant to the Plan, the normal retirement date is
the date on which the eligible Director/Trustee has attained age 65 and has
completed at least ten years of continuous and non-forfeited service with one or
more of the investment companies advised by LMC (or its affiliates)
(collectively, the "Covered Funds"). Each eligible Director/Trustee is entitled
to receive from the Covered Fund an annual benefit commencing on the first day
of the calendar quarter coincident with or next following his date of retirement
equal to 5% of his compensation multiplied by the number of such
Director/Trustee's years of service (not in excess of 15 years) completed with
respect to any of the Covered Portfolios. Such benefit is payable to each
eligible Director in quarterly installments for ten years following the date of
retirement or the life of the Director/Trustee. The Plan establishes age 72 as a
mandatory retirement age for Directors/Trustees; however, Director/Trustees
serving the Funds as of September 12, 1995 are not subject to such mandatory
retirement. Directors/Trustees serving the Funds as of September 12, 1995 who
elect retirement under the Plan prior to September 12, 1996 will receive an
annual retirement benefit at any increased compensation level if compensation is
increased prior to September 12, 1997 and receive
12
<PAGE>
spousal benefits (i.e., in the event the Director/Trustee dies prior to
receiving full benefits under the Plan, the Director/Trustee's spouse (if any)
will be entitled to receive the retirement benefit within the 10 year period.)
Retiring Directors will be eligible to serve as Honorary Directors for one
year after retirement and will be entitled to be reimbursed for travel expenses
to attend a maximum of two meetings.
Set forth in the table below are the estimated annual benefits payable to an
eligible Director upon retirement assuming various compensation and years of
service classifications. As of December 31, 1995, the estimated credited years
of service for Directors Duer, Miller, Preston, Russell, Smith and Sunderland
are 18, 22, 18, 15, 26 and 36, respectively.
Highest Annual Compensation Paid by All Funds
$20,000 $25,000 $30,000 $35,000
Years of
Service Estimated Annual Benefit Upon Retirement
15 $15,000 $18,750 $22,500 $26,250
14 14,000 17,500 21,000 24,500
13 13,000 16,250 19,500 22,750
12 12,000 15,000 18,000 21,000
11 11,000 13,750 16,500 19,250
10 10,000 12,500 15,000 17,500
13
<PAGE>
Independent Auditors' Report
The Board of Directors and Shareholders
Lexington Growth and Income Fund, Inc.:
We have audited the accompanying statements of net assets (including the
portfolio of investments) and assets and liabilities of Lexington Growth and
Income Fund, Inc. as of December 31, 1995, the related statement of operations
for the year then ended, the statements of changes in net assets for each of the
years in the two-year period then ended, and the financial highlights for each
of the years in the five-year period then ended. These financial statements and
financial highlights are the responsibility of the Fund's management. Our
responsibility is to express an opinion on these financial statements and
financial highlights based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned as of
December 31, 1995 by correspondence with the custodian and brokers. An audit
also includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, the financial statements and financial highlights referred
to above present fairly, in all material respects, the financial position of
Lexington Growth and Income Fund, Inc. as of December 31, 1995, the results of
its operations for the year then ended, the changes in its net assets for each
of the years in the two-year period then ended, and the financial highlights for
each of the years in the five-year period then ended, in conformity with
generally accepted accounting principles.
KPMG Peat Marwick LLP
New York, New York
February 5, 1996
14
<PAGE>
(Left column)
Lexington Growth and Income Fund, Inc.
Statement of Net Assets
(Including the Portfolio of Investments)
December 31, 1995
Number of Value
Shares Security (Note 1)
- -----------------------------------------------------------------------
COMMON STOCKS: 99.8%
BANKING: 6.0%
56,300 Bank of New York Company, Inc............... $ 2,744,625
33,300 J P Morgan & Company........................ 2,672,325
85,500 US Bancorp.................................. 2,869,594
------------
8,286,544
------------
Capital Equipment: 16.3%
37,300 Boeing Company.............................. 2,923,388
58,000 Ceridian Corporation1....................... 2,392,500
83,700 Deere & Company............................. 2,950,425
66,000 Dover Corporation........................... 2,433,750
48,700 Fluor Corporation........................... 3,214,200
38,600 Lockheed Martin Corporation................. 3,049,400
88,200 Loral Corporation........................... 3,120,075
18,600 Xerox Corporation........................... 2,548,200
------------
22,631,938
------------
Chemicals-Specialty: 1.8%
67,000 Union Carbide Corporation................... 2,512,500
------------
Consumer-Non Durable Goods: 9.6%
36,900 CPC International, Inc. .................... 2,532,262
41,000 Hershey Foods Corporation 2,665,000
47,100 PepsiCo, Inc................................ 2,631,712
52,200 Pioneer Hi-Bred International, Inc. ........ 2,903,625
30,600 Procter & Gamble Company.................... 2,539,800
------------
13,272,399
------------
Electrical And Electronics: 1.9%
32,300 Hewlett-Packard Company..................... 2,705,125
------------
Energy Sources: 12.4%
54,000 Burlington Resources, Inc. ................. 2,119,500
102,200 Diamond Offshore Drilling, Inc.1 ........... 3,449,250
62,000 Halliburton Company......................... 3,138,750
25,900 Mobil Corporation........................... 2,900,800
106,300 Valero Energy Corporation................... 2,604,350
67,900 Williams Companies, Inc. ................... 2,979,112
------------
17,191,762
------------
Environmental Technology: 2.0%
67,900 Millipore Corporation....................... 2,792,388
------------
(Right column)
Number of Value
Shares Security (Note 1)
- -----------------------------------------------------------------------
Financial Services: 14.2%
59,000 American Express Company.................... $ 2,441,125
30,000 American International Group................ 2,775,000
27,700 Chubb Corporatio............................ 2,679,975
32,000 Foremost Corporation of America............. 1,632,000
17,200 General Re Corporation...................... 2,666,000
39,700 Household International, Inc................ 2,347,262
37,000 NationsBank Corporation..................... 2,576,125
77,400 Safeco Corporation.......................... 2,675,137
------------
19,792,624
------------
Health & Personal Care: 8.4%
29,500 American Home Products Corporation.......... 2,861,500
56,000 Eli Lilly & Company......................... 3,150,000
33,900 Johnson & Johnson........................... 2,902,688
63,750 St. Jude Medical, Inc.1..................... 2,733,281
------------
11,647,469
------------
Healthcare Miscellaneous: 2.2%
34,400 PacifiCare Health Systems, Inc.1............ 3,001,400
------------
Materials: 5.5%
47,000 Aluminum Company of America................. 2,485,125
36,300 FMC Corporation1 2,454,788
46,800 Hercules, Inc............................... 2,638,350
------------
7,578,263
------------
Medical Products & Supplies: 2.0%
66,000 Abbott Laboratories......................... 2,755,500
------------
Merchandising: 5.7%
149,000 Borders Group, Inc.1........................ 2,756,500
73,000 Circuit City Stores, Inc. .................. 2,016,625
86,000 Winn-Dixie Stores, Inc...................... 3,171,250
------------
7,944,375
------------
Services: 7.9%
92,900 Ecolab, Inc. ............................... 2,787,000
67,900 Meredith Corporation........................ 2,843,313
63,100 Service Corporation International........... 2,776,400
54,000 Viacom, Inc.1 .............................. 2,558,250
------------
10,964,963
------------
15
<PAGE>
(Left column)
Lexington Growth and Income Fund, Inc.
Statement of Net Assets
(Including the Portfolio of Investments)
December 31, 1995 (continued)
Number of Value
Shares Security (Note 1)
- -----------------------------------------------------------------------
Telecommunications: 2.1%
50,500 Ameritech Corporation....................... $ 2,979,500
------------
Transportation: 1.8%
38,500 Union Pacific Corporation................... 2,541,000
------------
TOTAL COMMON STOCKS
(cost $127,470,606)....................... 138,597,750
------------
(Right column)
Number of Value
Shares Security (Note 1)
- -----------------------------------------------------------------------
SHORT-TERM INVESTMENTS: 1.1%
$1,600,000 U.S. Treasury Bill
5.15% due O1/04/96 (cost $1,599,313)...... $ 1,599,313
------------
TOTAL INVESTMENTS: 100.9%
(cost $129,069,919+) (Note 1)............ 140,197,063
Liabilities in excess
of other assets: (0.9%).................. (1,296,523)
------------
TOTAL NET ASSETS: 100.0%
(equivalent to $15.71 per share on
8,844,228 shares outstanding............. $138,900,540
============
- ------------
1Non-income producing securities.
+Aggregate cost for Federal Income tax purposes is identical.
The Notes to Financial Statements are an integral part of this statement.
16
<PAGE>
(Left column)
Lexington Growth and Income Fund, Inc.
Statement of Assets and Liabilities
December 31, 1995
Assets
Investment in securities, at value
(cost $129,069,919) (Note 1).......................... $140,197,063
Cash.................................................... 72,319
Receivable for shares sold.............................. 96,171
Dividends and interest receivable....................... 256,956
------------
Total Assets.......................................... 140,622,509
------------
Liabilities
Due to Lexington Management Corporation
(Note 2).............................................. 77,728
Payable for shares redeemed............................. 35,772
Distributions payable................................... 1,530,125
Accrued expenses........................................ 78,344
------------
Total Liabilities..................................... 1,721,969
------------
Net Assets (equivalent to $15.71 per share on
8,844,228 shares outstanding) (Note 4)................ $138,900,540
============
Net Assets consist of:
Capital stock-authorized 500,000,000
shares, $.001 par value per share..................... $ 8,844
Additional paid-in capital (Note 1)..................... 127,066,558
Undistributed net investment income
(Note 1).............................................. 695,588
Accumulated net realized gains on
investments (Note 1).................................. 2,406
Net unrealized appreciation of investments.............. 11,127,144
------------
$138,900,540
============
(Right column)
Lexington Growth and Income Fund, Inc.
Statement of Operations
Year ended December 31, 1995
Investment Income
Income
Dividends............................... $ 2,699,630
Interest................................ 543,200
-----------
3,242,830
Less: foreign tax expense............... 13,227
-----------
Total investment income........................... $ 3,229,603
Expenses
Investment advisory fee (Note 2......... 935,397
Accounting and shareholder
services expense (Note 2)............. 198,790
Custodian and transfer agent
expenses.............................. 56,625
Printing and mailing.................... 59,388
Directors' fees and expenses............ 10,371
Audit and legal......................... 38,131
Registration fees....................... 21,117
Distribution expenses (Note 3).......... 31,339
Computer processing fees................ 17,483
Other expenses.......................... 56,229
-----------
Total expenses.................................... 1,424,870
------------
Net investment income............................. 1,804,733
Realized and Unrealized Gain on Investments
(Note 5)
Net realized gain on
investments........................................... 15,931,202
Net change in unrealized appreciation on
investments........................................... 9,051,101
------------
Net realized and unrealized gain.................... 24,982,303
------------
Increase in Net Assets Resulting
from Operations....................................... $ 26,787,036
============
The Notes to Financial Statements are an integral part of these statements.
17
<PAGE>
(Left column)
Lexington Growth and Income Fund, Inc.
Statements of Changes in Net Assets
Years ended December 31, 1995 and 1994
1995 1994
------------ ------------
Net investment income........................... $ 1,804,733 $ 1,410,631
Net realized gain from security
transactions.................................. 15,931,202 7,178,841
Increase (decrease) in unrealized
appreciation of investments................... 9,051,101 (12,748,337)
------------ ------------
Net increase (decrease) in net assets
resulting from operations................... 26,787,036 (4,158,865)
Distributions to shareholders from net
investment income ............................ (1,809,688) (1,348,135)
Distributions to shareholders from net
realized gains from security
transactions ................................. (13,290,821) (7,199,281)
Distributions to shareholders in excess of
net realized gains from security
transactions (Note 1)......................... - (1,937,432)
Increase in net assets from capital
share transactions (Note 4)................... 2,925,345 4,424,144
------------ ------------
Net increase (decrease) in net assets......... 14,611,872 (10,219,569)
Net Assets
Beginning of period........................... 124,288,668 134,508,237
------------ ------------
End of period (including undistributed
net investment income of $695,588
and $62,496, respectively) (Note 1)......... $138,900,540 $124,288,668
============ ============
The Notes to Financial Statements are an integral part of these statements.
Lexington Growth and Income Fund, Inc.
Notes to Financial Statements
December 31, 1995 and 1994
1. Significant Accounting Policies
Lexington Growth and Income Fund, Inc. (the "Fund") is an open end diversified
management investment company registered under the Investment Company Act of
1940, as amended. The Fund's principal investment objective is long-term
appreciation of capital. Income is a secondary objective. The following is a
summary of the significant accounting policies followed by the Fund in the
preparation of its financial statements:
Securities Security transactions are accounted for on a trade date basis.
Realized gains and losses from security transactions are reported on the
identified cost basis. Investments are stated at market value based on closing
prices reported by the exchanges on which the securities are traded on the last
business day of the period or, for over-the-
(Right column)
counter securities, at the average between bid and asked prices. Short-term
securities are stated at amortized cost which approximates market value.
Securities for which market quotations are not readily available and other
assets are valued at fair value as determined by management and approved in good
faith by the Board of Directors. Dividend income and distributions to
shareholders are recorded on the ex-dividend date. Interest income is accrued as
earned.
Distributions In accordance with Statement of Position 93-2: Determination,
Disclosure and Financial Statement Presentation of Income, Capital Gain and
Return of Capital Distributions by Investment Companies, as of December 31,
1995, book and tax differences amounting to $62,496 have been reclassified from
undistributed net investment income to additional paid-in capital. In addition,
$700,543 was reclassified from accumulated net realized gains on investments to
undistributed net investment income. As of December 31, 1994, book and tax basis
differences amounting to $29,385 have been reclassified from undistributed net
investment income and distributions in excess of net realized gain to additional
paid-in capital. Distributions in excess of net realized gains reflect temporary
book-tax differences arising from Internal Revenue Code Excise Tax distribution
requirements and associated post-October loss deferral provisions, which
effectively allow the deferral of some net realized capital losses to the next
tax year.
Federal Income Taxes It is the Fund's intention to comply with the
requirements of the Internal Revenue Code applicable to "regulated investment
companies" and to distribute all of its taxable income to its shareholders.
Therefore, no provision for Federal income taxes has been made.
2. Investment Advisory Fee and Other
Transactions with Affiliate
The Fund pays an investment advisory fee to Lexington Management Corporation
("LMC") at an annual rate of 0.75% of the Fund's average daily net assets up to
$100 million and in decreasing stages to 0.4% of average daily net assets in
excess of $250 million. The investment advisory contract provides that the total
annual expenses of the Fund (including management fees, but excluding interest,
taxes, brokerage commissions and extraordinary expenses) will not exceed the
level of expenses which the Fund is permitted to bear under the most restrictive
expense limitation imposed by any state in which shares of the Fund are offered
for sale. No reimbursement was required for the year ended December 31, 1995.
The Fund also reimburses LMC for certain expenses, including accounting and
shareholder servicing costs, which are incurred by the Fund but paid by LMC.
18
<PAGE>
(Left column)
Lexington Growth and Income Fund, Inc.
Notes to Financial Statements
December 31, 1995 and 1994 (continued)
3. Distribution Plan
The Fund has a Distribution Plan (the "Plan") which allows payments to finance
activities associated with the distribution of the Fund's shares. The plan
provides that the Fund may pay distribution fees on a reimbursement basis,
including payments to Lexington Fund Distributors, Inc. ("LFD"), the Fund's
distributor, in amounts not exceeding 0.25% per annum of the Fund's average
daily net assets. Total distribution expenses for the year ended December 31,
1995 were $31,339 which are set forth in the statement of operations.
4. Capital Stock
Transactions in capital stock were as follows:
Year Ended Year Ended
December 31, 1995 December 31, 1994
------------------------ ------------------------
Shares Amount Shares Amount
---------- ----------- ---------- -----------
Shares sold............. 423,165 $ 6,632,289 890,121 $14,369,520
Shares issued to share-
holders on reinvest-
ment of dividends..... 854,913 13,393,562 640,376 9,254,980
---------- ----------- ---------- -----------
1,278,078 20,025,851 1,530,497 23,624,500
Shares redeemed......... (1,087,805) (17,100,506) (1,199,120) (19,200,356)
---------- ----------- ---------- -----------
Net increase............ 190,273 $ 2,925,345 331,377 $ 4,424,144
========== =========== ========== ===========
(Right column)
5. Purchases and Sales of Investment Securities
The cost of purchases and proceeds from sales of securities for the year ended
December 31, 1995, excluding short-term securities, were $196,540,300 and
$196,214,523, respectively.
At December 31, 1995, aggregate gross unrealized appreciation for all securities
in which there is an excess of value over tax cost amounted to $13,689,179 and
aggregate gross unrealized depreciation for all securities in which there is an
excess of tax cost over value amounted to $2,562,035.
6. Investment Risks
The Fund's ability to invest in foreign securities may involve risks not present
in domestic investments. Since foreign securities may be denominated in a
foreign currency and involve settlement and pay interest or dividends in foreign
currencies, changes in the relationship of these foreign currencies to the U.S.
dollar can significantly affect the value of the investments and earnings of the
Fund. Foreign investments may also subject the Fund to foreign government
exchange restrictions, expropriation, taxation or other political, social or
economic developments, all of which could affect the market and/or credit risk
of the investments.
- --------------------------------------------------------------------------------
Financial Highlights
Selected per share data for a share outstanding throughout the period:
<TABLE>
<CAPTION>
Year ended December 31,
--------------------------------------------------
1995 1994 1993 1992 1991
- --------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period.................... $14.36 $16.16 $16.25 $16.39 $14.24
------ ------ ------ ------ ------
Income from investment operations:
Net investment income................................. .22 .17 .21 .23 .35
Net realized and unrealized gain (loss) on investments 3.00 (.68) 1.94 1.79 3.17
------ ------ ------ ------ ------
Total income (loss) from investment operations.......... 3.22 (.51) 2.15 2.02 3.52
------ ------ ------ ------ ------
Less distributions:
Dividends from net investment income.................. (.22) (.16) (.21) (.32) (.35)
Distributions from net realized capital gains......... (1.65) (.91) (2.03) (1.84) (1.02)
Distributions in excess of net realized gains
(temporary book-tax difference)..................... - (.22) - - -
------ ------ ------ ------ ------
Total distributions..................................... (1.87) (1.29) (2.24) (2.16) (1.37)
------ ------ ------ ------ ------
Net asset value, end of period.......................... $15.71 $14.36 $16.16 $16.25 $16.39
====== ====== ====== ====== ======
Total return............................................ 22.57% (3.11%) 13.22% 12.36% 24.87%
Ratios to average net assets:
Expenses.............................................. 1.09% 1.15% 1.29% 1.20% 1.13%
Net investment income................................. 1.38% 1.06% 1.20% 2.57% 2.19%
Portfolio turnover...................................... 159.94% 63.04% 93.90% 88.13% 80.33%
Net assets at end of period (000's omitted)............. $138,901 $124,289 $134,508 $126,241 $121,263
</TABLE>
19
<PAGE>
PART C. OTHER INFORMATION
-----------------
Item 24. Financial Statements and Exhibits - List
----------------------------------------
The Annual Report for the year ending December 31, 1995 was filed
electronically on February 21, 1996 (as form type N-30D). Financial
statements from this 1995 Annual Report have been included in the
Statement of Additional Information.
Page in the Statement
(a) Financial Statements: of Additional Information
-------------------- -------------------------
Report of Independent Auditors 14
dated February 5, 1996
Statement of Net Assets (Including 15
the Portfolio of Investments) at
December 31, 1995 (1)
Statement of Assets and Liabilities 16
at December 31, 1995
Statement of Operations for the year 17
ended December 31, 1995 (2)
Statements of Changes in Net Assets for 18
the years ended December 31, 1995
and December 31, 1994
Notes to financial statements 18
Schedules II-VII and other Financial Statements, for
which provisions are made in the applicable accounting
regulations of the Securities and Exchange Commission,
are omitted because they are not required under the
related instructions, they are inapplicable, or the
required information is presented in the financial
statements or notes thereto.
(1) Includes the information required by Schedule I.
(2) Includes the information required by the Statement of
Realized Gain or Loss on Investments
<PAGE>
ITEM 24. Financial Statements and Exhibits - List
----------------------------------------
(b) Exhibits:
1. Articles of Incorporation - Filed 4/13/88 - Filed electronically
2. By-Laws - Filed 4/13/88 - Incorporated by reference
3. Not Applicable
4. Stock Certificate Specimen - Filed 4/13/88 -
Incorporated by reference
5. Investment Advisory Agreement between Registrant
and Lexington Management Corporation - Filed electronically
6. Distribution Agreement between Registrant
and Lexington Funds Distributor, Inc. -
Filed 4/30/91 - Incorporated by reference
7. Not Applicable
8a. Form of Custodian Agreement between
Registrant and Chase Manhattan Bank, N.A. -
Filed electronically 4/28/95 - Incorporated by
reference
8b. Transfer Agency Agreement between Registrant
and State Street Bank and Trust Company - Filed electronically
9. Form of Administrative Services Agreement
between Registrant and Lexington Management
Corporation - Filed electronically 4/28/95 -
Incorporated by reference
10. Opinion of Counsel as to Legality of Securities
being registered - Filed 5/26/72 -
Incorporated by reference
11. Consents
(a) Consent of Counsel Filed electronically
(b) Consent of Independent Auditors Filed electronically
12. Not Applicable
13. Not Applicable
14. Model Retirement Plan Filed electronically
15. Form of Distribution Plan under Rule 12b-1
and Related Agreements - Filed 3/13/92 -
Incorporated by reference
16. Performance Calculation - Filed 4/25/89 -
Incorporated by reference
17. Financial Data Schedule Filed electronically
<PAGE>
Item 25. Persons Controlled by or under Common Control with Registrant
-------------------------------------------------------------
Furnish a list or diagram of all persons directly or indirectly
controlled by or under common control with the Registrant and as to each
such person indicate (1) if a company, the state or other sovereign
power under the laws of which it is organized, (2) the percentage of
voting securities owned or other basis of control by the person, if any,
immediately controlling it.
None.
Item 26. Number of Holders of Securities
-------------------------------
State in substantially the tabular form indicated, as of a
specified date within 90 days prior to the date of filing, the number of
record holders of each class of securities of the Registrant.
The following information is given as of April 1, 1996:
Title of Class Number of Record Holders
Capital Stock 6,926
($0.001 par value)
Item 27. Indemnification
---------------
State the general effect of any contract, arrangements or statute
under which any director, officer, underwriter or affiliated person of
the Registrant is insured or indemnified in any manner against any
liability which may be incurred in such capacity, other than insurance
provided by any director, officer, affiliated person or underwriter for
their own protection.
Under the terms of the Maryland General Corporation Law and the
Company's By-Laws, the Company may indemnify any person who was or is a
director, officer or employee of the Company to the maximum extent
permitted by the Maryland General Corporation Law; provided, however,
that Company only as authorized in the specific case upon a
determination that indemnification of such persons is proper in the
circumstances. Such determination shall be made (i) by the Board of
Directors, by a majority vote of a quorum which consists of directors
who are neither "interested persons" of Company as defined in Section
2(a)(19) of the 1940 Act, nor parties to the proceeding, or (ii) if the
required quorum is not obtainable or if a quorum of such directors so
directs by independent legal counsel in a written opinion. No
indemnification will be provided by the Company to any director or
officer of the Company for any liability by the Company or Shareholders
to which he would otherwise be subject by reason of willful misfeasance,
bad faith, gross negligence or reckless disregard of duty.
<PAGE>
Item 28. Business and Other Connections of Investment Adviser
----------------------------------------------------
Describe any other business, profession, vocation or employment of
a substantial nature in which the investment adviser of the Registrant,
and each director, officer or partner of any such investment adviser, is
or has been, at any time during the past two fiscal years, engaged for
his own account or in the capacity of director, officer, employee,
partner or trustee.
See Prospectus Part A and Statement of Additional Information Part
B ("Management of the Fund").
Item 29. Principal Underwriters
----------------------
(a) Lexington Money Market Trust
Lexington Tax Free Money Fund, Inc.
Lexington Worldwide Emerging Markets Fund, Inc.
Lexington GNMA Income Fund, Inc.
Lexington Growth and Income Fund, Inc.
Lexington Ramirez Global Income Fund
Lexington Goldfund, Inc.
Lexington Global Fund, Inc.
Lexington Natural Resources Trust
Lexington Strategic Investments Fund, Inc.
Lexington Strategic Silver Fund, Inc.
Lexington Convertible Securities Fund
Lexington International Fund, Inc.
Lexington Emerging Markets Fund, Inc.
Lexington Corporate Leaders Trust Fund
Lexington Crosby Small Cap Asia Growth Fund, Inc.
Lexington SmallCap Value Fund, Inc.
<PAGE>
29 (b)
Position and Offices Position and
Name and Principal with Principal Offices with
Business Address Underwriter Registrant
- ------------------ -------------------- ------------
Peter Corniotes* Assistant Secretary Asst. Secretary
Lisa Curcio* Vice President and Secretary
Secretary
Robert M. DeMichele* Chief Executive Officer Chairman of the
and Chairman Board and President
Richard M. Hisey* Chief Financial Officer, Vice President and
Vice President & Director Treasurer
Lawrence Kantor* Executive Vice President Director & Vice
and Director President
Richard Lavery* Vice President Vice President
Janice Violette* Assistant Treasurer None
(c)
Not Applicable.
*P.O. Box 1515
Saddle Brook, New Jersey 07663
<PAGE>
Item 30. Location of Accounts and Records
--------------------------------
With respect to each account, book or other document
required to be maintained by Section 31(a) of the 1940 Act and the Rules
(17 CFR 270, 31a-1 to 31a-3) promulgated thereunder, furnish the name
and address of each person maintaining physical possession of each such
account, book or other document.
The Registrant, Lexington Growth and Income Fund, Inc., Park
80 West - Plaza Two, Saddle Brook, New Jersey 07663 will maintain
physical possession of each such account, book or other document of the
Company, except for those maintained by the Registrant's Custodian,
Chase Manhattan Bank, N.A., 1211 Avenue of the Americas, New York, New
York 10036, or Transfer Agent, State Street Bank and Trust Company, c/o
National Financial Data Services, 1004 Baltimore, Kansas City, Missouri
64105.
Item 31. Management Services
-------------------
Furnish a summary of the substantive provisions of any
management-related service contract not discussed in Part A or B of this
Form (because the contract was not believed to be material to a
purchaser of securities of the Registrant) under which services are
provided to the Registrant, indicating the parties to the contract, the
total dollars paid and by whom for the last three fiscal years.
None.
Item 32. Undertakings -
--------------
The Registrant, Lexington Growth and Income Fund, Inc.,
undertakes to furnish a copy of the Fund's latest annual
report, upon request and without charge, to every person to
whom a prospectus is delivered.
<PAGE>
Registration No. 2-14767
Securities and Exchange Commission
Washington, D.C. 20549
Exhibits
Filed With
Form N-1A
LEXINGTON GROWTH AND INCOME FUND, INC.
<PAGE>
EXHIBIT INDEX
The following documents are being filed electronically as exhibits to
this filing:
Form of Articles of Incorporation
Form of Investment Advisory Agreement between Registrant and Lexington
Management Corporation
Form of Transfer Agency Agreement between Registrant and State Street Bank
and Trust Company
Consent of Kramer, Levin, Naftalis, Nessen, Kamin & Frankel
Consent of independent auditors for the inclusion of their report herein
Model Retirement Plan
Article 6 Financial Data Schedule
Cover
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940 the Registrant certifies that it meets
all of the requirements for effectiveness of this amendment to the
Registration Statement pursuant to Rule 485(b) under the Securities Act
of 1933 and has duly caused this amendment to be signed on its behalf by
the Undersigned, thereunto duly authorized, in the City of Saddle Brook
and State of New Jersey, on the 29th day of April, 1996.
LEXINGTON GROWTH AND INCOME FUND, INC.
/s/ Robert M. DeMichele
________________________________________
By Robert M. DeMichele
Chairman of the Board
Pursuant to the requirements of the Securities Act of 1933, this
amendment to the Registration Statement has been signed below by the
following persons in the capacities and on the dates indicated.
Signature Title Date
/s/ Robert M. DeMichele
__________________________ Chairman of the Board April 29, 1996
Robert M. DeMichele Principal Executive
Officer
/s/ Richard M. Hisey
__________________________ Principal Financial April 29, 1996
Richard M. Hisey and Accounting Officer
/s/ Lisa Curcio
__________________________ Principal Compliance April 29, 1996
Lisa Curcio Officer
*Beverley C. Duer, P.E. Director April 29, 1996
__________________________
Beverley C. Duer, P.E.
*Barbara M. Evans Director April 29, 1996
__________________________
Barbara M. Evans
<PAGE>
Signature Title Date
*Lawrence Kantor Director April 29, 1996
__________________________
Lawrence Kantor
*Donald B. Miller Director April 29, 1996
__________________________
Donald B. Miller
*John G. Preston Director April 29, 1996
__________________________
John G. Preston
*Margaret W. Russell Director April 29, 1996
__________________________
Margaret W. Russell
*Philip C. Smith Director April 29, 1996
__________________________
Philip C. Smith
*Francis A. Sunderland Director April 29, 1996
__________________________
Francis A. Sunderland
/s/ Lisa Curcio
*By: ______________________
Lisa Curcio
Attorney-in-Fact
LEXINGTON RESEARCH FUND, INC.
ARTICLES OF AMENDMENT
Lexington Research Fund, Inc., a Maryland corporation having
its principal office in Baltimore City, Maryland (hereinafter
called Corporation ), hereby certifies:
FIRST: The charter of the Corporation is amended by
striking out Article Second of the Articles of Incorporation and
inserting in lieu thereof the following:
Second: The name of the Corporation
is LEXINGTON GROWTH AND INCOME FUND,
INC. (hereinafter called the
Corporation).
SECOND: The amendment of the charter of the Corporation as
hereinabove set forth has been duly advised by the Board of
Directors and approved by the stockholders of the Corporation.
IN WITNESS WHEREOF, Lexington Research Fund, Inc. has caused
this instrument to be signed in its name and on its behalf by its
Vice President, Lawrence Kantor, and attested by its Secretary,
Lisa A. Curcio, on the 30th day of April, 1991.
The undersigned acknowledges these Articles of Amendment to
be the corporate act of the Corporation and states that to the
best of his or her knowledge, information and belief the matters
and facts set forth therein with respect to the authorization and
approval thereof are true in all material respects and that this
statement is made under the penalties of perjury.
ATTEST: LEXINGTON RESEARCH FUND, INC.
Lisa Curcio Lawrence Kantor
_________________________ By:__________________________
Secretary Vice President
****************************************************************************
ARTICLES OF INCORPORATION
OF
LEXINGTON RESEARCH FUND, INC.
FIRST: THE UNDERSIGNED, John W. Scheflen, whose address is
1800 Mercantile Bank Building, 2 Hopkins Plaza, Baltimore,
Maryland 21201, being at least eighteen years of age, does, under
and by virtue of the general laws of the State of Maryland
authorizing the formation of corporations, act as incorporator
with the intention of forming a corporation.
SECOND: The name of the corporation is Lexington Research
Fund, Inc. (hereinafter called the Corporation ).
THIRD: The purpose for which the Corporation is formed and
the business or objects to be transacted, carried on and promoted
by it, is to act as an open-end investment company of the
management type registered as such with the Securities and
Exchange Commission pursuant to the Investment Company Act of 1940
and to exercise and generally to enjoy all of the powers, rights
and privileges granted to, or conferred upon, corporations by the
general laws of the State of Maryland now or hereafter in force.
FOURTH: The post office address of the principal office of
the Corporation in the State of Maryland is 100 Light Street, 6th
Floor, Baltimore, Maryland 21202. The name of the resident agent
of the Corporation in Maryland is the Corporation Trust
Incorporated, 32 South Street, Baltimore, Maryland 21202.
FIFTH: The total number of shares of capital stock which
the Corporation shall have authority to issue is 500,000,000
shares of Common Stock of the par value of $.001 each. The
aggregate par value of capital stock of all classes or series is
$500,000.
SIXTH: The preferences, conversion and other rights,
voting powers, restrictions, limitations as to dividends,
qualifications and terms or conditions of redemption of the Common
Stock of the Corporation, shall be as follows:
(a) To the extent that the Corporation has funds or
property legally available therefor, each holder of shares of
stock of the Corporation, upon proper written request (including
signature guarantees, if required by the Board of Directors) to
the Corporation accompanied, when stock certificates representing
such shares are outstanding, by surrender of the appropriate stock
certificate or certificates in proper form for transfer, or any
such form as the Board of Directors may provide, shall be entitled
to require the Corporation to redeem all or any number of the
shares outstanding in the name of such holder on the books of the
Corporation, at the net asset value of such shares computed as
hereinafter provided. Notwithstanding the foregoing, the Board of
Directors of the Corporation may suspend the right of the holders
of the shares of stock of the Corporation to require the
Corporation to redeem such shares when permitted or required to do
so by the Investment Company Act of 1940 or any rule or regulation
of the Securities and Exchange Commission promulgated thereunder.
When the Board of Directors of the Corporation, including a
majority of the Directors who are not interested persons as
defined in Section 2(a)(19) of the Investment Company Act of 1940,
determines in its sole discretion, that the action is necessary
for the business success and general welfare of the Corporation in
order to reduce disproportionate and unduly burdensome expenses in
the operation of the Corporation s affairs, to achieve
efficiencies in the administration of its activities, or to reduce
or eliminate excessive expenditures and undue difficulties in
servicing, accounting and reporting requirements with respect to
the accounts of shareowners, it may by resolution order the
redemption of all shares of the stock of the Corporation at the
net asset value of such shares computed as hereinafter provided in
accounts having a net asset value for a period of three months
less than that specified in such resolution (but not exceeding
$1,000.00 on the date of notice), excepting accounts having a net
asset value less than that specified in such resolution as a
result of a decline in the net asset value per share, following
notice to affected holders by mail, postage prepaid, at their
addresses contained in the books and records of the Corporation or
its transfer agent, and subject to such other reasonable terms and
conditions as the Board of Directors may, in its sole discretion,
determine appropriate and desirable and to any requirements of
applicable statutes or regulations.
(b) No holder of shares of stock of the Corporation shall,
as such holder, have any right to purchase or subscribe for any
shares of stock of the Corporation, other than such rights, if
any, as the Board of Directors of the Corporation, in its
discretion, may from time to time determine.
(c) All persons who shall acquire stock or securities of
the Corporation shall acquire the same subject to the provisions
of these Articles of Incorporation.
SEVENTH: The initial number of directors of the Corporation
shall be fourteen and the names of those who will serve as such
until their successors are duly chosen and qualified are as
follows: Robert M. DeMichele, E. Eloy Doolan, Beverley C. Duer,
Harry B. Freeman, Jr., William E. S. Griswold, Jr., Lawrence
Kantor, Donald B. Miller, Francis Olmsted, John. G. Preston,
Margaret W. Russell, Philip C. Smith, William S. Stack, Leon M.
Stern and Francis A. Sunderland.
The By-Laws of the Corporation may fix the number of
directors at a number greater or less than that named in these
Articles of Incorporation and may authorize the Board of
Directors, by the vote of a majority of the entire Board of
Directors, to increase or decrease the number of directors fixed
by these Articles of Incorporation or by the By-Laws within the
limits specified from time to time in the By-Laws, provided that
in no case shall the number of directors be less than three or the
number of stockholders, whichever is less, and to fill the
vacancies created by any such increase in the number of directors.
Unless otherwise provided by the By-Laws of the Corporation, the
directors of the Corporation need not be stockholders therein.
EIGHTH: In furtherance and not in limitation of the powers
conferred by the laws of the State of Maryland, the following
provisions are hereby adopted for the purpose of defining and
regulating the powers of the Corporation and of the directors and
stockholders:
(a) The Board of Directors of the Corporation is hereby
empowered to authorize the issuance from time to time of shares of
its stock of any class, whether now or hereafter authorized, and
securities convertible into shares of its stock of any class or
classes, whether now or hereafter authorized, in each case upon
such terms and conditions and for such consideration as such Board
of Directors shall from time to time determine.
(b) The Board of Directors shall have the power to
classify or reclassify any unissued stock, whether now or
hereafter authorized, by setting or changing the preferences,
conversion or other rights, voting powers, restrictions,
limitations as to dividend, qualifications, or terms or conditions
of redemption of such stock. Subject to the power of the Board of
Directors to reclassify unissued shares, the shares of each class
or series of stock of the Corporation shall have the following
preferences, conversion and other rights, voting powers,
restrictions, limitations as to dividends, qualifications, and
terms and conditions or redemption:
(i) All consideration received by the Corporation
for the issue or sale of shares of a class or series
together with all income, earnings, profits and proceeds
thereof, shall irrevocably belong to such class or series
for all purposes, subject only to the rights of creditors,
and are herein referred to as assets belonging to such
class.
(ii) The assets belonging to such class or series
shall be charged with the liabilities of the Corporation in
respect of such class or series and with such class or
series share of the general liabilities of the Corporation,
in the latter case in proportion that the net asset value of
such class or series bears to the net asset value of all
class or series. The determination of the Board of
Directors shall be conclusive as to the allocation of
liabilities, including accrued expenses and reserves, to a
class or series.
(iii) Dividends or distributions on shares of any
class or series, whether payable in stock or cash, shall be
paid only out of earnings, surplus or other assets belonging
to such class or series.
(iv) In the event of the liquidation or dissolution
of the Corporation, stockholders of each class or series
shall be entitled to receive, as a class or series, out of
the assets of the Corporation available for distribution to
stockholders, the assets belonging to such class or series
and the assets so distributable to the stockholders of such
class or series shall be distributed among such stockholders
in proportion to the number of shares of such class or
series held by them.
(v) On each matter submitted to a vote of the
stockholders, each holder of a share of stock shall be
entitled to one vote for each such share of stock standing
in his name on the books of the Corporation irrespective of
the class or series thereof; provided, however, that to the
extent class voting is required by the Investment Company
Act of 1940 or Maryland law as to any such matter, those
requirements shall apply.
Except as provided above, all provisions of the Articles of
Incorporation relating to stock of the Corporation shall apply to
shares of and to the holders of shares of all classes or series of
stock.
(c) The Board of Directors of this Corporation is hereby
empowered to authorize the issuance from time to time of
fractional shares of stock of this Corporation, whether now or
hereafter authorized, and any fractional shares so issued shall
entitle the holders thereof to exercise voting rights, receive
dividends and participate in the distribution of assets of the
Corporation in the event of liquidation or dissolution to the
extent of their proportionate interest represented by such
fractional shares, but excluding the right to a certificate
evidencing such shares.
(d) The Corporation reserves the right to make from time
to time any amendment of its Articles of Incorporation, now or
hereafter authorized by law, including, but without limitation,
any amendment which alters the contract rights as expressly set
forth in such Articles of Incorporation of any outstanding stock.
(e) Except to the extent otherwise prohibited by
applicable law, the Corporation may enter into any management of
investment advisory contract or underwriting contract or any other
type of contract with, and may otherwise engage in any transaction
or do business with, any person, firm or corporation or any
subsidiary or other affiliate of any such person, firm or
corporation and may authorize such person, firm or corporation or
such subsidiary or other affiliate to enter into any other
contracts or arrangements with any other person, firm or
corporation which relate to the Corporation or the conduct of its
business, notwithstanding that any directors or officers of the
Corporation are or may subsequently become partners, directors,
officers, stockholders or employees of such person, firm or
corporation or of such subsidiary or other affiliate or may have a
material financial interest in any such contract or transaction or
business and no such contract shall be invalidated or voidable or
in any way affected thereby nor shall any of such directors or
officers of the Corporation be liable to the Corporation or to any
stockholder or creditor thereof or to any other person for any
loss incurred solely because of the entering into and performance
of such contract or the engaging in such transaction or business
or the existence of such material financial interest therein,
provided that such relationship to such person, firm or
corporation or said subsidiary or affiliate or such material
financial interest was disclosed or otherwise known to the Board
of Directors prior to the Corporation s entering into such
contract or engaging in such transaction or business and in the
case of directors of the Corporation that any requirements of the
Maryland General Corporation Law have been satisfied; and provided
further that nothing herein shall protect any director or officer
of the Corporation from liability to the Corporation or its
security holders to which he would be otherwise subject by reason
of willful misfeasance, bad faith, gross negligence or reckless
disregard of the duties involved in the conduct of his office.
(f) The net asset value of a share of any class or series
of stock of the Corporation will be determined by or pursuant to
the direction of the Board of Directors, which is authorized to
determine, the methods to be used to value the assets of a class
or series, the amount and allocation of liabilities of the
Corporation to each class or series and all other matters in
connection therewith.
(g) The stockholders of the Corporation may remove any
director of the Corporation prior to the expiration of his term of
office for cause, and not otherwise, by the affirmative vote of a
majority of all votes entitled to be cast for the election of
directors.
(h) Except to the extent otherwise specifically provided
in the Articles of Incorporation or By-Laws of the Corporation,
the Corporation may authorize or take any corporate action
(including, but without limitation, any amendment to its Articles
of Incorporation) upon the affirmative vote of the holders of a
majority of the outstanding shares of stock entitled to vote
thereon, notwithstanding any provision of the Maryland General
Corporation Law which would otherwise require more than a majority
vote of the outstanding shares of stock to authorize or take such
action.
NINTH: (a) To the fullest extent that limitations on the
liability of directors and officers are permitted by the Maryland
General Corporation Law, no director or officer of the Corporation
shall have any liability to the Corporation or its stockholders
for damages. This limitation on liability applies to events
occurring at the time a person serves as a director or officer of
the Corporation whether or not such person is a director or
officer at the time of any proceeding in which liability is
asserted.
(b) The Corporation shall indemnify and advance expenses
to its currently acting and its former directors to the fullest
extent that indemnification of directors is permitted by the
Maryland General Corporation Law. The Corporation shall indemnify
and advance expenses to its officers to the same extent as its
directors and to such further extent as is consistent with law.
The Board of Directors may by By-Law, resolution or agreement make
further provisions for indemnification of directors, officers,
employees and agents to the fullest extent permitted by the
Maryland General Corporation Law.
(c) No provision of this Article shall be effective to
protect or purport to protect any director or officer of the
Corporation against any liability to the Corporation or its
security holders to which he would otherwise be subject by reason
of willful misfeasance, bad faith, gross negligence or reckless
disregard of the duties involved in the conduct of his office.
(d) References to the Maryland General Corporation Law in
this Article are to the law as from time to time amended. No
further amendment to the Articles of Incorporation of the
Corporation shall affect any right of any person under this
Article based on any event, omission or proceeding prior to such
amendment.
TENTH: No annual meetings of stockholders of the
Corporation shall be held except as required by the Maryland
General Corporation Law or as the Board of Directors of the
Corporation may determine.
IN WITNESS WHEREOF, the undersigned incorporator of
Lexington Research Fund, Inc. who executed the foregoing Articles
of Incorporation hereby acknowledges the same to be his act and
further acknowledges that, to the best of his knowledge,
information and belief, the matters and facts set forth therein
are true in all material respects.
Dated the 11th day of May, 1988.
John W. Scheflen
________________________
John W. Scheflen
Sole Incorporator
Leah R. Schuman
_____________________
Witness
INVESTMENT ADVISORY AGREEMENT
THIS AGREEMENT is made this 15th day of April, 1992 by and between
LEXINGTON GROWTH AND INCOME FUND, INC., a Maryland corporation (the
"Fund"), and LEXINGTON MANAGEMENT CORPORATION, a Delaware corporation (the
"Manager"), with respect to the following recital of fact:
RECITALS
WHEREAS, the Fund is registered as an open-end diversified management
investment company under the Investment Company Act of 1940, as amended
(the "1940 Act"), and the rules and regulations promulgated thereunder; and
WHEREAS, the Manager is registered as an investment advisor under the
Investment Advisers Act of 1940, as amended, and engages in the business
of acting as an investment advisor; and
WHEREAS, the Fund and the Manager desire to enter an agreement to
provide for management services for the Fund on the terms and conditions
hereinafter set forth.
NOW THEREFORE, in consideration of the mutual covenants herein
contained and other good and valuable consideration, the receipt of which
is hereby acknowledged, the parties hereto agree as follows:
1. Management. The Manager shall act as investment advisor for
the Fund and shall, in such capacity, supervise the investment and
reinvestment of the cash, securities or other properties comprising the
Fund's assets subject at all times to the policies and control of the
Fund's Board of Directors. The Manager shall give the Fund the benefit of
its best judgment, efforts and facilities in rendering its services as
investment advisor.
2. Investment Analysis and Implementation. In carrying out its
obligation under paragraph 1 hereof, the Manager shall:
(a) determine which issuers and securities shall be
represented in the Fund and regularly report thereof to the Fund's Board
of Directors;
(b) formulate and implement continuing programs for the
purchases and sales of the securities of such issuers and regularly report
thereon to the Fund's Board of Directors;
(c) continuously review the portfolio security holdings, the
investment programs and the investment policies of the Fund; and
(d) take, on behalf of the Fund, all actions which appear to
the Fund necessary to carry into effect such purchase and sale programs and
supervisory functions aforesaid, including the placing of orders for the
purchase and sale of portfolio securities.
3. Broker-Dealer Relationships. The Manager's primary policy is
to execute all purchases and sales of portfolio instruments at the most
favorable prices consistent with best execution, considering all of the
costs of the transaction including brokerage commissions. This policy
governs the selection of brokers and dealers and the market in which a
transaction is executed. Consistent with this policy, the Rules of Fair
Practice of the National Association of Securities Dealers, Inc., and such
other policies as the Directors may determine, the Manager may consider
sales of shares of the Fund and of the other funds advised by the Manager
as a factor in the selection of broker-dealers to execute the Fund's
portfolio transactions. However, in selecting a broker-dealer to execute
each transaction, the Manager may consider research provided and payment
may be made of the commission higher than that charged by another broker-
dealer which does not furnish research services or which furnishes research
services deemed to be of lesser value, in accordance with Section 28(e) of
the Securities Exchange Act of 1934. Section 28(e) of the Securities
Exchange Act of 1934 specifies that a person with investment discretion
shall not be "deemed to have acted unlawfully or to have breached a
fiduciary duty" solely because such person has caused the account to pay
a higher commission than the lowest available under certain circumstances,
provided that the person so exercising investment discretion makes a good
faith determination that the commissions paid are "reasonable in relation
to the value of the brokerage and research services provided...viewed in
terms of either that particular transaction or his overall responsibilities
with respect to the accounts as to which he exercises investment
discretion."
The Manager cannot determine the extent to which commissions that
reflect an element of value for research services alone. Research services
furnished may be useful and of value to the Manager and its affiliates, in
serving other clients as well as the Fund. Similarly, any research
services obtained by the Manager or its affiliates from the placement of
portfolio brokerage of other clients might be useful and of value to the
Manager in carrying out its obligations to the Fund.
Brokerage transactions involving securities of companies domiciled
in countries other than the United States will be normally conducted on the
principal stock exchanges of those countries.
4. Control by Board of Directors. Any investment program
undertaken by the Manager pursuant to this Agreement, as well as any other
activities undertaken by the Manager on behalf of the Fund pursuant
thereto, shall at all times be subject to any directives of the Board of
Directors of the Fund.
5. Compliance with Applicable Requirements. In carrying out its
obligations under this Agreement, the Manager shall at all times conform
to:
(a) all applicable provisions of the 1940 Act and any rules
and regulations adopted thereunder as amended; and
(b) the provisions of the Registration Statement of the Fund
under the Securities Act of 1933, as amended, and the 1940 Act; and
(c) the provisions of the Articles of Incorporation of the
Fund; and
(d) the provisions of the By-Laws of the Fund; and
(e) any other applicable provisions of state and federal law.
6. Expenses. The expenses connected with the Fund shall be
allocable between the Fund and the Manager as follows:
(a) The Manager shall maintain, at its expense and without
cost to the Fund, a trading function in order to carry out its obligations
under subparagraph (d) of paragraph 2 hereof to place orders for the
purchase and sale of portfolio securities for the Fund.
(b) The Manager shall pay the Fund's expenses for office rent,
utilities, telephone, furniture and supplies utilized at the fund's
principal office.
(c) The Manager shall pay the salaries and payroll expenses
of persons serving as officers or Directors of the Fund who are also
employees of the Manager or any of its affiliates.
(d) Nothing in subparagraph (a) through (e) hereof shall be
construed to require the Manager to bear other expenses.
(e) Any of the other expenses incurred in the operation of the
Fund shall be borne by the Fund, including, among other things, fees of its
custodian, transfer and shareholder servicing agent; cost of pricing and
calculating its daily net asset value and of maintaining its books and
accounts required by the 1940 Act; expenditures in connection with meetings
of the Fund's Directors and shareholders, except those called to
accommodate the Manager; fees and expenses of Directors who are not
affiliated with or interested persons of the Manager; in maintaining
registration of its shares under state securities laws or in providing
shareholder and dealer services; insurance premiums on property or
personnel of the Fund which inure to its benefit; costs of preparing and
printing reports, proxy statements and prospectuses of the Fund for
distribution to its shareholders; legal, auditing and accounting fees; fees
and expenses of registering and maintaining registration of its shares for
sale under Federal and applicable state securities laws; and all other
expenses in connection with issuance, registration and transfer of its
shares.
7. Delegation of Responsibilities. Upon the request of the Fund's
Board of Directors, the Manager may perform services on behalf of the Fund
which are not required by this Agreement. Such services will be performed
on behalf of the Fund and the Manager's cost in rendering such services may
be billed monthly to the Fund, subject to examination by the Fund's
independent accountants. Payment or assumption by the Manager of any Fund
expense that the Manager is not required to pay or assume under this
Agreement shall not relieve the Manager of any of its obligations to the
Fund nor obligate the Manager to pay or assume any similar Fund expense on
any subsequent occasions.
8. Compensation. The Fund shall pay the Manager in full
compensation for services rendered hereunder an annual investment advisory
fee payable monthly equal to 0.75% of the Fund's average daily net assets
up to $100 million; 0.60% of such assets in excess of $100 million up to
$150 million; 0.50% of such assets in excess of $150 million up to $250
million and 0.40% of such assets in excess of $250 million, after deduction
of the Funds' expenses, if any, in excess of the expense limitations set
forth below. The average daily net asset value of the Fund shall be
determined in the manner set forth in the Articles of Incorporation and
Prospectus of the Fund.
9. Expense Limitation. If, for any fiscal year, the total of all
ordinary business expense of the Fund, including all investment advisory
fees but excluding brokerage commissions and fees, taxes, interest and
extraordinary expenses such as litigation, would exceed the most
restrictive expense limits imposed by any statute or regulatory authority
of any jurisdiction in which shares of the Fund are offered for sale, the
investment advisory fee shall be reduced by the amount of such excess. The
amount of any such reduction to be borne by the Manager shall be deducted
from the monthly investment advisory fee otherwise payable to the Manager
during such fiscal year; and if such amount should exceed such monthly fee,
the Manager agrees to pay to the Fund such expenses no later than the last
day of the first month of the next succeeding fiscal year. For purposes
of this paragraph, the term "fiscal year" shall exclude the portion of the
current fiscal year which shall have elapsed prior to the date hereof and
shall include the portion of the then current fiscal year which shall have
elapsed at the date of termination of this Agreement.
10. Non-Exclusivity. The services of the Manager to the Fund are
not to be deemed to be
exclusive, and the Manager shall be free to render investment advisory and
corporate administrative or other services to others (including other
investment companies) and to engage in other activities. It is understood
and agreed that officers and Directors of the Manager may serve as officers
or Directors of the Fund, and that officers or Directors of the Fund may
serve as officers or Directors of the Manager to the extent permitted by
law; and that the officers and directors of the Manager are not prohibited
from engaging in any other business activity or from rendering services to
any other person, or from serving as partners, officers, trustees or
directors of any other firm or corporation, including other investment
companies.
11. Term and Approval. This Agreement shall become effective at
the close of business on the date hereof and shall thereunder continue in
force and effect from year to year, provided that such continuance is
specifically approved at least annually:
(a) (i) by the Fund's Board of Directors; or (ii) by the vote
of a majority of the Fund's outstanding voting securities (as defined in
Section 2(a)(42) of the 1940 Act, and
(b) by the affirmative vote of a majority of the Directors who
are not parties to this Agreement or interested persons of a party to this
Agreement (other than as a Director of the Fund), by votes cast in person
at a meeting specifically called for such purpose.
12. Termination. This Agreement may be terminated at any time,
without the payment of any penalty, by vote of the Fund's Board of
Directors or by vote of a majority of the Fund's outstanding voting
securities or by the Manager, on sixty (60) days' written notice to the
other party. This Agreement shall automatically terminate in the event of
its assignment, the term "assignment" for the purposes having the meaning
defined in Section 2(a)(4) of the 1940 Act, as amended.
13. Liability of Manager and Indemnification. In the absence of
willful misfeasance, bad faith, gross negligence or reckless disregard of
obligations or duties hereunder on the part of the Manager or any of its
officers, directors or employees, it shall not be subject to liability to
the Fund or to any shareholder of the Fund for any commission in the course
of, or connected with, rendering services hereunder or for any losses that
may be sustained in the purchase, holding or sale of any security.
14. Notices. Any notices under this agreement shall be in writing,
addressed and delivered or mailed postage paid to the other party at such
address as such other party may designate for the receipt of such notice.
Until further notice of the other party, it is agreed that the address of
the Manager shall be Park 80 West, Plaza Two, Saddle Brook, New Jersey
07662 and that the Fund for this purpose shall be Park 80 West Plaza Two,
Saddle Brook, New Jersey 07662.
15. Questions of Interpretation. Any question of interpretation
of any term of provision of this agreement having a counterpart in or
otherwise derived from a term or provision of the 1940 Act shall be
resolved by reference to such term or provision of the Act and to
interpretations thereof, if any, by the United States Courts or in the
absence of any controlling decision of any such court, by rules,
regulations or orders of the Securities and Exchange Commission issued
pursuant to said Act. In addition, where the effect of a requirement of
the 1940 Act reflected in any provision of this agreement is revised by
rules, regulations or order of the Securities and Exchange Commission, such
provisions shall be deemed to incorporate the effect of such rule,
regulation or order.
In witness whereof, the parties hereto have caused this Agreement to
be executed in duplicate by their respective officers on the day and year
first above written.
Attest: LEXINGTON GROWTH AND INCOME FUND, INC.
___________________ By:______________________________
President
Attest: LEXINGTON MANAGEMENT CORPORATION
____________________ By:__________________________________
Executive Vice President
TRANSFER AGENCY AND SERVICE AGREEMENT
between
LEXINGTON GROWTH AND INCOME FUND, INC.
and
STATE STREET BANK AND TRUST COMPANY
TABLE OF CONTENTS
Article 1 Terms of Appointment; Duties of the Bank
Article 2 Fees and Expenses
Article 3 Representations and Warranties of the Bank
Article 4 Representations and Warranties of the Fund
Article 5 Data Access and Proprietary Information
Article 6 Indemnification
Article 7 Standard of Care
Article 8 Covenants of the Fund and the Bank
Article 9 Termination of Agreement
Article 10 Assignment
Article 11 Amendment
Article 12 Massachusetts Law to Apply
Article 13 Force Majeure
Article 14 Consequential Damages
Article 15 Merger of Agreement
Article 16 Counterparts
TRANSFER AGENCY AND SERVICE AGREEMENT
AGREEMENT made as of the __ day of __________, 19__, by and between
Lexington Growth and Income Fund, Inc., a corporation, having its principal
office and place of business at Park 80 West Plaza Two, Saddle Brook, New
Jersey 07663, (the "Fund"), and STATE STREET BANK AND TRUST COMPANY, a
Massachusetts trust company having its principal office and place of
business at 225 Franklin Street, Boston, Massachusetts 02110 (the "Bank").
WHEREAS, the Fund desires to appoint the Bank as its transfer agent,
dividend disbursing agent, custodian of certain retirement plans and agent in
connection with certain other activities, and the Bank desires to accept such
appointment;
NOW, THEREFORE, in consideration of the mutual covenants herein
contained, the parties hereto agree as follows:
Article l Terms of Appointment; Duties of the Bank
1.01 Subject to the terms and conditions set forth in
this Agreement, the Fund hereby employs and appoints the Bank to act as, and
the Bank agrees to act as its transfer agent for the Fund's authorized and
issued shares of its common stock, $____ par value, ("Shares"), dividend
disbursing agent, custodian of certain retirement plans and agent in
connection with any accumulation, open-account or similar plans provided to
the shareholders of the Fund ("Shareholders") and set out in the currently
effective prospectus and statement of additional information ("prospectus")
of the Fund, including without limitation any periodic investment plan or
periodic withdrawal program.
1.02 The Bank agrees that it will perform the following services:
(a) In accordance with procedures established from time to time by
agreement between the Fund and the Bank, the Bank shall:
(i) Receive for acceptance, orders for the purchase of Shares,
and promptly deliver payment and appropriate documentation
thereof to the Custodian of the Fund authorized pursuant to
the Articles of Incorporation of the Fund (the "Custodian");
(ii) Pursuant to purchase orders, issue the appropriate number of
Shares and hold such Shares in the appropriate Shareholder
account;
(iii) Receive for acceptance redemption requests and redemption
directions and deliver the appropriate documentation thereof
to the Custodian;
(iv) In respect to the transactions in items (i), (ii) and (iii)
above, the Bank shall execute transactions directly with
broker-dealers authorized by the Fund who shall thereby be
deemed to be acting on behalf of the Fund;
(v) At the appropriate time as and when it receives monies
paid to it by the Custodian with respect to any redemption, pay
over or cause to be paid over in the appropriate manner such
monies as instructed by the redeeming Shareholders;
(vi) Effect transfers of Shares by the registered owners thereof
upon receipt of appropriate instructions;
(vii) Prepare and transmit payments for dividends and distributions
declared by the Fund;
(viii)Issue replacement certificates for those certificates
alleged to have been lost, stolen or destroyed upon receipt
by the Bank of indemnification satisfactory to the Bank and
protecting the Bank and the Fund, and the Bank at its option,
may issue replacement certificates in place of mutilated
stock certificates upon presentation thereof and without such
indemnity;
(ix) Maintain records of account for and advise the Fund and its
Shareholders as to the foregoing; and
(x) Record the issuance of shares of the Fund and maintain
pursuant to SEC Rule 17Ad-10(e) a record of the total number
of shares of the Fund which are authorized, based upon data
provided to it by the Fund, and issued and outstanding. The
Bank shall also provide the Fund on a regular basis with the
total number of shares which are authorized and issued and
outstanding and shall have no obligation, when recording the
issuance of shares, to monitor the issuance of such shares or
to take cognizance of any laws relating to the issue or sale
of such shares, which functions shall be the sole
responsibility of the Fund.
(b) In addition to and neither in lieu nor in contravention of
the services set forth in the above paragraph (a), the Bank shall:
(i) perform the customary services of a transfer agent, dividend disbursing
agent, custodian of certain retirement plans and, as relevant, agent in
connection with accumulation, open-account or similar plans (including
without limitation any periodic investment plan or periodic withdrawal
program), including but not limited to: maintaining all Shareholder
accounts, preparing Shareholder meeting lists, mailing proxies, mailing
Shareholder reports and prospectuses to current Shareholders, withholding
taxes on U.S. resident and non-resident alien accounts, preparing and filing
U.S. Treasury Department Forms 1099 and other appropriate forms required with
respect to dividends and distributions by federal authorities for all
Shareholders, preparing and mailing confirmation forms and statements of
account to Shareholders for all purchases and redemptions of Shares and other
confirmable transactions in Shareholder accounts, preparing and mailing
activity statements for Shareholders, and providing Shareholder account
information and (ii) provide a system which will enable the Fund to monitor
the total number of Shares sold in each State.
(c) In addition, the Fund shall (i) identify to the Bank in
writing those transactions and assets to be treated as exempt from blue sky
reporting for each State and (ii) verify the establishment of transactions
for each State on the system prior to activation and thereafter monitor the
daily activity for each State. The responsibility of the Bank for the Fund's
blue sky State registration status is solely limited to the initial
establishment of transactions subject to blue sky compliance by the Fund and
the reporting of such transactions to the Fund as provided above.
(d) Procedures as to who shall provide certain of these services
in Article 1 may be established from time to time by agreement between the
Fund and the Bank per the attached service responsibility schedule. The Bank
may at times perform only a portion of these services and the Fund or its
agent may perform these services on the Fund's behalf.
(e) The Bank shall provide additional services on behalf of the
Fund (i.e., escheatment services) which may be agreed upon in writing between
the Fund and the Bank.
Article 2 Fees and Expenses
2.01 For the performance by the Bank pursuant to this
Agreement, the Fund agrees to pay the Bank an annual maintenance fee for each
Shareholder account as set out in the initial fee schedule attached hereto.
Such fees and out-of-pocket expenses and advances identified under Section
2.02 below may be changed from time to time subject to mutual written
agreement between the Fund and the Bank.
2.02 In addition to the fee paid under Section 2.01 above, the
Fund agrees to reimburse the Bank for out-of-pocket expenses, including but
not limited to confirmation production, postage, forms, telephone, microfilm,
microfiche, tabulating proxies, records storage, or advances incurred by the
Bank for the items set out in the fee schedule attached hereto. In addition,
any other expenses incurred by the Bank at the request or with the consent of
the Fund, will be reimbursed by the Fund.
2.03 The Fund agrees to pay all fees and reimbursable expenses
within five days following the receipt of the respective billing notice.
Postage for mailing of dividends, proxies, Fund reports and other mailings to
all shareholder accounts shall be advanced to the Bank by the Fund at least
seven (7) days prior to the mailing date of such materials.
Article 3 Representations and Warranties of the Bank
The Bank represents and warrants to the Fund that:
3.01 It is a trust company duly organized and existing and in good
standing under the laws of the Commonwealth of Massachusetts.
3.02 It is duly qualified to carry on its business in the
Commonwealth of Massachusetts.
3.03 It is empowered under applicable laws and by its Charter and
By-Laws to enter into and perform this Agreement.
3.04 All requisite corporate proceedings have been taken to
authorize it to enter into and perform this Agreement.
3.05 It has and will continue to have access to the necessary
facilities, equipment and personnel to perform its duties and obligations
under this Agreement.
Article 4 Representations and Warranties of the Fund
The Fund represents and warrants to the Bank that:
4.01 It is a corporation duly organized and existing and in good
standing under the laws of Maryland.
4.02 It is empowered under applicable laws and by its Articles of
Incorporation and By-Laws to enter into and perform this Agreement.
4.03 All corporate proceedings required by said Articles of
Incorporation and By-Laws have been taken to authorize it to enter into and
perform this Agreement.
4.04 It is an open-end and diversified management investment
company registered under the Investment Company Act of 1940, as amended.
4.05 A registration statement under the Securities Act of 1933, as
amended is currently effective and will remain effective, and appropriate
state securities law filings have been made and will continue to be made,
with respect to all Shares of the Fund being offered for sale.
Article 5 Data Access and Proprietary Information
5.01 The Fund acknowledges that the data bases,
computer programs, screen formats, report formats, interactive design
techniques, and documentation manuals furnished to the Fund by the Bank as
part of the Fund's ability to access certain Fund-related data ("Customer
Data") maintained by the Bank on data bases under the control and ownership
of the Bank or other third party ("Data Access Services") constitute
copyrighted, trade secret, or other proprietary information (collectively,
"Proprietary Information") of substantial value to the Bank or other third
party. In no event shall Proprietary Information be deemed Customer Data.
The Fund agrees to treat all Proprietary Information as proprietary to the
Bank and further agrees that it shall not divulge any Proprietary Information
to any person or organization except as may be provided hereunder. Without
limiting the foregoing, the Fund agrees for itself and its employees and
agents:
(a) to access Customer Data solely from locations as may be
designated in writing by the Bank and solely in accordance
with the Bank's applicable user documentation;
(b) to refrain from copying or duplicating in any way the
Proprietary Information;
(c) to refrain from obtaining unauthorized access to any portion
of the Proprietary Information, and if such access is
inadvertently obtained, to inform in a timely manner of such
fact and dispose of such information in accordance with the
Bank's instructions;
(d) to refrain from causing or allowing third-party data acquired
hereunder from being retransmitted to any other computer
facility or other location, except with the prior written
consent of the Bank;
(e) that the Fund shall have access only to those authorized
transactions agreed upon by the parties;
(f) to honor all reasonable written requests made by the Bank to
protect at the Bank's expense the
rights of the Bank in Proprietary Information at common law,
under federal copyright law and under other federal or state
law.
Each party shall take reasonable efforts to advise its employees of their
obligations pursuant to this Article 5. The obligations of this Article
shall survive any earlier termination of this Agreement.
5.02 If the Fund notifies the Bank that any of the Data Access
Services do not operate in material compliance with the most recently issued
user documentation for such services, the Bank shall endeavor in a timely
manner to correct such failure. Organizations from which the Bank may obtain
certain data included in the Data Access Services are solely responsible for
the contents of such data and the Fund agrees to make no claim against the
Bank arising out of the contents of such third-party data, including, but not
limited to, the accuracy thereof. DATA ACCESS SERVICES AND ALL COMPUTER
PROGRAMS AND SOFTWARE SPECIFICATIONS USED IN CONNECTION THEREWITH ARE
PROVIDED ON AN AS IS, AS AVAILABLE BASIS. THE BANK EXPRESSLY DISCLAIMS ALL
WARRANTIES EXCEPT THOSE EXPRESSLY STATED HEREIN INCLUDING, BUT NOT LIMITED
TO, THE IMPLIED WARRANTIES OF MERCHANTABILITY AND FITNESS FOR A PARTICULAR
PURPOSE.
5.03 If the transactions available to the Fund include
the ability to originate electronic instructions to the Bank in order to (i)
effect the transfer or movement of cash or Shares or (ii) transmit Shareholder
information or other information (such transactions constituting a "COEFI"),
then in such event the Bank shall be entitled to rely on the validity and
authenticity of such instruction without undertaking any further inquiry as
long as such instruction is undertaken in conformity with security procedures
established by the Bank from time to time.
Article 6 Indemnification
6.01 The Bank shall not be responsible for, and the
Fund shall indemnify and hold the Bank harmless from and against, any and all
losses, damages, costs, charges, counsel fees, payments, expenses and
liability arising out of or attributable to:
(a) All actions of the Bank or its agent or subcontractors
required to be taken pursuant to this Agreement, provided that such actions
are taken in good faith and without negligence or willful misconduct.
(b) The Fund's lack of good faith, negligence or willful
misconduct which arise out of the breach of any representation or warranty of
the Fund hereunder.
(c) The reliance on or use by the Bank or its agents or
subcontractors of information, records, documents or services which (i) are
received by the Bank or its agents or subcontractors, and (ii) have been
prepared, maintained or performed by the Fund or any other person or firm on
behalf of the Fund including but not limited to any previous transfer agent
or registrar.
(d) The reliance on, or the carrying out by the Bank or its agents
or subcontractors of any instructions or requests of the Fund.
(e) The offer or sale of Shares in violation of any requirement
under the federal securities laws or regulations or the securities laws or
regulations of any state that such Shares be registered in such state or in
violation of any stop order or other determination or ruling by any federal
agency or any state with respect to the offer or sale of such Shares in such
state.
6.02 At any time the Bank may apply to any officer of the Fund for
instructions, and may consult with legal counsel with respect to any matter
arising in connection with the services to be performed by the Bank under this
Agreement, and the Bank and its agents or subcontractors shall not be liable
and shall be indemnified by the Fund for any action taken or omitted by it in
reliance upon such instructions or upon the opinion of such counsel. The
Bank, its agents and subcontractors shall be protected and indemnified in
acting upon any paper or document furnished by or on behalf of the Fund,
reasonably believed to be genuine and to have been signed by the proper
person or persons, or upon any instruction, information, data, records or
documents provided the Bank or its agents or subcontractors by machine
readable input, telex, CRT data entry or other similar means authorized by
the Fund, and shall not be held to have notice of any change of authority of
any person, until receipt of written notice thereof from the Fund. The Bank,
its agents and subcontractors shall also be protected and indemnified in
recognizing stock certificates which are reasonably believed to bear the
proper manual or facsimile signatures of the officers of the Fund, and the
proper countersignature of any former transfer agent or former registrar, or
of a co-transfer agent or co-registrar.
6.03 In order that the indemnification provisions
contained in this Article 6 shall apply, upon the assertion of a claim for
which the Fund may be required to indemnify the Bank, the Bank shall promptly
notify the Fund of such assertion, and shall keep the Fund advised with
respect to all developments concerning such claim. The Fund shall have the
option to participate with the Bank in the defense of such claim or to defend
against said claim in its own name or in the name of the Bank. The Bank
shall in no case confess any claim or make any compromise in any case in
which the Fund may be required to indemnify the Bank except with the Fund's
prior written consent.
Article 7 Standard of Care
7.01 The Bank shall at all times act in good faith and
agrees to use its best efforts within reasonable limits to insure the
accuracy of all services performed under this Agreement, but assumes no
responsibility and shall not be liable for loss or damage due to errors
unless said errors are caused by its negligence, bad faith, or willful
misconduct of that of its employees.
Article 8 Covenants of the Fund and the Bank
8.01 The Fund shall promptly furnish to the Bank the following:
(a) A certified copy of the resolution of the Board of Directors
of the Fund authorizing the appointment of the Bank and the execution and
delivery of this Agreement.
(b) A copy of the Articles of Incorporation and By-Laws of the
Fund and all amendments thereto.
8.02 The Bank hereby agrees to establish and maintain facilities
and procedures reasonably acceptable to the Fund for safekeeping of stock
certificates, check forms and facsimile signature imprinting devices, if any;
and for the preparation or use, and for keeping account of such certificates,
forms and devices.
8.03 The Bank shall keep records relating to the services to be
performed hereunder, in the form and manner as it may deem advisable. To the
extent required by Section 31 of the Investment Company Act of 1940, as
amended, and the Rules thereunder, the Bank agrees that all such records
prepared or maintained by the Bank relating to the services to be performed
by the Bank hereunder are the property of the Fund and will be preserved,
maintained and made available in accordance with such Section and Rules, and
will be surrendered promptly to the Fund on and in accordance with its
request.
8.04 The Bank and the Fund agree that all books, records,
information and data pertaining to the business of the other party which are
exchanged or received pursuant to the negotiation or the carrying out of this
Agreement shall remain confidential, and shall not be voluntarily disclosed
to any other person, except as may be required by law.
8.05 In case of any requests or demands for the inspection of the
Shareholder records of the Fund, the Bank will endeavor to notify the Fund
and to secure instructions from an authorized officer of the Fund as to such
inspection. The Bank reserves the right, however, to exhibit the Shareholder
records to any person whenever it is advised by its counsel that it may be
held liable for the failure to exhibit the Shareholder records to such person.
Article 9 Termination of Agreement
9.01 This Agreement may be terminated by either party
upon one hundred twenty (120) days written notice to the other.
9.02 Should the Fund exercise its right to terminate,
all out-of-pocket expenses associated with the movement of records and
material will be borne by the Fund. Additionally, the Bank reserves the
right to charge for any other reasonable expenses associated with such
termination and/or a charge equivalent to the average of three (3) months'
fees.
Article 10 Assignment
10.01 Except as provided in Section 10.03 below, neither
this Agreement nor any rights or obligations hereunder may be assigned by
either party without the written consent of the other party.
10.02 This Agreement shall inure to the benefit of and be binding
upon the parties and their respective permitted successors and assigns.
10.03 The Bank may, without further consent on the part of the
Fund, subcontract for the performance hereof with (i) Boston Financial Data
Services, Inc., a Massachusetts corporation ("BFDS") which is duly registered
as a transfer agent pursuant to Section 17A(c)(1) of the Securities Exchange
Act of 1934, as amended ("Section 17A(c)(1)"), (ii) a BFDS subsidiary duly
registered as a transfer agent pursuant to Section 17A(c)(1) or (iii) a BFDS
affiliate; provided, however, that the Bank shall be as fully responsible to
the Fund for the acts and omissions of any subcontractor as it is for its own
acts and omissions.
Article 11 Amendment
11.01 This Agreement may be amended or modified by a
written agreement executed by both parties and authorized or approved by a
resolution of the Board of Directors of the Fund.
Article 12 Massachusetts Law to Apply
12.01 This Agreement shall be construed and the
provisions thereof interpreted under and in accordance with the laws of the
Commonwealth of Massachusetts.
Article 13 Force Majeure
13.01 In the event either party is unable to perform its
obligations under the terms of this Agreement because of acts of God,
strikes, equipment or transmission failure or damage reasonably beyond its
control, or other causes reasonably beyond its control, such party shall not
be liable for damages to the other for any damages resulting from such
failure to perform or otherwise from such causes.
Article 14 Consequential Damages
14.01 Neither party to this Agreement shall be liable to
the other party for consequential damages under any provision of this
Agreement or for any consequential damages arising out of any act or failure
to act hereunder.
Article 15 Merger of Agreement
15.01 This Agreement constitutes the entire agreement
between the parties hereto and supersedes any prior agreement with respect to
the subject matter hereof whether oral or written.
Article 16 Counterparts
16.01 This Agreement may be executed by the parties
hereto on any number of counterparts, and all of said counterparts taken
together shall be deemed to constitute one and the same instrument.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed in their names and on their behalf by and through their duly
authorized officers, as of the day and year first above written.
LEXINGTON GROWTH AND INCOME FUND, INC.
BY:
___________________________________
Vice President
ATTEST:
_________________________________
STATE STREET BANK AND TRUST COMPANY
BY:
____________________________________
Senior Vice President
ATTEST:
___________________________________
STATE STREET BANK & TRUST COMPANY
FUND SERVICE RESPONSIBILITIES*
Service Performed Responsibility
----------------- --------------
Bank Fund
---- ----
1. Receives orders for the purchase
of Shares.
2. Issue Shares and hold Shares in
Shareholders accounts.
3. Receive redemption requests.
4. Effect transactions 1-3 above
directly with broker-dealers.
5. Pay over monies to redeeming
Shareholders.
6. Effect transfers of Shares.
7. Prepare and transmit dividends
and distributions.
8. Issue Replacement Certificates.
9. Reporting of abandoned property.
10. Maintain records of account.
11. Maintain and keep a current and
accurate control book for each
issue of securities.
12. Mail proxies.
13. Mail Shareholder reports.
14. Mail prospectuses to current
Shareholders.
15. Withhold taxes on U.S. resident
and non-resident alien accounts.
Service Performed Responsibility
----------------- --------------
Bank Fund
---- ----
16. Prepare and file U.S. Treasury
Department forms.
17. Prepare and mail account and
confirmation statements for
Shareholders.
18. Provide Shareholder account
information.
19. Blue sky reporting.
* Such services are more fully described in Article 1.02 (a), (b) and (c)
of the Agreement.
LEXINGTON GROWTH AND INCOME FUND, INC.
BY:
__________________________________
Vice President
ATTEST:
________________________________
STATE STREET BANK AND TRUST COMPANY
BY:
___________________________________
Vice President
ATTEST:
__________________________________
Kramer, Levin, Naftalis, Nessen, Kamin & Frankel
9 1 9 T H I R D A V E N U E
NEW YORK, N.Y. 10022 3852
(212) 715 9100
FAX
(212) 715-8000
______
WRITER'S DIRECT
NUMBER
(212) 715-9100
April 22, 1996
Lexington Growth & Income Fund, Inc.
Park 80 West
Plaza Two
Saddle Brook, New Jersey 07663
Gentlemen:
We hereby consent to the reference of this Firm as counsel in the
Registration Statement on Form N-1A of the Lexington Growth & Income Fund,
Inc.
Very truly yours,
/s/ Kramer, Levin, Naftalis, Nessen,
Kamin & Frankel
KPMG Peat Marwick LLP
345 Park Avenue Telephone 212 758 9700 Telefax 212 758 9819
New York, NY 10154 Telex 428038
Independent Auditors' Consent
The Board of Directors and Shareholders
Lexington Growth and Income Fund, Inc.:
We consent to the use of our report dated February 5, 1996, included in the
Registration Statement on form N-1A and to the references to our firm under
the headings Financial Highlights and Counsel and Independent Auditors
in the Prospectus.
/s/ KPMG Peat Marwick LLP
New York, New York
April 23, 1996
LEXINGTON MANAGEMENT CORPORATION
PROTOTYPE
MONEY PURCHASE PENSION AND
PROFIT SHARING PLAN
BASIC DOCUMENT #01
PROTOTYPE
MONEY PURCHASE PENSION AND
PROFIT SHARING PLAN
TABLE OF CONTENTS
Section Page
ARTICLE 1
GENERAL
1.1 Purpose......................................... 1
1.2 Trust........................................... 1
ARTICLE 2
DEFINITIONS
2.1 Account......................................... 1
2.2 Adoption Agreement.............................. 1
2.3 Affiliated Employers............................ 1
2.4 Beneficiary..................................... 2
2.5 Break in Service................................ 2
2.6 Code............................................ 2
2.7 Compensation.................................... 2
2.8 Custodian....................................... 3
2.9 Determination Date.............................. 3
2.10 Early Retirement Date........................... 3
2.11 Earned Income................................... 3
2.12 Effective Date.................................. 3
2.13 Eligibility Computation Period.................. 3
2.14 Employee........................................ 4
2.15 Employer........................................ 4
2.16 Employer Contributions.......................... 4
2.17 Entry Dates..................................... 4
2.18 ERISA........................................... 4
2.19 Hour of Service................................. 4
2.20 Integration Level............................... 7
2.21 Key Employee.................................... 7
2.22 Leased Employee................................. 7
2.23 Maximum Disparity Rate.......................... 8
2.24 Maximum Profit Sharing Disparity Rate........... 9
2.25 Non-Key Employee................................ 9
2.26 Normal Retirement Age........................... 9
2.27 Owner-Employee.................................. 9
2.28 Participant..................................... 10
2.29 Plan............................................ 10
2.30 Plan Administrator.............................. 10
2.31 Plan Year....................................... 10
2.32 Self-Employed Individuals....................... 10
2.33 Shares.......................................... 10
2.34 Sponsor......................................... 10
2.35 Taxable Wage Base............................... 10
2.36 Total and Permanent Disability.................. 10
2.37 Trust........................................... 11
2.38 Trust Agreement................................. 11
2.39 Trustee......................................... 11
2.40 Valuation Date.................................. 11
2.41 Vesting Computation Period...................... 11
2.42 Year of Service................................. 11
ARTICLE 3
ELIGIBILITY AND YEARS OF SERVICE
3.1 Eligibility Requirements........................ 11
3.2 Participation and Service Upon Reemployment..... 12
3.3 Predecessor Employers........................... 12
ARTICLE 4
CONTRIBUTIONS
4.1 Employer Contributions.......................... 13
4.2 Payment......................................... 13
4.3 Nondeductible Voluntary Contributions by
Participants.................................... 14
4.4 Rollovers....................................... 14
4.5 Direct Transfers................................ 14
ARTICLE 5
ALLOCATIONS
5.1 Individual Accounts............................. 15
5.2 Minimum Allocation.............................. 16
5.3 Allocation of Employer Contributions and
Forfeitures..................................... 17
5.4 Coordination of Social Security Integration..... 19
5.5 Withdrawals and Distributions................... 19
5.6 Determination of Value of Trust Fund and of Net
Earnings or Losses.............................. 19
5.7 Allocation of Net Earnings or Losses............ 20
5.8 Responsibilities of the Plan Administrator...... 21
ARTICLE 6
LIMITATIONS ON ALLOCATIONS
6.1 Employers Who Do Not Maintain Other Qualified
Plans........................................... 21
6.2 Employers Who Maintain Other Qualified Master
or Prototype Defined Contribution Plans......... 22
6.3 Employers Who, In Addition to This Plan,
Maintain Other Qualified Plans Which are
Defined Contribution Plans Other Than Master or
Prototype Plans................................. 24
6.4 Employers, Who In Addition To This Plan,
Maintain A Qualified Defined Benefit Plan....... 24
6.5 Definitions..................................... 24
ARTICLE 7
TRUST FUND
7.1 Receipt of Contributions by Trustee............. 29
7.2 Investment Responsibility....................... 29
7.3 Investment Limitations.......................... 30
ARTICLE 8
VESTING
8.1 Nondeductible Voluntary Contributions and
Earnings........................................ 30
8.2 Rollovers, Transfers and Earnings............... 31
8.3 Employer Contributions and Earnings............. 31
8.4 Amendments to Vesting Schedule.................. 31
8.5 Determination of Years of Service............... 32
8.6 Forfeiture of Nonvested Amounts................. 33
8.7 Reinstatement of Benefit........................ 33
ARTICLE 9
JOINT AND SURVIVOR ANNUITY REQUIREMENTS
9.1 General......................................... 34
9.2 Qualified Joint and Survivor Annuity............ 34
9.3 Qualified Preretirement Survivor Annuity........ 34
9.4 Definitions..................................... 34
9.5 Notice Requirements............................. 36
9.6 Safe Harbor Rules............................... 38
9.7 Transitional Rules.............................. 39
ARTICLE 10
DISTRIBUTION PROVISIONS
10.1 Vesting on Distribution Before Break in Service. 41
10.2 Restrictions on Immediate Distributions......... 42
10.3 Commencement of Benefits........................ 44
10.4 Early Retirement With Age and Service Require-
ment............................................ 44
10.5 Nontransferability of Annuities................. 44
10.6 Conflicts With Annuity Contracts................ 44
ARTICLE 11
TIMING AND MODES OF DISTRIBUTION
11.1 General Rules................................... 45
11.2 Required Beginning Date......................... 45
11.3 Limits on Distribution Periods.................. 45
11.4 Determination of Amount to be Distributed Each
Year............................................ 45
11.5 Death Distribution Provisions................... 46
11.6 Designation of Beneficiary...................... 48
11.7 Definitions..................................... 48
11.8 Transitional Rules.............................. 51
11.9 Optional Forms of Benefit....................... 52
ARTICLE 12
WITHDRAWALS
12.1 Withdrawal of Nondeductible Voluntary Contribu-
tions........................................... 54
12.2 Hardship Withdrawals............................ 54
12.3 Manner of Making Withdrawals.................... 55
12.4 Limitations on Withdrawals...................... 55
ARTICLE 13
LOANS
13.1 General Provisions.............................. 55
13.2 Administration of Loan Program.................. 57
13.3 Amount of Loan.................................. 57
13.4 Manner of Making Loans.......................... 57
13.5 Terms of Loan................................... 58
13.6 Security for Loan............................... 58
13.7 Segregated Investment........................... 59
13.8 Repayment of Loan............................... 59
13.9 Default on Loan................................. 59
13.10Unpaid Amounts.................................. 59
ARTICLE 14
INSURANCE
14.1 Insurance....................................... 60
14.2 Policies........................................ 60
14.3 Beneficiary..................................... 60
14.4 Payment of Premiums............................. 60
14.5 Limitation on Insurance Premiums................ 61
14.6 Insurance Company............................... 62
14.7 Distribution of Policies........................ 62
14.8 Policy Features................................. 64
14.9 Changed Conditions.............................. 64
14.10Conflicts....................................... 64
ARTICLE 15
ADMINISTRATION
15.1 Duties and Responsibilities of Fiduciaries;
Allocation of Fiduciary Responsibility.......... 64
15.2 Powers and Responsibilities of the Plan
Administrator................................... 65
15.3 Allocation of Duties and Responsibilities....... 67
15.4 Appointment of the Plan Administrator........... 67
15.5 Expenses........................................ 67
15.6 Liabilities..................................... 67
15.7 Claims Procedure................................ 68
ARTICLE 16
AMENDMENT, TERMINATION AND MERGER
16.1 Sponsor's Power to Amend........................ 69
16.2 Amendment by Adopting Employer.................. 69
16.3 Vesting Upon Plan Termination................... 70
16.4 Vesting Upon Complete Discontinuance of
Contributions................................... 70
16.5 Maintenance of Benefits Upon Merger............. 70
16.6 Special Amendments.............................. 70
ARTICLE 17
MISCELLANEOUS
17.1 Exclusive Benefit of Participants and
Beneficiaries................................... 70
17.2 Nonguarantee of Employment...................... 71
17.3 Rights to Trust Assets.......................... 71
17.4 Nonalienation of Benefits....................... 71
17.5 Aggregation Rules............................... 72
17.6 Failure of Qualification........................ 73
17.7 Applicable Law.................................. 73
<PAGE>
ARTICLE 1
GENERAL
1.1 Purpose. The Employer hereby establishes this Plan to provide
retirement, death and disability benefits for eligible employees and their
Beneficiaries. This Plan is a standardized prototype paired defined
contribution plan and is designed to permit adoption of profit sharing
provisions, money purchase pension provisions, or both. The provisions
herein and the selections made by the Employer by execution of the money
purchase pension or profit sharing Adoption Agreement or Agreements, shall
constitute the Plan. It is intended that the Plan and Trust qualify under
sections 401 and 501 of the Internal Revenue Code of 1986, as amended and
that it comply with the provisions of the Employee Retirement Income
Security Act of 1974, as amended.
1.2 Trust. The Employer has simultaneously adopted a Trust to
receive, invest, and distribute funds in accordance with the Plan.
ARTICLE 2
DEFINITIONS
2.1 Account. The aggregate of the individual bookkeeping
subaccounts established for each Participant, as provided in section 5.1.
2.2 Adoption_Agreement. The written agreement or agreements of
the Employer and the Trustee by which the Employer establishes this Plan
and adopts the Trust Agreement forming a part hereof, as the same may be
amended from time to time. The Adoption Agreement contains all the
options that may be selected by the Employer. The information set forth
in the Adoption Agreement executed by the Employer shall be deemed to be
a part of this Plan as if set forth in full herein.
2.3 Affiliated_Employers. The Employer and any corporation which
is a member of a controlled group of corporations (as defined in section
-1-
<PAGE>
414(b) of the Code) which includes the Employer, any trade or business
(whether or not incorporated) which is under common control (as defined
in section 414(c) of the Code) with the Employer, or any service
organization (whether or not incorporated) which is a member of an
affiliated service group (as defined in sections 414(m) and (o) of the
Code) which includes the Employer.
2.4 Beneficiary. The person or persons (natural or otherwise)
designated by a Participant in accordance with section 11.6 to receive any
undistributed amounts credited to the Participant's Account under the Plan
at the time of the Participant's death.
2.5 Break_in_Service. An Eligibility Computation Period or
Vesting Computation Period in which an Employee fails to complete more
than five hundred (500) Hours of Service.
2.6 Code. The Internal Revenue Code of 1986, as amended from time
to time, or any successor statute.
2.7 Compensation.
(a) Compensation will mean all of each Participant's W-2
earnings.
(b) For any self-employed individual covered under the Plan,
Compensation will mean Earned Income.
(c) Compensation shall include only that Compensation that
is actually paid to the Participant during the Plan Year.
(d) Notwithstanding the above, if elected by the Employer
in the Adoption Agreement, Compensation shall include any amount which is
contributed by the Employer pursuant to a salary reduction agreement and
which is not includable in the gross income of the Employee under sections
125, 402(a)(8), 402(h) or 403(b) of the Code. The effective date of this
subsection shall be elected by the Employer in the Adoption Agreement.
(e) The annual Compensation of each Participant taken into
-2-
<PAGE>
account under the Plan for any year shall not exceed two hundred thousand
dollars ($200,000), as adjusted by the Secretary at the same time and in
the same manner as under section 415(d) of the Code. In determining the
Compensation of a Participant for purposes of this limitation, the rules
of section 414(q)(6) of the Code shall apply, except in applying such
rules, the term "family" shall include only the Spouse of the Participant
and any lineal descendants of the Participant who have not attained age
nineteen (19) before the close of the year. If, as a result of the
application of such rules, the adjusted two hundred thousand dollar
($200,000) limitation is exceeded, then (except for purposes of
determining the portion of Compensation up to the Integration Level to the
extent this Plan provides for permitted disparity), the limitation shall
be prorated among the affected individuals in proportion to each such
individual's Compensation as determined under this section prior to the
application of this limitation.
(f) The effective date of this subsection shall be the
first Plan Year beginning on or after January 1, 1989.
2.8 Custodian. The custodian, if any, designated in the Adoption
Agreement.
2.9 Determination_Date. With respect to any Plan Year subsequent
to the first Plan Year, the last day of the preceding Plan Year. For the
first Plan Year of the Plan, the last day of that Plan Year.
2.10 Early_Retirement_Date. The first day of the month coincident
with or next following the date upon which the Participant satisfies the
early retirement age and service requirements in the Adoption Agreement;
provided, however, such requirements may not be less than age fifty- five
(55), nor more than fifteen (15) Years of Service.
2.11 Earned_Income. The net earnings from self- employment in the
trade or business with respect to which the Plan is established, for which
personal services of the individual are a material income-producing
factor. Net earnings will be determined without regard to items not
included in gross income and the deductions allocable to such items. Net
earnings are reduced by contributions to a qualified plan to the extent
deductible under section 404 of the Code. Net earnings shall be
determined with regard to the deduction allowed to the Employer by section
164(f) of the Code for taxable years beginning after December 31, 1989.
2.12 Effective_Date. The first day of the first Plan Year for
which the Plan is effective as specified in the Adoption Agreement.
2.13 Eligibility_Computation_Period. For purposes of determining
Years of Service and Breaks in Service for eligibility to participate, the
initial Eligibility Computation Period shall be the twelve (12)
consecutive month period beginning with the day the Employee first
performs an Hour of Service for the Employer (employment commencement
date). The succeeding twelve (12) consecutive month periods commence with
the first anniversary of the Employee's employment commencement date.
-3-
<PAGE>
2.14 Employee. Any person, including a Self-Employed Individual,
who is employed by the Employer maintaining the Plan or any other employer
required to be aggregated with such Employer under sections 414(b), (c),
(m) or (o) of the Code. The term "Employee" shall also include any Leased
Employee deemed to be an Employee of any Employer described above as
provided in sections 414(n) or (o) of the Code.
2.15 Employer. The corporation, proprietorship, partnership or
other organization that adopts the Plan by execution of an Adoption
Agreement.
2.16 Employer_Contributions. The contribution of the Employer to
the Plan and Trust as set forth in section 4.1 and the Adoption Agreement.
2.17 Entry_Dates. The Effective Date shall be the first Entry
Date. Thereafter, the Entry Dates shall be the first day of each Plan
Year and the first day of the seventh month of each Plan Year.
2.18 ERISA. The Employee Retirement Income Security Act of 1974,
as amended.
2.19 Hour_of_Service.
(a) Each hour for which an Employee is paid, or entitled to
payment, for the performance of duties for the Employer. These hours
shall be credited to the Employee only for the computation period or
periods in which the duties are performed; and
(b) Each hour for which an Employee is paid, or entitled to
payment, by the Employer on account of a period of time during which no
duties are performed (irrespective of whether the employment relationship
has terminated) due to vacation, holiday, illness, incapacity (including
disability), layoff, jury duty, military duty, or leave of absence. No
more than five hundred one (501) Hours of Service shall be credited under
this paragraph to an Employee on account of any single, continuous period
during which the Employee performs no duties (whether or not such period
occurs in a single computation period). Hours under this paragraph will
be calculated and credited pursuant to section 2530.200b-2 of the
Department of Labor regulations which are incorporated herein by this
reference.
-4-
<PAGE>
(c) Each hour for which back pay, irrespective of mitigation
of damages, is either awarded or agreed to by the Employer. The same
Hours of Service shall not be credited both under paragraph (a) or
paragraph (b), as the case may be, and under this paragraph (c). These
hours shall be credited to the Employee for the computation period or
periods to which the award or agreement pertains rather than the
computation period in which the award, agreement, or payment is made.
(d) Solely for purposes of determining whether an Employee
has a Break in Service, Hours of Service shall also include an
uncompensated authorized leave of absence not in excess of two (2) years,
or military leave while the Employee's reemployment rights are protected
by law or such additional or other periods as granted by the Employer as
military leave (credited on the basis of forty (40) Hours of Service per
each week or eight (8) Hours of Service per working day), provided the
Employee returns to employment at the end of his leave of absence or
within ninety (90) days of the end of his military leave, whichever is
applicable.
(e) Hours of Service will be credited for employment with
other members of an affiliated service group (under section 414(m)), a
controlled group of corporations (under section 414(b)), or a group of
trades or businesses under common control (under section 414(c)) of which
the adopting Employer is a member, and any other entity required to be
aggregated with the Employer pursuant to section 414(o) and the
regulations thereunder. Hours of Service will also be credited for any
individual considered an Employee for purposes of this Plan under section
414(n) or section 414(o) and the regulations thereunder.
(f) Solely for purposes of determining whether an Employee
has a Break in Service, Hours of Service shall also include absence from
work for maternity or paternity reasons, if the absence begins on or after
the first day of the first Plan Year beginning after 1984. During this
absence, the Employee shall be credited with the Hours of Service which
would have been credited but for the absence, or, if such hours cannot be
determined with eight (8) hours per day. An absence from work for
maternity or paternity reasons means an absence:
-5-
<PAGE>
(i) by reason of the pregnancy of an Employee;
(ii) by reason of the birth of a child of the
Employee;
(iii) by reason of the placement of a child with the
Employee in connection with adoption; or
(iv) for purposes of caring for such a child for a
period immediately following such birth or placement.
These Hours of Service shall be credited in the computation period
following the computation period in which the absence begins, except as
necessary to prevent a Break in Service in the computation period in which
the absence begins. However, no more than five hundred one (501) Hours
of Service will be credited for purposes of any such maternity or
paternity absence from work.
(g) The Employer may elect to compute Hours of Service by
the use of one of the service equivalencies in the Adoption Agreement.
Only one method may be selected. If selected, the service equivalency
must be applied to all Employees covered under the Plan.
(h) If the Employer amends the method of crediting service
from the elapsed time method described in section 1.410(a)-7 of the
Treasury regulations to the Hours of Service computation method by the
adoption of this Plan, or an Employee transfers from a plan under which
service is determined on the basis of elapsed time, the following rules
shall apply for purposes of determining the Employee's service under this
Plan up to the time of amendment or transfer:
(i) the Employee shall receive credit, as of the date
of amendment or transfer, for a number of Years of Service equal to the
number of one (1) year periods of service credited to the Employee as of
the date of the amendment or transfer; and
-6-
<PAGE>
(ii) the Employee shall receive credit in the
applicable computation period which includes the date of amendment or
transfer, for a number of Hours of Service determined by applying the
weekly service equivalency specified in paragraph (g) to any fractional
part of a year credited to the Employee under this paragraph (h) as of the
date of amendment or transfer. The use of the weekly service equivalency
shall apply to all Employees who formerly were credited with service under
the elapsed time method.
2.20 Integration_Level. The Taxable Wage Base or such lesser
amount elected by the Employer in the Adoption Agreement.
2.21 Key_Employee.
(a) Any Employee or former Employee (and the Beneficiaries
of such Employee) who at any time during the determination period was an
officer of the Employer if such individual's annual Compensation exceeds
fifty percent (50%) of the dollar limitation under section 415(b)(1)(A)
of the Code; an owner (or considered an owner under section 318 of the
Code) of one of the ten (10) largest interests in the Employer if such
individual's Compensation exceeds one hundred percent (100%) of the dollar
limitation under section 415(c)(1)(A) of the Code; a Five Percent (5%)
Owner of the Employer; or a one percent (1%) owner of the Employer who has
annual Compensation of more than one hundred fifty thousand dollars
($150,000).
(b) For purposes of this section, annual Compensation means
compensation as defined in section 415(c)(3) of the Code, but including
amounts contributed by the Employer pursuant to a salary reduction
agreement which are excludable from the Employee's gross income under
sections 125, 402(a)(8), 402(h) or 403(b) of the Code.
(c) For purposes of this section, determination period is
the Plan Year containing the Determination Date and the four (4) preceding
Plan Years.
2.22 Leased_Employee.
(a) Any person (other than an Employee of any of the
Affiliated Employers) who, pursuant to an agreement between any of the
Affiliated Employers and any other person ("leasing organization"), has
performed service for any of the Affiliated Employers (or for any of the
Affiliated Employers and related persons determined in accordance with
section 414(n)(6) of the Code) on a substantially full-time basis for a
period of at least one (1) year and such services are of a type
historically performed by employees in the Affiliated Employer's business
field. Contributions or benefits provided a Leased Employee by the
-7-
<PAGE>
leasing organization which are attributable to services performed for the
Affiliated Employer shall be treated as provided by the Affiliated
Employer.
(b) A Leased Employee shall not be considered an Employee
of an Affiliated Employer if:
(i) such employee is covered by a money purchase
pension plan providing:
(1) a nonintegrated employer contribution rate
of at least ten percent (10%) of compensation (as defined in section
415(c)(3) of the Code), but including amounts contributed pursuant to a
salary reduction agreement which are excludable from the employee's gross
income under sections 125, 402(a)(8), 402(h) or 403(b) of the Code;
(2) immediate participation; and
(3) full and immediate vesting.
and
(ii) Leased Employees do not constitute more than
twenty percent (20%) of the Affiliated Employer's non-Highly-Compensated
workforce.
(c) The determination of whether a person is a Leased
Employee will be made pursuant to section 414(n) of the Code.
2.23 Maximum_Disparity_Rate. The lesser of:
(a) five and seven-tenths percent (5.7%);
(b) the applicable percentage determined in accordance with
the table below:
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If the Integration Level is
The Applicable
More_Than But_Not_More_Than Percentage_Is:
$0 X */ 5.7%
X of TWB 80% of TWB 4.3%
80% of TWB Y **/ 5.4%
*/ X = the greater of $10,000 or 20% of the Taxable Wage Base.
**/ Y = any amount more than 80% of the Taxable Wage Base but less than
100% of the Taxable Wage Base.
"TWB" means the Taxable Wage Base.
If the Integration Level used is equal to the Taxable Wage Base, the
applicable percentage is five and seven-tenths percent (5.7%).
2.24 Maximum_Profit_Sharing_Disparity_Rate. The lesser of:
(a) two and seven-tenths percent (2.7%);
(b) the applicable percentage determined in accordance with
the table below:
If the Integration Level is
The Applicable
More_Than But_Not_More_Than Percentage_Is:
$0 X */ 2.7%
X of TWB 80% of TWB 1.3%
80% of TWB Y **/ 2.4%
*/ X = the greater of $10,000 or 20% of the Taxable Wage Base.
**/ Y = any amount more than 80% of the Taxable Wage Base but less than
100% of the Taxable Wage Base.
"TWB" means the Taxable Wage Base.
If the Integration Level used is equal to the Taxable Wage Base, the
applicable percentage is two and seven-tenths percent (2.7%).
2.25 Non-Key_Employee. Any Employee or former Employee who is not
a Key Employee. In addition, any Beneficiary of a Non-Key Employee shall
be treated as a Non- Key Employee.
2.26 Normal_Retirement_Age. The age selected in the Adoption
Agreement, but not less than age fifty-five (55). If the Employer
enforces a mandatory retirement age, the Normal Retirement Age is the
lesser of that mandatory age or the age specified in the Adoption
Agreement.
2.27 Owner-Employee. An individual who is a sole proprietor, or
who is a partner owning more than ten percent (10%) of either the capital
or profits interest of a partnership.
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2.28 Participant. A person who has met the eligibility
requirements of section 3.1 and whose Account hereunder has been neither
completely forfeited nor completely distributed.
2.29 Plan. The prototype paired defined contribution profit
sharing and money purchase pension plan provided under this basic plan
document. References to the Plan shall refer to the profit sharing
provisions, the money purchase pension provisions, or both, as the context
may require.
2.30 Plan_Administrator. The person, persons or entity appointed
by the Employer pursuant to ARTICLE 15 to manage and administer the Plan.
2.31 Plan_Year. The twelve (12) consecutive month period
designated by the Employer in the Adoption Agreement.
2.32 Self-Employed_Individual. An individual who has Earned Income
for the taxable year from the trade or business for which the Plan is
established, or an individual who would have had Earned Income for the
taxable year but for the fact that the trade or business had no net
profits for the taxable year.
2.33 Shares. Shares of stock in any regulated investment company
registered under the Investment Company Act of 1940 that are made
available for investment purposes as an investment option under this Plan.
2.34 Sponsor. The sponsor designated in the Adoption Agreement
which has made this Plan available to the Employer.
2.35 Taxable_Wage_Base. The maximum amount of earnings which may
be considered wages for a year under section 3121(a)(1) of the Code in
effect as of the beginning of the Plan Year.
2.36 Total_and_Permanent_Disability. The inability of the
Participant to engage in any substantial gainful activity by reason of any
medically determinable physical or mental impairment, which condition, in
the opinion of a physician chosen by the Plan Administrator, can be
expected to result in death or which has lasted or can be expected to last
for a continuous period of not less than twelve (12) months.
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2.37 Trust. The fund maintained by the Trustee for the investment
of Plan assets in accordance with the terms and conditions of the Trust
Agreement.
2.38 Trust_Agreement. The agreement between the Employer and the
Trustee under which the assets of the Plan are held, administered, and
managed. The provisions of the Trust Agreement shall be considered an
integral part of this Plan as if set forth fully herein.
2.39 Trustee. The individual or corporate Trustee or Trustees
under the Trust Agreement as they may be constituted from time to time.
2.40 Valuation_Date. The last day of each Plan Year and such other
dates as may be determined by the Plan Administrator, as provided in
section 5.6 for valuing the Trust assets.
2.41 Vesting_Computation_Period. The Plan Year.
2.42 Year_of_Service. An Eligibility Computation Period, Vesting
Computation Period, or Plan Year, whichever is applicable, during which
an Employee has completed at least one thousand (1,000) Hours of Service
(whether or not continuous). The Employer may, in the Adoption Agreement,
specify a fewer number of hours.
ARTICLE 3
ELIGIBILITY AND YEARS OF SERVICE
3.1 Eligibility_Requirements.
(a) Each Employee of the Affiliated Employers shall become
a Participant in the Plan as of the first Entry Date after the date on
which the Employee has satisfied the minimum age and service requirements
specified in the Adoption Agreement.
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(b) The Employer may elect in the Adoption Agreement to
exclude from participation:
(i) Employees included in a unit of employees covered
by a collective bargaining agreement between the Employer and Employee
representatives, if retirement benefits were the subject of good faith
bargaining. For this purpose, the term "Employee representatives" does
not include any organization more than half of whose members are Employees
who are owners, officers, or executives of the Employer; and
(ii) nonresident aliens who receive no earned income
from the Employer which constitutes income from sources within the United
States.
3.2 Participation_and_Service_Upon_Reemployment. Upon the
reemployment of any Employee, the following rules shall determine his
eligibility to participate in the Plan and his credit for prior service.
(a) Participation. If the reemployed Employee was a
Participant in the Plan during his prior period of employment, he shall
be eligible upon reemployment to resume participation in the Plan. If the
reemployed Employee was not a Participant in the Plan, he shall be
considered a new Employee and required to meet the requirements of section
3.1 in order to be eligible to participate in the Plan, subject to the
reinstatement of credit for prior service under paragraph (b) below.
(b) Credit_for_Prior_Service. In the case of any Employee
who is reemployed before or after incurring a Break in Service, any Hour
of Service and Year of Service credited to the Employee at the end of his
prior period of employment shall be reinstated as of the date of his
reemployment.
3.3 Predecessor_Employers. If specified in the Adoption
Agreement, Years of Service with a predecessor employer will be treated
as service for the Employer for eligibility purposes; provided, however,
if the Employer maintains the plan of a predecessor employer, Years of
Service with such employer will be treated as service with the Employer
without regard to any election.
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ARTICLE 4
CONTRIBUTIONS
4.1 Employer_Contributions.
(a) Money_Purchase_Pension_Contributions. For each Plan
Year, the Employer shall contribute to the Trust an amount equal to such
uniform percentage of Compensation of each eligible Participant as may be
determined by the Employer in accordance with the money purchase pension
contribution formula specified in the Adoption Agreement. Subject to the
limitations of section 5.4, the money purchase pension contribution
formula may be integrated with Social Security, as set forth in the
Adoption Agreement.
(b) Profit_Sharing_Contribution. For each Plan Year, the
Employer shall contribute to the Trust an amount as may be determined by
the Employer in accordance with the profit sharing formula set forth in
the Adoption Agreement.
(c) Eligible_Participants. Subject to the Minimum
Allocation rules of section 5.2 and the exclusions specified in this
section, each Participant shall be eligible to share in the Employer
Contribution. An Employer may elect in the Adoption Agreement that
Participants who terminate employment during the Plan Year with not more
than five hundred (500) Hours of Service and who are not Employees as of
the last day of the Plan Year (other than Participants who die, retire or
become totally and Permanently Disabled during the Plan Year) shall not
be eligible to share in the Employer Contribution. An Employer may
further elect in the Adoption Agreement to allocate a contribution on
behalf of a Participant who completes fewer than five hundred (500) Hours
of Service and is otherwise ineligible to share in the Employer
Contribution. If the Employer fails to specify in the Adoption Agreement
the number of Hours of Service required to share in the Employer
Contribution, the number shall be five hundred (500) Hours of Service.
(d) Contribution_Limitation. In no event shall any Employer
Contribution exceed the maximum amount deductible from the Employer's
income under section 404 of the Code, or the maximum limitations under
section 415 of the Code provided in ARTICLE 6.
4.2 Payment. All Employer Contributions to the Trust for any Plan
Year shall be made either in one lump-sum or in installments in U.S.
currency, by check, or in Shares within the time prescribed by law,
including extensions granted by the Internal Revenue Service, for filing
the Employer's federal income tax return for the taxable year with or
within which such Plan Year ends. All Employer Contributions to the Trust
for a money purchase pension plan for any Plan Year shall be made within
the time prescribed by regulations under section 412(c)(10) of the Code.
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4.3 Nondeductible_Voluntary_Contributions_by_Partici pants.
(a) This Plan will not accept nondeductible Employee
contributions for Plan Years beginning after the Plan Year in which this
Plan is adopted by the Employer. Employee contributions made with respect
to Plan years beginning after December 31, 1986 will be limited so as to
meet the nondiscrimination test of section 401(m).
(b) A separate account shall be maintained by the Trustee
for the nondeductible Employee contributions of each Participant.
(c) Employee contributions and earnings thereon shall be
fully vested and nonforfeitable at all times.
(d) The provisions of this section shall apply to Employee
contributions made prior to the first Plan Year after the Plan Year in
which the Employer adopts this Plan.
4.4 Rollovers.
(a) Subject to the approval of the Plan Administrator, a
participant who has participated in any other qualified plan described in
section 401(a) of the Code or in a qualified annuity plan described in
section 403(a) of the Code shall be permitted to make a rollover
contribution in the form of cash to the Trustee of an amount received by
the Participant that is attributable to participation in such other plan
(reduced by any nondeductible voluntary contributions he made to the
plan), provided that the rollover contribution complies with all
requirements of sections 402(a)(5) or 403(a)(4) of the Code, whichever is
applicable.
(b) Before approving such a Participant rollover, the Plan
Administrator may request from the Participant or the Employer any
documents which the Plan Administrator, in its discretion, deems necessary
for such rollover.
(c) Any rollover contribution to the Trust shall be credited
to the Participant's rollover subaccount established under section 5.1 and
separately accounted for.
4.5 Direct_Transfers.
(a) The Plan shall accept a transfer of assets directly from
another plan qualified under sections 401(a) or 403(a) of the Code only
if the Plan Administrator, in its sole discretion, agrees to accept such
a transfer. In determining whether to accept such a transfer the Plan
Administrator shall consider the administrative inconvenience engendered
by such a transfer and any risks to the continued qualification of the
Plan under section 401(a) of the Code. Acceptance of any such transfer
shall not preclude the Plan Administrator from refusing any subsequent
such transfers.
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(b) Any transfer of assets accepted under this section shall
be credited to the Participant's direct transfer subaccount and shall be
separately accounted for at all times and shall remain subject to the
provisions of the transferor plan (as it existed at the time of such
transfer) to the extent required by section 411(d)(6) of the Code
(including, but not limited to, any rights to Qualified Joint and Survivor
Annuities and qualified preretirement survivor annuities) as if such
provisions were part of the Plan. In all other respects, however, such
transferred assets will be subject to the provisions of the Plan.
(c) Assets accepted under this section shall be fully vested
and nonforfeitable.
(d) Before approving such a direct transfer, the Plan
Administrator may request from the Participant or the Employer (or the
prior employer) any documents the Plan Administrator, in its discretion,
deems necessary for such direct transfer.
ARTICLE 5
ALLOCATIONS
5.1 Individual_Accounts. The Plan Administrator shall establish
and maintain an Account in the name of each Participant. The Account
shall contain the following subaccounts:
(a) A money purchase pension contribution subaccount to
which shall be credited each such Participant's share of (i) Employer
Contributions under section 4.1(a); (ii) the net earnings or net losses
on the investment of the assets of the Trust; (iii) distributions; and
(iv) dividends, capital gain distributions and other earnings received on
any Shares credited to the Participant's subaccount;
(b) A profit sharing contribution subaccount to which shall
be credited each such Participant's share of (i) Employer Contributions
under section 4.1(b); (ii) forfeitures; (iii) the net earnings or net
losses on the investment of the assets of the trust; (iv) distributions;
and (v) dividends, capital gain distributions and other earnings received
on any Shares credited to the Participant's subaccount;
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(c) A nondeductible voluntary contribution subaccount to
which shall be credited (i) nondeductible voluntary contributions by the
Participant under section 4.3; (ii) the net earnings or net losses on the
investment of the assets of the Trust; (iii) distributions; and
(iv) dividends, capital gain distributions and other earnings received on
any Shares credited to the Participant's subaccount;
(d) A direct transfer subaccount to which shall be credited
(i) contributions to the Trust accepted under section 4.5(a); (ii) the net
earnings or net losses on the investment of the assets of the Trust;
(iii) distributions; and (iv) dividends, capital gain distributions and
other earnings received on any Shares credited to the Participant's
subaccount;
(e) A rollover subaccount to which shall be credited
(i) contributions to the Trust accepted under section 4.4(a); (ii) the net
earnings or net losses on the investment of the assets of the Trust;
(iii) distributions; and (iv) dividends, capital gain distributions and
other earnings received on any Shares credited to the Participant's
subaccount.
5.2 Minimum_Allocation.
(a) Except as otherwise provided in this section, the
Employer Contributions and forfeitures allocated on behalf of any
Participant who is not a Key Employee shall not be less than the lesser
of three percent (3%) of such Participant's Compensation or in the case
where the Employer has no defined benefit plan which designates this Plan
to satisfy section 401 of the Code, the largest percentage of Employer
Contributions and forfeitures, as a percentage of the first two hundred
thousand dollars ($200,000) of the Key Employee's Compensation, allocated
on behalf of any Key Employee for that year. The minimum allocation is
determined without regard to any Social Security contribution. This
minimum allocation shall be made even though, under other Plan provisions,
the Participant would not otherwise be entitled to receive an allocation,
or would have received a lesser allocation for the year because of (i) the
Participant's failure to complete one thousand (1,000) Hours of Service
(or any equivalent provided in the Plan); or (ii) the Participant's
failure to make mandatory Employee contributions to the Plan; or
(iii) Compensation less than a stated amount. For purposes of this
subsection, all defined contribution plans required to be included in an
aggregation group under section 416(g)(2)(A)(i) shall be treated as a
single plan.
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(b) For purposes of computing the minimum allocation,
Compensation shall mean Compensation as defined in section 6.5(b) of the
Plan.
(c) The provision in subsection (a) above shall not apply
to any Participant who was not employed by the Employer on the last day
of the Plan Year.
(d) The provision in subsection (a) above shall not apply
to any Participant to the extent the Participant is covered under any
other plan or plans of the Employer and the Employer has provided in the
Adoption Agreement that the minimum allocation or benefit requirement
applicable to top-heavy plans will be met in the other plan or plans.
(e) The minimum allocation required (to the extent required
to be nonforfeitable under section 416(b)) may not be forfeited under
section 411(a)(3)(B) or 411(a)(3)(D).
5.3 Allocation_of_Employer_Contributions_and_Forfeitures.
(a) All money purchase pension contributions for a given
Plan Year shall be allocated to the Account of the Participant for whom
such contribution was made. Any forfeiture from a Participant's money
purchase pension contribution subaccount arising under the Plan for a
given Plan Year shall be applied as specified in the Adoption Agreement,
either: (i) to reduce the Employer Contribution in that year, or if in
excess of the Employer Contribution for such Plan Year, the excess amounts
shall be used to reduce the Employer Contribution in the next succeeding
Plan Year or Years or (ii) to be added to the Employer Contributions and
allocated accordingly.
(b) All profit sharing contributions and forfeitures from
a Participant's profit sharing contribution subaccount will be allocated
to the Account of each Participant in the ratio that such Participant's
Compensation bears to the Compensation of all Participants. However, if
the profit sharing contribution formula selected in the Adoption
Agreement is integrated with Social Security, profit sharing contributions
for the Plan Year plus any forfeitures will be allocated to Participants'
Accounts as follows:
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(i) Step_One. Contributions and forfeitures will be
allocated to each Participant's Account in the ratio that each
Participant's total Compensation bears to all Participants' total
Compensation, but not in excess of three percent (3%) of each
Participant's Compensation. (Step One is not applicable if the Employer
enters into the money purchase pension Adoption Agreement).
(ii) Step_Two. Any contributions and forfeitures
remaining after the allocation in Step One (if any) will be allocated to
each Participant's Account in the ratio that each Participant's
Compensation for the Plan Year in excess of the Integration Level bears
to the excess Compensation of all Participants, but not in excess of three
percent (3%). (Step Two is not applicable if the Employer enters into the
money purchase pension Adoption Agreement).
(iii) Step_Three. Any contributions and forfeitures
remaining after the allocation in Step Two (if any) will be allocated to
each Participant's Account in the ratio that the sum of each Participant's
total Compensation and Compensation in excess of the Integration Level
bears to the sum of all Participants' total Compensation and Compensation
in excess of the Integration Level, but not in excess of whichever of the
following is applicable:
(i) if the Employer has not adopted the money
purchase pension Adoption Agreement, then the Maximum Profit Sharing
Disparity Rate; or
(ii) If the Employer has adopted the money purchase
pension Adoption Agreement, then the lesser of:
(1) the percentage of each Participant's
Compensation for the Plan Year up to the Integration Level determined by
dividing the allocation by such Compensation (the base contribution
percentage); or
(2) the Maximum Disparity Rate.
(iv) Step_Four. Any remaining contributions or
forfeitures will be allocated to each Participant's Account in the ratio
that each Participant's total Compensation for the Plan Year bears to all
Participants' total Compensation for that year.
(c) Notwithstanding anything in (a) or (b) above to the
contrary, forfeitures arising under a Participant's money purchase pension
contribution subaccount will only be used to reduce the contributions of
the Participant's Employer who adopted this Plan, and forfeitures arising
under a Participant's profit sharing contribution subaccount will be
reallocated only for the benefit of Employees of the Participant's
Employer who adopted this Plan.
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5.4 Coordination_of_Social_Security_Integration. If the Employer
maintains plans involving integration with Social Security other than this
Plan, and if any Participant is eligible to participate in more than one
of such plans, all such plans will be considered to be integrated if the
extent of the integration of all such plans does not exceed one hundred
percent (100%). For purposes of the preceding sentence, the extent of
integration of a plan is the ratio (expressed as a percentage) which the
actual benefits, benefit rate, offset rate, or Employer Contribution rate
under the plan bears to the integration limitation applicable to such
plan. If the Employer enters into both the money purchase pension
Adoption Agreement and the profit sharing Adoption Agreement under this
Plan, integration with Social Security may only be selected in one Adop-
tion Agreement.
5.5 Withdrawals_and_Distributions. Any distribution to a
Participant or his Beneficiary, any amount transferred from a
Participant's Account directly to the Trustee of any other qualified plan
described in section 401(a) of the Code or to a qualified annuity plan
described in section 403(a) of the Code, or any withdrawal by a
Participant shall be charged to the appropriate subaccount(s) of the
Participant as of the date of the distribution or the withdrawal.
5.6 Determination_of_Value_of_Trust_Fund_and_of_Net
Earnings_or_Losses. As of each Valuation Date the Trustee shall determine
for the period then ended the sum of the net earnings or losses of the
Trust (excluding with respect to Shares and other assets specifically
allocated to a specific Participant's subaccount, (i) dividends and
capital gain distributions from Shares, (ii) receipts or income
attributable to insurance policies, (iii) income gains and/or losses
attributable to a Participant's loans made pursuant to ARTICLE 13 or to
any other assets) which shall reflect accrued but unpaid interest,
dividends, gains, or losses realized from the sale, exchange or collection
of assets, other income received, appreciation in the fair market value
of assets, depreciation in the fair market value of assets, administration
expenses, and taxes and other expenses paid. Gains or losses realized and
adjustments for appreciation or depreciation in fair market value shall
be computed with respect to the difference between such value as of the
preceding Valuation Date or date of purchase, whichever is applicable, and
the value as of the date of disposition or the current Valuation Date,
whichever is applicable.
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5.7 Allocation_of_Net_Earnings_or_Losses.
(a) As of each Valuation Date the net earnings or losses of
the Trust (excluding with respect to Shares and other assets specifically
allocated to a specific Participant's subaccount, (i) dividends and
capital gain distributions from Shares, (ii) dividends or credits
attributable to insurance policies, (iii) income gains and/or losses
attributable to a Participant's loans made pursuant to ARTICLE 13 or to
any other assets, all of which shall be allocated to such Participant's
subaccount) for the valuation period then ending shall be allocated to the
Accounts of all Participants (or Beneficiaries) having credits in the fund
both on such date and at the beginning of such valuation period. Such
allocation shall be made by the application of a fraction, the numerator
of which is the value of the Account of a specific Participant (or
Beneficiary) as of the immediately preceding Valuation Date, reduced by
any distributions therefrom since such preceding Valuation Date, and the
denominator of which is the total value of all such Accounts as of the
preceding Valuation Date, reduced by any distributions therefrom since
such preceding Valuation Date.
(b) To the extent that Shares and other assets are
specifically allocated to a specific Participant's subaccount:
(i) dividends and capital gain distributions from Shares; (ii) dividends
or credits attributable to insurance policies; and (iii) income gains
and/or losses attributable to a Participant's loans made pursuant to
ARTICLE 13 or to any other assets, all shall be allocated to such Partici-
pant's subaccount.
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5.8 Responsibilities_of_the_Plan_Administrator. The Plan
Administrator shall maintain accurate records with respect to the
contributions made by or on behalf of Participants under the Plan, and
shall furnish the Trustee with written instructions directing the Trustee
to allocate all Plan contributions to the Trust among the separate
Accounts of Participants in accordance with section 5.1 above. In making
any such allocation, the Trustee shall be fully entitled to rely on the
instructions furnished by the Plan Administrator, and shall be under no
duty to make any inquiry or investigation with respect thereto.
ARTICLE 6
LIMITATIONS ON ALLOCATIONS
6.1 Employers_Who_Do_Not_Maintain_Other_Qualified Plans.
(a) If the Participant does not participate in, and has
never participated in another qualified plan or a welfare benefit fund,
as defined in section 419(e) of the Code, maintained by the Employer, or
an individual medical account, as defined in section 415(l)(2) of the
Code, maintained by the Employer, which provides an Annual Addition as
defined in section 6.5(a), the amount of Annual Additions that may be
credited to the Participant's Account for any Limitation Year will not
exceed the lesser of the Maximum Permissible Amount or any other
limitation contained in this Plan. If the Employer Contribution that
would otherwise be contributed or allocated to the Participant's Account
would cause the Annual Additions for the Limitation Year to exceed the
Maximum Permissible Amount, the amount contributed or allocated will be
reduced so that the Annual Additions for the Limitation Year will equal
the Maximum Permissible Amount.
(b) Prior to determining the Participant's actual
Compensation for the Limitation Year, the Employer may determine the
Maximum Permissible Amount for a Participant on the basis of a reasonable
estimation of the Participant's Compensation for the Limitation Year,
uniformly determined for all Participants similarly situated.
(c) As soon as is administratively feasible after the end
of the Limitation Year, the Maximum Permissible Amount for the Limitation
Year will be determined on the basis of the Participant's actual
Compensation for the Limitation Year.
(d) If, pursuant to subsection (c) or as a result of the
allocation of forfeitures, there is an Excess Amount the excess will be
disposed of as follows:
(i) Any nondeductible voluntary Employee
contributions, to the extent they would reduce the Excess Amount, will be
returned to the Participant;
(ii) If after the application of paragraph (i) an
Excess Amount still exists, and the Participant is covered by the Plan at
the end of the Limitation Year, the Excess Amount in the Participant's
Account will be used to reduce Employer Contributions (including any
allocation of forfeitures) for such Participant in the next Limitation
Year, and each succeeding Limitation Year if necessary;
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(iii) If after the application of paragraph (i) an
Excess Amount still exists, and the Participant is not covered by the Plan
at the end of the Limitation Year, the Excess Amount will be held
unallocated in a suspense account. The suspense account will be applied
to reduce future Employer Contributions (including allocation of any
forfeitures) for all remaining Participants in the next Limitation Year,
and each succeeding Limitation Year if necessary;
(iv) If a suspense account is in existence at any time
during the Limitation Year pursuant to this section, it will not
participate in the allocation of the Trust's investment gains and losses.
If a suspense account is in existence at any time during a particular
Limitation Year, all amounts in the suspense account must be allocated and
reallocated to Participants' Accounts before any Employer or any Employee
contributions may be made to the Plan for that Limitation Year. Excess
amounts may not be distributed to Participants or former Participants.
6.2 Employers_Who_Maintain_Other_Qualified_Master_or
Prototype_Defined_Contribution_Plans.
(a) This section applies if, in addition to this Plan, the
Participant is covered under another qualified master or prototype defined
contribution plan maintained by the Employer, a welfare benefit fund, as
defined in section 419(e) of the Code maintained by the Employer or an
individual medical account, as defined in section 415(l)(2) of the Code,
maintained by the Employer which provides an Annual Addition as defined
in section 6.5(a), during any Limitation Year. The Annual Additions that
may be credited to a Participant's Account under this Plan for any such
Limitation Year will not exceed the Maximum Permissible Amount reduced by
the Annual Additions credited to a Participant's Account under the other
plans and welfare benefit funds for the same Limitation Year. If the
Annual Additions with respect to the Participant under other defined
contribution plans and welfare benefit funds maintained by the Employer
are less than the Maximum Permissible Amount and the Employer Contribution
that would otherwise be contributed or allocated to the Participant's
Account under this Plan would cause the Annual Additions for the
Limitation Year to exceed this limitation, the amount contributed or
allocated will be reduced so that the Annual Additions under all such
plans and funds for the Limitation Year will equal the Maximum Permissible
Amount. If the Annual Additions with respect to the Participant under
such other defined contribution plans and welfare benefit funds in the
aggregate are equal to or greater than the Maximum Permissible Amount, no
amount will be contributed or allocated to the Participant's Account under
this Plan for the Limitation Year.
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(b) Prior to determining the Participant's actual
Compensation for the Limitation Year, the Employer may determine the
Maximum Permissible Amount for a Participant in the manner described in
section 6.1(b).
(c) As soon as is administratively feasible after the end
of the Limitation Year, the Maximum Permissible Amount for the Limitation
Year will be determined on the basis of the Participant's actual
Compensation for the Limitation Year.
(d) If, pursuant to section 6.2(c), or as a result of the
allocation of forfeitures, a Participant's Annual Additions under this
Plan and such other plans would result in an Excess Amount for a
Limitation Year, the Excess Amount will be deemed to consist of the Annual
Additions last allocated, except that Annual Additions attributable to a
welfare benefit fund or individual medical account will be deemed to have
been allocated first regardless of the actual allocation date.
(e) If an Excess Amount was allocated to a Participant on
an allocation date of this Plan which coincides with an allocation date
of another plan, the Excess Amount attributed to this Plan will be the
product of:
(i) the total Excess Amount allocated as of such
date, times
(ii) the ratio of (1) the Annual Additions allocated
to the Participant for the Limitation Year as of such date under this Plan
to (2) the total Annual Additions allocated to the Participant for the
Limitation Year as of such date under this and all the other qualified
master or prototype defined contribution plans.
(f) Any Excess Amount attributed to this Plan will be
disposed of in the manner described in section 6.1(d).
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6.3 Employers_Who,_In_Addition_to_this_Plan,_Maintain
Other_Qualified_Plans_Which_Are_Defined_Contribution_Plans
Other_than_Master_or_Prototype_Plans. If the Participant is covered under
another qualified defined contribution plan maintained by the Employer
which is not a Master or Prototype Plan, Annual Additions which may be
credited to the Participant's Account under this Plan for any Limitation
Year will be limited in accordance with section 6.2 as though the other
plan were a Master or Prototype Plan unless the Employer provides other
limitations in the Adoption Agreement.
6.4 Employers_Who,_In_Addition_to_This_Plan,_Maintain
A_Qualified_Defined_Benefit_Plan. If the Employer maintains, or at any
time maintained, a qualified defined benefit plan covering any Participant
in this Plan, the sum of the Participant's Defined Benefit Fraction and
Defined Contribution Fraction will not exceed 1.0 in any Limitation Year.
The Annual Additions which may be credited to the Participant's Account
under this Plan for any Limitation Year will be limited in accordance with
the Adoption Agreement.
6.5 Definitions. Unless otherwise expressly provided herein, for
purposes of this ARTICLE only, the following definitions and rules of
interpretation shall apply:
(a) Annual_Additions. The sum of the following amounts
credited to a Participant's Account for the Limitation Year:
(i) Employer Contributions;
(ii) Employee contributions;
(iii) forfeitures; and
(iv) amounts allocated after March 31, 1984 to an
individual medical account, as defined in section 415(l)(2) of the Code,
which is part of a pension or annuity plan maintained by the Employer, are
treated as Annual Additions to a defined contribution plan. Also, amounts
derived from contributions paid or accrued after December 31, 1985, in
taxable years ending after such date, which are attributable to post-
retirement medical benefits allocated to the separate account of a key
employee, as defined in section 419A(d)(3) of the Code, under a welfare
benefit fund, as defined in section 419(e) of the Code, maintained by the
Employer, are treated as Annual Additions to a defined contribution plan.
For this purpose, any Excess Amount applied under sections 6.1(d) or
6.2(f) in the Limitation Year to reduce Employer Contributions will be
considered Annual Additions for such Limitation Year.
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(b) Compensation. A Participant's earned income, wages,
salaries, and fees for professional services and other amounts received
for personal services actually rendered in the course of employment with
the Employer maintaining the Plan (including, but not limited to,
commissions paid salesmen, compensation for services on the basis of a
percentage of profits, commissions on insurance premiums, tips and
bonuses), and excluding the following:
(i) Employer contributions to a plan of deferred
compensation which are not includable in the Employee's gross income for
the taxable year in which contributed, or Employer Contributions under a
simplified employee pension plan to the extent such contributions are
excluded from the Employee's gross income, or any distributions from a
plan of deferred compensation;
(ii) Amounts realized from the exercise of a
nonqualified stock option, or when restricted stock (or property) held by
the Employee either becomes freely transferable or is no longer subject
to a substantial risk of forfeiture;
(iii) Amounts realized from the sale, exchange or other
disposition of stock acquired under a qualified stock option; and
(iv) Other amounts which received special tax
benefits, or contributions made by the Employer (whether or not under a
salary reduction agreement) towards the purchase of an annuity described
in section 403(b) of the Code (whether or not the amounts are actually
excludable from the gross income of the Employee).
For purposes of applying the limitations of this
ARTICLE, Compensation for a Limitation Year is the Compensation actually
paid or includable in gross income during such year.
Notwithstanding the preceding sentence, Compensation for
a Participant in a defined contribution plan who is Totally and
Permanently Disabled (as defined in section 22(e)(3) of the Code) is the
Compensation such Participant would have received for the Limitation Year
if the Participant had been paid at the rate of Compensation paid
immediately before becoming permanently and totally disabled; such imputed
Compensation for the disabled Participant may be taken into account only
if the Participant is not a Highly-Compensated Employee (as defined in
section 414(q) of the Code), and contributions made on behalf of such
Participant are nonforfeitable when made.
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(c) Defined_Benefit_Fraction. A fraction, the numerator of
which is the sum of the Participant's Projected Annual Benefits under all
the defined benefit plans (whether or not terminated) maintained by the
Employer, and the denominator of which is the lesser of one hundred
percent (100%) of the dollar limitation determined for the Limitation Year
under sections 415(b) and (d) of the Code or one hundred forty percent
(140%) of highest average compensation, including any adjustments under
section 415(b) of the Code.
Notwithstanding the above, if the Participant was a
Participant as of the first day of the first Limitation Year beginning
after December 31, 1986, in one or more defined benefit plans maintained
by the Employer which were in existence on May 6, 1986, the denominator
of this fraction will not be less than one hundred twenty-five percent
(125%) of the sum of the annual benefits under such plans which the
Participant had accrued as of the close of the last Limitation Year
beginning before January 1, 1987, disregarding any changes in the terms
and conditions of the Plan after May 5, 1986. The preceding sentence
applies only if the defined benefit plans individually and in the
aggregate satisfied the requirements of section 415 of the Code for all
Limitation Years beginning before January 1, 1987.
(d) Defined_Contribution_Dollar_Limitation. Thirty thousand
dollars ($30,000) or, if greater, one- fourth (1/4) of the defined benefit
dollar limitation set forth in section 415(b)(1) of the Code as in effect
for the Limitation Year.
(e) Defined_Contribution_Fraction. A fraction, the
numerator of which is the sum of the Annual Additions to the Participant's
Account under all the defined contribution plans (whether or not
terminated) maintained by the Employer for the current and all prior
Limitation Years (including the Annual Additions attributable to the
Participant's nondeductible voluntary contributions to all defined benefit
plans, whether or not terminated, maintained by the Employer, and the
Annual Additions attributable to all welfare benefit funds, as defined in
section 419(e) of the Code and individual medical accounts, as defined in
section 415(l)(2) of the Code, maintained by the Employer), and the
denominator of which is the sum of the maximum aggregate amounts for the
current and all prior Limitation Years of service with the Employer
(regardless of whether a defined contribution plan was maintained by the
Employer). The maximum aggregate amount in any Limitation Year is the
lesser of one hundred percent (100%) of the dollar limitation in effect
under section 415(c)(1)(A) of the Code or thirty-five percent (35%) of the
Participant's Compensation for such year.
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If the Participant was a Participant as of the end of the
first day of the first Limitation Year beginning after December 31, 1986,
in one or more defined contribution plans maintained by the Employer which
were in existence on May 6, 1986, the numerator of this fraction will be
adjusted if the sum of this fraction and the Defined Benefit Fraction
would otherwise exceed 1.0 under the terms of this Plan. Under the
adjustment, an amount equal to the product of (1) the excess of the sum
of the fractions over 1.0 times (2) the denominator of this fraction, will
be permanently subtracted from the numerator of this fraction. The
adjustment is calculated using the fractions as they would be computed as
of the end of the last Limitation Year beginning before January 1, 1987,
and disregarding any changes in the terms and conditions of the Plan made
after May 5, 1986, but using the section 415 limitation applicable to the
first Limitation Year beginning on or after January 1, 1987. The Annual
Addition for any Limitation Year beginning before January 1, 1987, shall
not be recomputed to treat all Employee contributions as Annual Additions.
(f) Employer. For purposes of this ARTICLE, Employer shall
mean the employer that adopts this Plan, and all members of a controlled
group of corporations (as defined in section 414(b) of the Code as
modified by section 415(h) of the Code), all commonly controlled trades
or businesses (as defined in section 414(c) of the Code as modified by
section 415(h) of the Code), or affiliated service groups (as defined in
section 414(m) of the Code) of which the adopting Employer is a part and
any other entity required to be aggregated with the Employer pursuant to
regulations under section 414(o) of the Code.
(g) Excess_Amount. The excess of the Participant's Annual
Addition for the Limitation Year over the Maximum Permissible Amount.
(h) Highest_Average_Compensation. The average compensation
for the three consecutive Plan Years that produce the highest average.
(i) Limitation_Year. A Plan Year, or the twelve (12)
consecutive month period elected by the Employer in the Adoption
Agreement. All qualified plans maintained by the Employer must use the
same Limitation Year. If the Limitation Year is amended to a different
twelve (12) consecutive month period, the new Limitation Year must begin
on a date within the Limitation Year in which the amendment is made.
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(j) Master_or_Prototype_Plan. A plan the form of which is
the subject of a favorable opinion letter from the Internal Revenue
Service.
(k) Maximum_Permissible_Amount. The maximum Annual Addition
that may be contributed or allocated to a Participant's Account under the
Plan for any Limitation Year shall not exceed the lesser of:
(a) the Defined Contribution Dollar Limitation;
or
(b) twenty-five percent (25%) of the Participant's
Compensation for the Limitation Year.
The Compensation limitation referred to in subsection (b)
shall not apply to any contribution for medical benefits (within the
meaning of section 401(h) or section 419A(f)(2) of the Code) which is
otherwise treated as an Annual Addition under section 415(l)(1) or section
419A(d)(2) of the Code.
If a short Limitation Year is created because of an amendment
changing the Limitation Year to a different twelve (12) consecutive month
period, the Maximum Permissible Amount will not exceed the Defined
Contribution Dollar Limitation multiplied by the following fraction:
Number of Months in the Short Limitation Year
---------------------------------------------
12
(l) Projected_Annual_Benefit. The annual retirement benefit
(adjusted to an actuarially equivalent straight life annuity if such
benefit is expressed in a form other than a straight life annuity or
Qualified Joint and Survivor Annuity) to which the Participant would be
entitled under the terms of the Plan assuming:
(i) the Participant will continue employment until
Normal Retirement Age under the Plan (or current age, if later), and
(ii) the Participant's Compensation for the current
Limitation Year and all other relevant factors used to determine benefits
under the Plan will remain constant for all future Limitation Years.
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ARTICLE 7
TRUST FUND
7.1 Receipt_of_Contributions_by_Trustee. All contributions to the
Trust that are received by the Trustee, together with any earnings
thereon, shall be held, managed and administered by the Trustee named in
the Adoption Agreement in accordance with the terms and conditions of the
Trust Agreement and the Plan. The Trustee may use a Custodian designated
by the Sponsor to perform recordkeeping and custodial functions. The
Trustee shall be subject to the proper directions of the Employer or the
Plan Administrator made in accordance with the terms of the Plan and
ERISA.
7.2 Investment_Responsibility.
(a) If the Employer elects in the Adoption Agreement to
exercise investment authority and responsibility, the selection of the
investments in which assets of the Trust are invested shall be the
responsibility of the Plan Administrator and each Participant will have
a ratable interest in all assets of the Trust.
(b) If the Adoption Agreement so provides and the Employer
elects to permit each Participant or Beneficiary to select the investments
in his Account, no person, including the Trustee and the Plan
Administrator, shall be liable for any loss or for any breach of fiduciary
duty which results from such Participant's or Beneficiary's exercise of
control.
(c) If the Adoption Agreement so provides and the Employer
elects to permit each Participant or Beneficiary to select the investments
in his Account, the Employer or the Plan Administrator must complete a
schedule of Participant designations.
(d) If Participants and Beneficiaries are permitted to
select the investment in their Accounts, all investment related expenses,
including administrative fees charged by brokerage houses, will be charged
against the Accounts of the Participants.
(e) The Plan Administrator may at any time change the
selection of investments in which the assets of the Trust are invested,
or subject to such reasonable restrictions as may be imposed by the
Sponsor for administrative convenience, may submit an amended schedule of
Participant designations. Such amended documents may provide for a
variance in the percentages of contributions to any particular investment
or a request that Shares in the Trust be reinvested in whole or in part
in other Shares.
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7.3 Investment_Limitations. The Sponsor may impose reasonable
investment limitations on the Employer and the Plan Administrator relating
to the type of permissible investments in the Trust or the minimum
percentage of Trust assets to be invested in Shares.
ARTICLE 8
VESTING
8.1 Nondeductible_Voluntary_Contributions_and Earnings. The
Participant's nondeductible voluntary contribution subaccount shall be
fully vested and nonforfeitable at all times and no forfeitures will occur
as a result of an Employee's withdrawal of nondeductible voluntary
contributions.
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8.2 Rollovers,_Transfers_and_Earnings. The Participant's rollover
subaccount and direct transfer subaccount shall be fully vested and
nonforfeitable at all times.
8.3 Employer_Contributions_and_Earnings. Notwithstanding the
vesting schedule elected by the Employer in the Adoption Agreement, the
Participant's money purchase pension contribution subaccount and profit
sharing contribution subaccount shall be fully vested and nonforfeitable
upon the Participant's death, disability, attainment of Normal Retirement
Age, or, if the Adoption Agreement provides for an Early Retirement Date,
attainment of the required age and completion of the required service.
In the absence of any of the preceding events, the Participant's money
purchase contribution subaccount and his profit sharing contribution
subaccount shall vest in accordance with a minimum vesting schedule
specified in the Adoption Agreement. The schedule must be at least as
favorable to Participants as either schedule (a) or (b) below.
(a) Graduated vesting according to the following schedule:
Years_of_Service Vested_Percentage
Less than 2 0%
2 but less than 3 20%
3 but less than 4 40%
4 but less than 5 60%
5 but less than 6 80%
6 or more 100%
(b) Full one hundred percent (100%) vesting after three (3)
Years of Service.
8.4 Amendments_to_Vesting_Schedule.
(a) If the Plan's vesting schedule is amended, or the Plan
is amended in any way that directly or indirectly affects the computation
of the Participant's nonforfeitable percentage or if the Plan is deemed
amended by an automatic change to or from a top-heavy vesting schedule,
each Participant with at least three (3) Years of Service with the
Employer may elect, within a reasonable period after the adoption of the
amendment or change, to have the nonforfeitable percentage computed under
the Plan without regard to such amendment or change. For any Participants
who do not have at least one (1) Hour of Service in any Plan Year
beginning after December 31, 1988, the preceding sentence shall be applied
by substituting "five (5) Years of Service" for "three (3) Years of
Service" where such language appears.
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(b) The period during which the election may be made shall
commence with the date the amendment is adopted or deemed to be made and
shall end on the latest of:
(i) sixty (60) days after the amendment is adopted;
(ii) sixty (60) days after the amendment becomes
effective; or
(iii) sixty (60) days after the Participant is issued
written notice of the amendment by the Employer or Plan Administrator.
(c) No amendment to the Plan shall be effective to the
extent that it has the effect of decreasing a Participant's accrued
benefit. Notwithstanding the preceding sentence, a Participant's Account
balance may be reduced to the extent permitted under section 412(c)(8) of
the Code. For purposes of this paragraph, a Plan amendment which has the
effect of decreasing a Participant's Account balance or eliminating an
optional form of benefit, with respect to benefits attributable to service
before the amendment shall be treated as reducing an accrued benefit.
Furthermore, if the vesting schedule of a Plan is amended, in the case of
an Employee who is a Participant as of the later of the date such
amendment is adopted or the date it becomes effective, the nonforfeitable
percentage (determined as of such date) of such Employee's right to his
Employer-derived accrued benefit will not be less than his percentage
computed under the Plan without regard to such amendment.
8.5 Determination_of_Years_of_Service. For purposes of
determining the vested and nonforfeitable percentage of the Participant's
Employer Contribution subaccounts, all of the Participant's Years of
Service with the Employer or an Affiliated Employer shall be taken into
account. If specified in the Adoption Agreement, Years of Service with
a predecessor employer will be treated as service for the Employer;
provided, however, if the Employer maintains the plan of a predecessor
employer, Years of Service with such predecessor employer will be treated
as service with the Employer without regard to any election.
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8.6 Forfeiture_of_Nonvested_Amounts.
(a) For Plan Years beginning before 1985, any portion of a
Participant's Account that is not vested shall be forfeited by him as of
the last day of the Plan Year in which a Break in Service occurs. For
Plan Years beginning after 1984, any portion of a Participant's Account
that is not vested shall be forfeited by him as of the last day of the
Plan Year in which his fifth consecutive Break in Service occurs. Any
amounts thus forfeited shall be reallocated as provided in ARTICLE 5 and
shall not be considered part of a Participant's Account in computing his
vested interest. The remaining portion of the Participant's Account will
be nonforfeitable.
(b) If a distribution is made at a time when a Participant
has a vested right to less than one hundred percent (100%) of the value
of the Participant's Account attributable to Employer Contributions and
forfeitures, as determined in accordance with the provisions of section
8.3, and the nonvested portion of the Participant's Account has not yet
been forfeited in accordance with paragraph (a) above:
(i) a separate remainder subaccount shall be
established for the Participant's interest in the Plan as of the time of
the distribution, and
(ii) at any relevant time the Participant's vested
portion of the separate remainder subaccount shall be equal to an amount
("X") determined by the following formula:
X = P(AB + (R x D)) - (R x D)
For purposes of applying the formula: P is the vested
percentage at the relevant time; AB is the Account balance at the relevant
time; D is the amount of the distribution; and R is the ratio of the
Account balance at the relevant time to the Account balance after
distribution.
8.7 Reinstatement_of_Benefit. If a benefit is forfeited because
a Participant or Beneficiary cannot be found, such benefit will be
reinstated if a claim is made by the Participant or Beneficiary.
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ARTICLE 9
JOINT AND SURVIVOR ANNUITY REQUIREMENTS
9.1 General. The provisions of this ARTICLE shall apply to any
Participant who is credited with at least one (1) Hour of Service with the
Employer on or after August 23, 1984, and such other Participants as
provided in section 9.7.
9.2 Qualified_Joint_and_Survivor_Annuity. Unless an optional form
of benefit is selected pursuant to a Qualified Election within the ninety
(90) day period ending on the Annuity Starting Date, a married
Participant's Vested Account Balance will be paid in the form of a
Qualified Joint and Survivor Annuity and an unmarried Participant's Vested
Account Balance will be paid in the form of a life annuity. The
Participant may elect to have such annuity distributed upon attainment of
the Earliest Retirement Age under the Plan.
9.3 Qualified_Preretirement_Survivor_Annuity. Unless an optional
form of benefit has been selected within the Election Period pursuant to
a Qualified Election, if a Participant dies before the Annuity Starting
Date, then the Participant's Vested Account Balance shall be applied
toward the purchase of an annuity for the life of the Surviving Spouse.
The Surviving Spouse may elect to have such annuity distributed within a
reasonable period after the Participant's death.
9.4 Definitions.
(a) Election_Period.
(i) The period which begins on the first day of the
Plan Year in which the Participant attains age thirty-five (35) and ends
on the date of the Participant's death. If a Participant separates from
service prior to the first day of the Plan Year in which age thirty-five
(35) is attained, with respect to the Account balance as of the date of
separation, the Election Period shall begin on the date of separation.
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(ii) A Participant who has not yet attained age
thirty-five (35) as of the end of any current Plan Year may make a special
Qualified Election to waive the qualified preretirement survivor annuity
for the period beginning on the date of such election and ending on the
first day of the Plan Year in which the Participant will attain age
thirty-five (35). Such election shall not be valid unless the Participant
receives a written explanation of the qualified preretirement survivor
annuity in such terms as are comparable to the explanation required under
section 9.5. Qualified preretirement survivor annuity coverage will be
automatically reinstated as of the first day of the Plan Year in which the
Participant attains age thirty-five (35). Any new waiver on or after such
date shall be subject to the full requirements of this ARTICLE.
(b) Earliest_Retirement_Age. The earliest date on which,
under the Plan, the Participant could elect to receive retirement
benefits.
(c) Qualified_Election.
(i) A waiver of a Qualified Joint and Survivor
Annuity or a qualified preretirement survivor annuity. Any waiver of a
Qualified Joint and Survivor Annuity or a qualified preretirement survivor
annuity shall not be effective unless:
(1) the Participant's Spouse consents in
writing to the election;
(2) the election designates a specific
Beneficiary, including any class of Beneficiaries or any contingent
Beneficiaries, which may not be changed without spousal consent (or the
Spouse expressly permits designations by the Participant without any
further spousal consent);
(3) the Spouse's consent acknowledges the
effect of the election; and
(4) the Spouse's consent is witnessed by a Plan
representative or notary public. Additionally, a Participant's waiver of
the Qualified Joint and Survivor Annuity shall not be effective unless the
election designates a form of benefit payment which may not be changed
without spousal consent (or the Spouse expressly permits designations by
the participant without any further spousal consent). If it is
established to the satisfaction of a Plan representative that there is no
Spouse or that the Spouse cannot be located, a waiver will be deemed a
Qualified Election.
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(ii) Any consent by a Spouse obtained under this
provision (or establishment that the consent of Spouse may not be
obtained) shall be effective only with respect to such Spouse. A consent
that permits designations by the Participant without any requirement of
further consent by such Spouse must acknowledge that the Spouse has the
right to limit consent to a specific Beneficiary, and a specific form of
benefit where applicable, and that the Spouse voluntarily elects to
relinquish either or both of such rights. A revocation of a prior waiver
may be made by a Participant without the consent of the Spouse at any time
before the commencement of benefits. The number of revocations shall not
be limited. No consent obtained under this provision shall be valid
unless the Participant has received notice as provided in section 9.5.
(d) Qualified_Joint_and_Survivor_Annuity. An immediate
annuity for the life of the Participant with a survivor annuity for the
life of the Spouse which equals fifty percent (50%) of the amount of the
annuity which is payable during the joint lives of the Participant and the
Spouse and which is the amount of benefit which can be purchased with the
Participant's Vested Account Balance.
(e) Spouse_(Surviving_Spouse). The Spouse or Surviving
Spouse of the Participant, provided that a former spouse will be treated
as the Spouse or Surviving Spouse and a current Spouse will not be treated
as the Spouse or Surviving Spouse to the extent provided under a qualified
domestic relations order as described in section 414(p) of the Code.
(f) Annuity_Starting_Date. The first day of the first
period for which an amount is paid as an annuity or any other form.
(g) Vested_Account_Balance. The aggregate value of the
Participant's Vested Account Balances derived from Employer and Employee
contributions (including rollovers and direct transfers), whether vested
before or upon death, including the proceeds of insurance contracts if
any, on the Participant's life. The provisions of this ARTICLE shall
apply to a Participant who is vested in amounts attributable to Employer
Contributions, Employee contributions (or both) at the time of death or
distribution.
9.5 Notice_Requirements.
(a) In the case of a Qualified Joint and Survivor Annuity,
the Plan Administrator shall no less than thirty (30) days and no more
than ninety (90) days prior to the Annuity Starting Date, provide each
Participant a written explanation of:
(i) the terms and conditions of a Qualified Joint and
Survivor Annuity;
(ii) the Participant's right to make and the effect
of an election to waive the Qualified Joint and Survivor Annuity form of
benefit;
(iii) the rights of a Participant's Spouse; and
(iv) the right to make, and the effect of, a
revocation of a previous election to waive the Qualified Joint and
Survivor Annuity.
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(b) In the case of a qualified preretirement survivor
annuity as described in section 9.3, the Plan Administrator shall provide
each Participant within the applicable period for such Participant a
written explanation of the qualified preretirement survivor annuity in
such terms and in such manner as would be comparable to the explanation
provided for meeting the requirements of subsection (a) applicable to a
Qualified Joint and Survivor Annuity.
(c) The applicable period for a Participant is whichever of
the following periods ends last:
(i) the period beginning with the first day of the
Plan Year in which the Participant attains age thirty-two (32) and ending
with the close of the Plan Year preceding the Plan Year in which the
Participant attains age thirty-five (35);
(ii) a reasonable period ending after the individual
becomes a Participant;
(iii) a reasonable period ending after subsection (e)
ceases to apply to the Participant;
(iv) a reasonable period ending after this ARTICLE
first applies to the Participant. Notwithstanding the foregoing, notice
must be provided within a reasonable period ending after separation from
service in the case of a Participant who separates from service before
attaining age thirty-five (35).
(d) For purposes of applying subsection (c), a reasonable
period ending after the enumerated events described above in subsections
(ii), (iii) and (iv) is the end of the two-year period beginning one (1)
year prior to the date the applicable event occurs, and ending one (1)
year after that date. In the case of a Participant who separates from
service before the Plan Year in which age thirty-five (35) is attained,
notice shall be provided within the two (2) year period beginning one (1)
year prior to separation and ending one (1) year after separation. If
such a participant thereafter returns to employment with the Employer, the
applicable period for such Participant shall be redetermined.
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(e) Notwithstanding the other requirements of this section,
the respective notices prescribed by this section need not be given to a
Participant if:
(i) the Plan "fully subsidizes" the cost of a
Qualified Joint and Survivor Annuity or qualified preretirement survivor
annuity; and
(ii) the Plan does not allow the Participant to waive
the Qualified Joint and Survivor Annuity or qualified preretirement
survivor annuity and does not allow a married Participant to designate a
nonspouse Beneficiary.
For purposes of this subsection, a plan fully subsidizes the
costs of a benefit if no increase in cost, or decrease in benefits to the
Participant may result from the Participant's failure to elect another
benefit.
9.6 Safe_Harbor_Rules.
(a) This section shall apply to a Participant in a profit
sharing plan, and to any distribution, made on or after the first day of
the first Plan year beginning after December 31, 1988, from or under a
separate account attributable solely to accumulated deductible Employee
contributions, as defined in section 72(o)(5)(B) of the Code, and
maintained on behalf of a Participant in a money purchase pension plan
(including a target benefit plan) if the following conditions are
satisfied:
(i) the Participant does not or cannot elect payments
in the form of a life annuity; and
(ii) on the death of a Participant, the Participant's
Vested Account Balance will be paid to the Participant's Surviving Spouse,
but if there is no Surviving Spouse, or if the Surviving Spouse has
consented in a manner conforming to a Qualified Election, then to the
Participant's Designated Beneficiary.
(b) The Surviving Spouse may elect to have distribution of
the Vested Account Balance commence within the ninety (90) day period
following the date of the Participant's death. The Account balance shall
be adjusted for gains or losses occurring after the Participant's death
in accordance with the provisions of the Plan governing the adjustment of
Account balances for other types of distributions.
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(c) This section shall not be operative with respect to a
Participant in a profit sharing plan if the plan is a direct or indirect
transferee of a defined benefit plan, money purchase plan, a target
benefit plan, stock bonus, or profit sharing plan which is subject to the
survivor annuity requirements of sections 401(a)(11) and 417 of the Code.
If this section is operative, then the provisions of this ARTICLE, other
than section 9.7, shall be inoperative.
(d) The Participant may waive the spousal death benefit
described in this section at any time provided that no such waiver shall
be effective unless it satisfies the conditions of section 9.4(c) (other
than the notification requirement referred to therein) that would apply
to the Participant's waiver of the qualified preretirement survivor
annuity.
(e) For purposes of this section, Vested Account Balance
shall mean, in the case of a money purchase pension plan or a target
benefit plan, the Participant's separate Account balance attributable
solely to accumulated deductible Employee contributions within the meaning
of section 72(o)(5)(B) of the Code. In the case of a profit sharing plan,
Vested Account Balance shall have the same meaning as provided in section
9.4(g).
9.7 Transitional_Rules.
(a) Any living Participant not receiving benefits on
August 23, 1984, who would otherwise not receive the benefits prescribed
by the previous sections of this ARTICLE must be given the opportunity to
elect to have the prior sections of this ARTICLE apply if such Participant
is credited with at least one (1) Hour of Service under this Plan or a
predecessor plan in a Plan Year beginning on or after January 1, 1976, and
such Participant had at least ten (10) years of vesting service when he
or she separated from service.
(b) Any living Participant not receiving benefits on
August 23, 1984, who was credited with at least one (1) Hour of Service
under this Plan or a predecessor plan on or after September 2, 1974, and
who is not otherwise credited with any service in a Plan Year beginning
on or after January 1, 1976, must be given the opportunity to have his or
her benefits paid in accordance with subsection (d).
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(c) The respective opportunities to elect (as described in
subsections (a) and (b) above) must be afforded to the appropriate
Participants during the period commencing on August 23, 1984, and ending
on the date benefits would otherwise commence to said Participants.
(d) Any Participant who has elected pursuant to subsection
(b) and any Participant who does not elect under subsection (a) or who
meets the requirements of subsection (a) except that such Participant does
not have at least ten (10) years of vesting service when he or she
separates from service, shall have his or her benefits distributed in
accordance with all of the following requirements if benefits would have
been payable in the form of a life annuity:
(i) Automatic_Joint_and_Survivor_Annuity. If
benefits in the form of a life annuity become payable to a married
Participant who:
(1) begins to receive payments under the Plan
on or after Normal Retirement Age; or
(2) dies on or after Normal Retirement Age
while still working for the Employer; or
(3) begins to receive payments on or after the
qualified early retirement age; or
(4) separates from service on or after
attaining Normal Retirement Age (or the qualified early retirement age)
and after satisfying the eligibility requirements for the payment of
benefits under the Plan and thereafter dies before beginning to receive
such benefits;
then such benefits will be received under this Plan in the form of a
Qualified Joint and Survivor Annuity, unless the Participant has elected
otherwise during the Election Period. The Election Period must begin at
least six (6) months before the Participant attains qualified early
retirement age and end not more than ninety (90) days before the
commencement of benefits. Any election hereunder will be in writing and
may be changed by the Participant at any time.
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(ii) Election_of_Early_Survivor_Annuity. A
Participant who is employed after attaining the qualified early retirement
age will be given the opportunity to elect, during the Election Period,
to have a survivor annuity payable on death. If the Participant elects
the survivor annuity, payments under such annuity must not be less than
the payments which would have been made to the Spouse under the Qualified
Joint and Survivor Annuity if the Participant had retired on the day
before his or her death. Any election under this provision will be in
writing and may be changed by the Participant at any time. The Election
Period begins on the later of (1) the 90th day before the Participant
attains the qualified early retirement age; or (2) the date on which
participation begins, and ends on the date the Participant terminates
employment.
(e) The following terms shall have the meanings specified
herein:
(i) Qualified_Early_Retirement_Age. The latest of:
(1) the earliest date, under the Plan, on which
the Participant may elect to receive retirement benefits;
(2) the first day of the 120th month beginning
before the Participant reaches Normal Retirement Age; or
(3) the date the Participant begins
participation.
(ii) Qualified_Joint_and_Survivor_Annuity. An annuity
for the life of the Participant with a survivor annuity for the life of
the Spouse as described in section 9.4(d).
ARTICLE 10
DISTRIBUTION PROVISIONS
10.1 Vesting_on_Distribution_Before_Break_in_Service.
(a) If an Employee terminates service, and the value of the
Employee's Vested Account Balance derived from Employer and Employee
contributions is not greater than three thousand five hundred dollars
($3,500), the Employee will receive a distribution of the value of the
entire vested portion of such Account balance and the nonvested portion
will be treated as a forfeiture. For purposes of this section, if the
value of an Employee's Vested Account Balance is zero, the Employee shall
be deemed to have received a distribution of such Vested Account Balance.
A Participant's Vested Account Balance shall not include accumulated
deductible Employee contributions within the meaning of section
72(o)(5)(B) of the Code for Plan Years beginning prior to January 1, 1989.
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(b) If an Employee terminates service and elects, in
accordance with this ARTICLE, to receive the value of his Vested Account
Balance, the nonvested portion will be treated as a forfeiture. If the
Employee elects to have distributed less than the entire vested portion
of the Account balance derived from Employer Contributions, the part of
the nonvested portion that will be treated as a forfeiture is the total
nonvested portion multiplied by a fraction, the numerator of which is the
amount of the distribution attributable to Employer Contributions and the
denominator of which is the total value of the vested Employer derived
Account balance.
(c) If an Employee receives a distribution pursuant to this
section and the Employee resumes employment covered under this Plan, the
Employee's Employer- derived Account balance will be restored to the
amount on the date of distribution if the Employee repays to the Plan the
full amount of the distribution attributable to Employer Contributions
before the earlier of five (5) years after the first date on which the
Participant is subsequently reemployed by the Employer, or the date the
Participant incurs five (5) consecutive one (1) year Breaks in Service
following the date of the distribution. If an Employee is deemed to
receive a distribution pursuant to this section, and the Employee resumes
employment covered under this Plan before the date the Participant incurs
five (5) consecutive one (1) year Breaks in Service, upon the reemployment
of such Employee, the Employer-derived Account balance of the Employee
will be restored to the amount on the date of such deemed distribution.
10.2 Restrictions_on_Immediate_Distributions.
(a) If the value of a Participant's Vested Account Balance
derived from Employer and Employee contributions exceeds (or at the time
of any prior distribution exceeded) three thousand five hundred dollars
($3,500) and the Account balance is immediately distributable, the
Participant and the Participant's Spouse (or where either the Participant
or the Spouse has died, the survivor) must consent to any distribution of
such Account balance. The consent of the Participant and the
Participant's Spouse shall be obtained in writing within the ninety (90)
day period ending on the Annuity Starting Date. The Annuity Starting Date
is the first day of the first period for which an amount is paid as an
annuity or any other form. The Plan Administrator shall notify the
Participant and the Participant's Spouse of the right to defer any
distribution until the Participant's Account balance is no longer
immediately distributable. Such notification shall include a general
description of the material features, and an explanation of the relative
values of, the optional forms of benefit available under the Plan in a
manner that would satisfy the notice requirements of section 417(a)(3),
and shall be provided no less than thirty (30) days and no more than
ninety (90) days prior to the Annuity Starting Date.
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(b) Notwithstanding the provisions of subsection (a), only
the Participant need consent to the commencement of a distribution in the
form of a Qualified Joint and Survivor Annuity while the Account balance
is immediately distributable. (Furthermore, if payment in the form of a
Qualified Joint and Survivor Annuity is not required with respect to the
Participant pursuant to section 9.6 of the Plan, only the Participant need
consent to the distribution of an Account balance that is immediately
distributable). Neither the consent of the Participant nor the Partici-
pant's Spouse shall be required to the extent that a distribution is
required to satisfy section 401(a)(9) or section 415 of the Code. In
addition, upon termination of this Plan if the Plan does not offer an
annuity option (purchased from a commercial provider), the Participant's
Account balance may, without the Participant's consent, be distributed to
the Participant or transferred to another defined contribution plan (other
than an employee stock ownership plan as defined in section 4975(e)(7) of
the Code) within the same controlled group.
(c) An Account balance is immediately distributable if any
part of the Account balance could be distributed to the Participant (or
Surviving Spouse) before the Participant attains (or would have attained
if not deceased) the later of Normal Retirement Age or age sixty- two
(62).
(d) For purposes of determining the applicability of the
foregoing consent requirements to distributions made before the first day
of the first Plan Year beginning after December 31, 1988, the
Participant's Vested Account Balance shall not include amounts
attributable to accumulated deductible Employee contributions within the
meaning of section 72(o)(5)(B) of the Code.
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10.3 Commencement_of_Benefits.
(a) Unless the Participant elects otherwise, distribution
of benefits will begin no later than the 60th day after the latest of the
close of the Plan Year in which:
(i) the Participant attains age sixty-five (65) (or
Normal Retirement Age, if earlier);
(ii) the 10th anniversary of the year in which the
Participant commenced participation in the Plan occurs; or
(iii) the Participant terminates service with the
Employer.
(b) Notwithstanding the foregoing, the failure of a
Participant and Spouse to consent to a distribution while a benefit is
immediately distributable, within the meaning of section 10.2 of the Plan,
shall be deemed to be an election to defer commencement of payment of any
benefit sufficient to satisfy this section.
10.4 Early_Retirement_With_Age_and_Service_Require ment. If a
Participant separates from service before satisfying the age requirement
for early retirement, but has satisfied the service requirement, the
Participant will be entitled to elect an early retirement benefit upon
satisfaction of such age requirement.
10.5 Nontransferability_of_Annuities. Any annuity contract
distributed herefrom must be nontransferable.
10.6 Conflicts_With_Annuity_Contracts. The terms of any annuity
contract purchased and distributed by the Plan to a Participant or Spouse
shall comply with the requirements of this Plan.
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ARTICLE 11
TIMING AND MODES OF DISTRIBUTION
11.1 General_Rules.
(a) Subject to ARTICLE 9, the requirements of this ARTICLE
shall apply to any distribution of a Participant's interest and will take
precedence over any inconsistent provisions of this Plan. Unless
otherwise specified, the provisions of this ARTICLE apply to calendar
years beginning after December 31, 1984.
(b) All distributions required under this ARTICLE shall be
determined and made in accordance with the income tax regulations under
section 401(a)(9) of the Code, including the minimum distribution
incidental benefit requirement of section 1.401(a)(9)-2 of the proposed
regulations.
11.2 Required_Beginning_Date. The entire interest of a Participant
must be distributed or begin to be distributed no later than the
Participant's Required Beginning Date.
11.3 Limits_on_Distribution_Periods. As of the first Distribution
Calendar Year, distributions, if not made in a single-sum, may only be
made over one of the following periods (or a combination thereof):
(a) the life of the Participant;
(b) the life of the Participant and a Designated
Beneficiary;
(c) a period certain not extending beyond the Life
Expectancy of the Participant; or
(d) a period certain not extending beyond the joint and last
survivor expectancy of the Participant and a Designated Beneficiary.
11.4 Determination_of_Amount_to_be_Distributed_Each Year.
(a) Individual_Account.
(i) If a Participant's Benefit is to be distributed
over (1) a period not extending beyond the Life Expectancy of the
Participant or the joint life and last survivor expectancy of the
Participant and the Participant's Designated Beneficiary or (2) a period
not extending beyond the Life Expectancy of the Designated Beneficiary,
the amount required to be distributed for each calendar year, beginning
with distributions for the first Distribution Calendar Year, must at least
equal the quotient obtained by dividing the Participant's Benefit by the
Applicable Life Expectancy.
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(ii) For calendar years beginning before January 1,
1989, if the Participant's Spouse is not the Designated Beneficiary, the
method of distribution selected must assure that at least fifty percent
(50%) of the present value of the amount available for distribution is
paid within the Life Expectancy of the Participant.
(iii) For calendar years beginning after December 31,
1988, the amount to be distributed each year, beginning with distributions
for the first Distribution Calendar Year shall not be less than the
quotient obtained by dividing the Participant's Benefit by the lesser of
(1) the Applicable Life Expectancy or (2) if the Participant's Spouse is
not the Designated Beneficiary, the applicable divisor determined from the
table set forth in Q&A-4 of section 1.401(a)(9)-2 of the proposed
regulations. Distributions after the death of the Participant shall be
distributed using the Applicable Life Expectancy in subsection (a)(i)
above as the relevant divisor without regard to proposed regulations
section 1.401(a)(9)-2.
(iv) The minimum distribution required for the
Participant's first Distribution Calendar Year must be made on or before
the Participant's Required Beginning Date. The minimum distribution for
other calendar years, including the minimum distribution for the
Distribution Calendar Year in which the Employee's Required Beginning Date
occurs, must be made on or before December 31 of that Distribution
Calendar Year.
(b) Other_Forms. If the Participant's Benefit is
distributed in the form of an annuity purchased from an insurance company,
distributions thereunder shall be made in accordance with the requirements
of section 401(a)(9) of the Code and the proposed regulations thereunder.
11.5 Death_Distribution_Provisions.
(a) Distribution_Beginning_Before_Death. If the Participant
dies after distribution of his or her interest has begun, the remaining
portion of such interest will continue to be distributed at least as
rapidly as under the method of distribution being used prior to the
Participant's death.
(b) Distribution_Beginning_After_Death. If the Participant
dies before distribution of his or her interest begins, distribution of
the Participant's entire interest shall be completed by December 31 of the
calendar year containing the fifth anniversary of the Participant's death
except to the extent that an election is made to receive distributions in
accordance with (i) or (ii) below:
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(i) if any portion of the Participant's interest is
payable to a Designated Beneficiary, distributions may be made over the
life or over a period certain not greater than the Life Expectancy of the
Designated Beneficiary commencing on or before December 31 of the calendar
year immediately following the calendar year in which the Participant
died;
(ii) if the Designated Beneficiary is the
Participant's Surviving Spouse, the date distributions are required to
begin in accordance with (i) above shall not be earlier than the later of
(1) December 31 of the calendar year immediately following the calendar
year in which the Participant died and (2) December 31 of the calendar
year in which the Participant would have attained age seventy and one-half
(70 1/2).
(c) If the Participant has not made an election pursuant to
this section by the time of his or her death, the Participant's Designated
Beneficiary must elect the method of distribution no later than the
earlier of (1) December 31 of the calendar year in which distributions
would be required to begin under this section; or (2) December 31 of the
calendar year which contains the fifth anniversary of the date of death
of the Participant. If the Participant has no Designated Beneficiary, or
if the Designated Beneficiary does not elect a method of distribution,
distribution of the Participant's entire interest must be completed by
December 31 of the calendar year containing the fifth anniversary of the
Participant's death.
(d) For purposes of subsection (b) above, if the Surviving
Spouse dies after the Participant, but before payments to such Spouse
begin, the provisions of subsection (b), with the exception of paragraph
(ii) therein, shall be applied as if the Surviving Spouse were the
Participant.
(e) For purposes of this section, any amount paid to a child
of the Participant will be treated as if it had been paid to the Surviving
Spouse if the amount becomes payable to the Surviving Spouse when the
child reaches the age of majority.
(f) For the purposes of this section, distribution of a
Participant's interest is considered to begin on the Participant's
Required Beginning Date (or, if subsection (d) above is applicable, the
date distribution is required to begin to the Surviving Spouse pursuant
to subsection (b) above). If distribution in the form of an annuity
described in section 11.4(b) above irrevocably commences to the
Participant before the Required Beginning Date, the date distribution is
considered to begin is the date distribution actually commences.
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11.6 Designation_of_Beneficiary. Subject to the rules of
ARTICLE 9, a Participant (or former Participant) may designate from time
to time any person or persons (who may be designated contingently or
successively and may be an entity other than a natural person) as his
Beneficiary who will be entitled to receive any undistributed amounts
credited to the Participant's separate Account under the Plan at the time
of the Participant's death. Any such Beneficiary designation by a
Participant shall be made in writing in the manner prescribed by the Plan
Administrator, and shall be effective only when filed with the Plan
Administrator during the Participant's lifetime. A Participant may change
or revoke his Beneficiary designation at any time in the manner prescribed
by the Plan Administrator. If any portion of the Participant's Account
is invested in insurance pursuant to ARTICLE 14, the Beneficiary of the
benefits under the insurance policy shall be the person or persons
designated under the policy. If the Designated Beneficiary (or each of
the Designated Beneficiaries) predeceases the Participant, the Partici-
pant's Beneficiary designation shall be ineffective. If no Beneficiary
designation is in effect at the time of the Participant's death, his
Beneficiary shall be his estate.
11.7 Definitions.
(a) Applicable_Life_Expectancy. The Life Expectancy (or
joint and last survivor expectancy) calculated using the attained age of
the Participant (or Designated Beneficiary) as of the Participant's (or
Designated Beneficiary's) birthday in the applicable calendar year reduced
by one (1) for each calendar year which has elapsed since the date Life
Expectancy was first calculated. If Life Expectancy is being
recalculated, the Applicable Life Expectancy shall be the Life Expectancy
as so recalculated. The applicable calendar year shall be the first
Distribution Calendar Year, and if Life Expectancy is being recalculated
such succeeding calendar year. If annuity payments commence in accordance
with section 11.4(b) before the Required Beginning Date, the applicable
calendar year is the year such payments commence. If distribution is in
the form of an immediate annuity purchased after the Participant's death
with the Participant's remaining interest, the applicable calendar year
is the year of purchase.
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(b) Designated_Beneficiary. The individual who is
designated as the Beneficiary under the Plan in accordance with section
401(a)(9) and the proposed regulations thereunder.
(c) Distribution_Calendar_Year. A calendar year for which
a minimum distribution is required. For distributions beginning before
the Participant's death, the first Distribution Calendar Year is the
calendar year immediately preceding the calendar year which contains the
Participant's Required Beginning Date. For distributions beginning after
the Participant's death, the first Distribution Calendar Year is the
calendar year in which distributions are required to begin pursuant to
section 11.5 above.
(d) Life_Expectancy.
(i) Life Expectancy and joint and last survivor
expectancy are computed by use of the expected return multiples in
Tables V and VI of section 1.72-9 of the income tax regulations.
(ii) Unless otherwise elected by the Participant (or
Spouse, in the case of distributions described in section 11.5(b)(ii)
above) by the time distributions are required to begin, life expectancies
shall be recalculated annually. Such election shall be irrevocable as to
the Participant (or Spouse) and shall apply to all subsequent years. The
Life Expectancy of a non-Spouse Beneficiary may not be recalculated.
(e) Participant's_Benefit.
(i) The Account balance as of the last valuation date
in the calendar year immediately preceding the Distribution Calendar Year
(valuation calendar year) increased by the amount of any contributions or
forfeitures allocated to the Account balance as of dates in the valuation
calendar year after the valuation date and decreased by distributions made
in the valuation calendar year after the valuation date.
(ii) For purposes of subsection (i) above, if any
portion of the minimum distribution for the first Distribution Calendar
Year is made in the second Distribution Calendar Year on or before the
Required Beginning Date, the amount of the minimum distribution made in
the second Distribution Calendar Year shall be treated as if it had been
made in the immediately preceding Distribution Calendar Year.
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(f) Required_Beginning_Date.
(i) General_Rule. The Required Beginning Date of a
Participant is the first day of April of the calendar year following the
calendar year in which the Participant attains age seventy and one-half
(70 1/2).
(ii) Transitional_Rules. The Required Beginning Date
of a Participant who attains age seventy and one-half (70 1/2) before
January 1, 1988, shall be determined in accordance with (1) or (2) below:
(1) Non-Five-Percent_Owners. The Required
Beginning Date of a Participant who is not a Five Percent (5%) Owner is
the first day of April of the calendar year following the calendar year
in which the later of retirement or attainment of age seventy and one-
half (70 1/2) occurs.
(2) Five_Percent_Owners. The Required
Beginning Date of a Participant who is a Five Percent (5%) Owner during
any year beginning after December 31, 1979, is the first day of April
following the later of:
(A) the calendar year in which the
Participant attains age seventy and one-half (70 1/2); or
(B) the earlier of the calendar year with
or within which ends the Plan Year in which the Participant becomes a Five
Percent (5%) Owner, or the calendar year in which the Participant retires.
The Required Beginning Date of a Participant who is not a Five Percent
(5%) Owner who attains age seventy and one- half (70 1/2) during 1988 and
who has not retired as of January 1, 1989, is April 1, 1990.
(iii) Five_Percent_Owner. A Participant is treated as
a Five Percent (5%) Owner for purposes of this section if such Participant
is a Five Percent (5%) Owner as defined in section 416(i) of the Code
(determined in accordance with section 416 but without regard to whether
the Plan is top-heavy) at any time during the Plan Year ending with or
within the calendar year in which such owner attains age sixty-six and
one-half (66 1/2) or any subsequent year.
(iv) Once distributions have begun to a Five Percent
(5%) Owner under this section, they must continue to be distributed, even
if the Participant ceases to be a Five Percent (5%) Owner in a subsequent
year.
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11.8 Transitional_Rule.
(a) Notwithstanding the other requirements of this ARTICLE
and subject to the requirements of ARTICLE 9, distribution on behalf of
any Employee, including a Five Percent (5%) Owner, may be made in
accordance with all of the following requirements (regardless of when such
distribution commences):
(i) The distribution by the Trust is one which would
not have disqualified such trust under section 401(a)(9) of the Internal
Revenue Code as in effect prior to amendment by the Deficit Reduction Act
of 1984.
(ii) The distribution is in accordance with a method
of distribution designated by the Employee whose interest in the Trust is
being distributed or, if the Employee is deceased, by a Beneficiary of
such Employee.
(iii) Such designation was in writing, was signed by
the Employee or the Beneficiary, and was made before January 1, 1984.
(iv) The Employee had accrued a benefit under the Plan
as of December 31, 1983.
(v) The method of distribution designated by the
Employee or the Beneficiary specifies the time at which distributions will
be made, and in the case of any distribution upon the Employee's death,
the Beneficiaries of the Employee listed in order of priority.
(b) A distribution upon death will not be covered by this
transitional rule unless the information in the designation contains the
required information described above with respect to the distributions to
be made upon the death of the Employee.
(c) For any distribution which commences before January 1,
1984, but continues after December 31, 1983, the Employee, or the
Beneficiary, to whom such distribution is being made, will be presumed to
have designated the method of distribution under which the distribution
is being made if the method of distribution was specified in writing and
the distribution satisfies the requirements in subsections (a)(i) and
(a)(v).
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(d) If a designation is revoked, any subsequent distribution
must satisfy the requirements of section 401(a)(9) of the Code and the
proposed regulations thereunder. If a designation is revoked subsequent
to the date distributions are required to begin, the Trust must distribute
by the end of the calendar year following the calendar year in which the
revocation occurs the total amount not yet distributed which would have
been required to have been distributed to satisfy section 401(a)(9) of the
Code and the regulations thereunder but for the section 242(b)(2)
election. For calendar years beginning after December 31, 1988, such
distributions must meet the minimum distribution incidental benefit
requirements in section 1.401(a)(9)-2 of the proposed regulations. Any
changes in the designation will be considered to be a revocation of the
designation. However, the mere substitution or addition of another
beneficiary (one not named in the designation) under the designation will
not be considered to be a revocation of the designation, so long as such
substitution or addition does not alter the period over which
distributions are to be made under the designation, directly or indirectly
(for example, by altering the relevant measuring life). In the case in
which an amount is transferred or rolled over from one plan to another
plan, the rules in Q&A J-2 and Q&A J-3 shall apply.
11.9 Optional_Forms_of_Benefit.
(a) Except to the extent benefits are required to be paid
in the form of an automatic joint and survivor annuity under ARTICLE 9,
any amount which a Participant shall be entitled to receive under the Plan
shall be distributed in one or a combination of the following ways:
(i) in a lump-sum payment of cash, the amount of
which shall be determined by redeeming all Shares credited to the
Participant's Account under the Plan as of the date of distribution;
(ii) in a lump-sum payment including a distribution
in kind of all Shares credited to the Participant's Account under the Plan
as of the date of distribution;
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(iii) in substantially equal monthly, quarterly, or
annual installment payments of cash, or the distribution of Shares in
kind, over a period certain not to exceed the Life Expectancy of the
Participant or the joint and last survivor Life Expectancy of the
Participant and his Beneficiary, determined in each case as of the earlier
of: (1) the end of the Plan Year in which occurs the event entitling the
Participant to a distribution of benefits, or (2) the date such
installments commence;
(iv) if permitted by the Sponsor, in monthly,
quarterly, or annual installment payments of cash, or the distribution of
Shares in kind, so that the amount distributed in each Plan Year equals
the quotient obtained by dividing the Participant's Account at the
beginning of that Plan Year by the joint and last survivor Life Expectancy
of the Participant and the Beneficiary for that Plan Year. The Life
Expectancy will be computed using the recomputation method described in
section 11.7(d). Unless the Spouse of the retired Participant is the
Beneficiary, the actuarial present value of all expected payments to the
retired Participant must be more than fifty percent (50%) of the actuarial
present value of payments to the retired Participant and the Beneficiary;
or
(v) by application of the Participant's vested
Account to the purchase of a nontransferable immediate or deferred annuity
contract, on an individual or group basis. Unless the Spouse of the
retired Participant is the Beneficiary, the actuarial present value of all
expected payments to the retired Participant must be more than fifty
percent (50%) of the actuarial present value of payments to the retired
Participant and the Beneficiary.
(b) If the Participant fails to select a method of
distribution, except as may be required by ARTICLE 9, all amounts which
he is entitled to receive under the Plan shall be distributed to him in
a lump-sum payment.
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ARTICLE 12
WITHDRAWALS
12.1 Withdrawal_of_Nondeductible_Voluntary_Contribu tions. Subject
to the Qualified Election requirements of ARTICLE 9 and section 12.3, any
Participant who has made nondeductible voluntary contributions may, upon
thirty (30) days notice in writing filed with the Plan Administrator, have
paid to him all or any portion of the fair market value of his
nondeductible voluntary contribution subaccount.
12.2 Hardship_Withdrawals. If the Adoption Agreement so provides
and the Employer elects, this section applies only to the profit sharing
contribution subaccount and only if the profit sharing allocation formula
selected in the Adoption Agreement is not integrated with Social Security.
(a) Demonstration_of_Need. Subject to the Qualified
Election requirements of ARTICLE 9 and section 12.3, if a Participant
establishes an immediate and heavy financial need for funds because of a
hardship resulting from the purchase or renovation of a primary residence,
the education of the Participant or a member of his immediate family
(including special education), the medical or personal expenses of the
Participant or a member of his immediate family, or other demonstrable
emergency as determined by the Plan Administrator on a uniform and
nondiscriminatory basis, the Participant shall be permitted, subject to
the limitations of subsection (b) below, to make a hardship withdrawal of
an amount credited to his profit sharing contribution subaccount under the
Plan.
(b) Amount_of_Hardship_Withdrawal. The amount of any
hardship withdrawal by a Participant under subsection (a) above shall not
exceed the amount required to meet the immediate financial need created
by the hardship and not reasonably available from other resources of the
Participant.
(c) Prior_Withdrawal_of_Nondeductible_Voluntary
Participant_Contributions. A Participant shall not be permitted to make
a hardship withdrawal under subsection (a) above unless he has already
withdrawn, in accordance with section 12.1, any amount credited to his
nondeductible voluntary contributions subaccount.
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12.3 Manner_of_Making_Withdrawals. Any withdrawal by a Participant
under the Plan shall be made only after the Participant files a written
request with the Plan Administrator specifying the nature of the
withdrawal (and the reasons therefor, if a hardship withdrawal), and the
amount of funds requested to be withdrawn. Upon approving any withdrawal,
the Plan Administrator shall furnish the Trustee with written instructions
directing the Trustee to make the withdrawal in a lump-sum payment of cash
to the Participant. In making any withdrawal payment, the Trustee shall
be fully entitled to rely on the instructions furnished by the Plan
Administrator, and shall be under no duty to make any inquiry or
investigation with respect thereto. Unless section 9.6 is applicable, if
the Participant is married, his Spouse must consent to the withdrawal
pursuant to a Qualified Election (as defined in section 9.4(c)) within the
ninety (90) day period ending on the date of the withdrawal.
12.4 Limitations_on_Withdrawals. The Plan Administrator may
prescribe uniform and nondiscriminatory rules and procedures limiting the
number of times a Participant may make a withdrawal under the Plan during
any Plan Year, and the minimum amount a Participant may withdraw on any
single occasion.
ARTICLE 13
LOANS
13.1 General_Provisions.
(a) If the Adoption Agreement so provides and the Employer
so elects, loans shall be made available to any Participant or Beneficiary
who is a party-in-interest (as defined in section 3(14) of ERISA) on a
reasonably equivalent basis. A Participant or Beneficiary who is not a
party-in-interest (as defined in section 3(14) of ERISA) shall not be
eligible to receive a loan under this ARTICLE.
(b) Loans shall not be made available to Highly- Compensated
Employees (as defined in section 414(q) of the Code) in an amount greater
than the amount made available to other Employees.
(c) Loans must be adequately secured and bear a reasonable
interest rate.
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(d) No Participant loan shall exceed the present value of
the Participant's Vested Account Balance.
(e) Unless section 9.6 is applicable, a Participant must
obtain the consent of his or her Spouse, if any, to use of the Account
balance as security for the loan. Spousal consent shall be obtained no
earlier than the beginning of the ninety (90) day period that ends on the
date on which the loan is to be so secured. The consent must be in
writing, must acknowledge the effect of the loan, and must be witnessed
by a Plan representative or notary public. Such consent shall thereafter
be binding with respect to the consenting Spouse or any subsequent Spouse
with respect to that loan. A new consent shall be required if the Account
balance is used for renegotiation, extension, renewal or other revision
of the loan.
(f) In the event of default, foreclosure on the note and
attachment of security will not occur until a distributable event occurs
under the Plan.
(g) Loans will not be made to any shareholder- employee or
Owner-Employee. For purposes of this requirement, a shareholder-employee
means an Employee or officer of an electing small business (subchapter S)
corporation who owns (or is considered as owning within the meaning of
section 318(a)(1) of the Code), on any day during the taxable year of such
corporation, more than five percent (5%) of the outstanding stock of the
corporation.
(h) If a valid spousal consent has been obtained in
accordance with subsection (e), then, notwithstanding any other provision
of this Plan, the portion of the Participant's Vested Account Balance used
as a security interest held by the Plan by reason of a loan outstanding
to the Participant shall be taken into account for purposes of determining
the amount of the Account balance payable at the time of death or
distribution, but only if the reduction is used as repayment of the loan.
If less than one hundred percent (100%) of the Participant's Vested
Account Balance (determined without regard to the preceding sentence) is
payable to the Surviving Spouse, then the Account balance shall be
adjusted by first reducing the Vested Account Balance by the amount of the
security used as repayment of the loan, and then determining the benefit
payable to the Surviving Spouse.
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13.2 Administration_of_Loan_Program.
(a) The Plan's loan program will be administered by the Plan
Administrator.
(b) Loan requests shall be made on a form prescribed by the
Plan Administrator and shall comply with section 13.4.
(c) Loan requests that comply with all the requirements of
this ARTICLE shall be approved by the Plan Administrator.
(d) The rate of interest to be charged on loans shall be
determined under section 13.5.
(e) The only collateral that may be used as security for a
loan, and the limitations and requirements applicable, are determined
under section 13.6.
(f) The rules regarding defaults are set forth in section
13.9.
13.3 Amount_of_Loan. Loans to any Participant or Beneficiary will
not be made to the extent that such loan, when added to the outstanding
balance of all other loans to the Participant or Beneficiary, would exceed
the lesser of:
(a) fifty thousand dollars ($50,000) reduced by the excess
(if any) of the highest outstanding balance of loans during the one (1)
year period ending on the day before the loan is made, over the
outstanding balance of loans from the Plan on the date the loan is made;
or
(b) one-half (1/2) the present value of the nonforfeitable
accrued benefit of the Participant.
(c) For the purpose of the above limitation, all loans from
all plans of the Employer and other members of a group of employers
described in sections 414(b), 414(c) and 414(m) of the Code are
aggregated.
13.4 Manner_of_Making_Loans. A request by a Participant for a loan
shall be made in writing to the Plan Administrator and shall specify the
amount of the loan, and the subaccount(s) or Shares of the Participant
from which the loan should be made. The terms and conditions on which the
Plan Administrator shall approve loans under the Plan shall be applied on
a uniform and nondiscriminatory basis with respect to all Participants.
If a Participant's request for a loan is approved by the Plan
Administrator, the Plan Administrator shall furnish the Trustee with
written instructions directing the Trustee to make the loan in a lump-sum
payment of cash to the Participant. In making any loan payment under this
ARTICLE, the Trustee shall be fully entitled to rely on the instructions
furnished by the Plan Administrator and shall be under no duty to make any
inquiry or investigation with respect thereto.
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13.5 Terms_of_Loan. Loans shall be made on such terms and subject
to such limitations as the Plan Administrator may prescribe.
Furthermore, any loan shall, by its terms, require that repayment
(principal and interest) be amortized in level payments, not less
frequently than quarterly, over a period not extending beyond five (5)
years from the date of the loan, unless such loan is used to acquire a
dwelling unit which, within a reasonable time (determined at the time the
loan is made) will be used as the principal residence of the Participant.
The rate of interest to be charged shall be determined by the Plan
Administrator in accordance with the rates quoted by representative
financial institutions in the local area for similar loans.
13.6 Security_for_Loan. Any loan to a Participant under the Plan
shall be secured by the pledge of all the Participant's right, title, and
interest in the Trust. Such pledge shall be evidenced by the execution
of a promissory note by the Participant which shall provide that, in the
event of any default by the Participant on a loan repayment, the Plan
Administrator shall be authorized (to the extent permitted by law) to
deduct the amount of the loan outstanding and any unpaid interest due
thereon from the Participant's wages or salary to be thereafter paid by
the Employer, and to take any and all other actions necessary and
appropriate to enforce collection of the unpaid loan. An assignment or
pledge of any portion of the Participant's interest in the Plan and a
loan, pledge, or assignment with respect to any insurance contract
purchased under the Plan, will be treated as a loan under this section.
In the event the value of the Participant's vested Account at any time is
less than one hundred twenty- five percent (125%) of the outstanding loan
balance, the Plan Administrator shall request additional collateral of
sufficient value to adequately secure the repayment of the loan. Failure
to provide such additional collateral upon a request of the Plan
Administrator shall constitute an event of default.
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13.7 Segregated_Investment. Loans shall be considered a
Participant directed investment and, for the limited purposes of
allocating earnings and losses pursuant to ARTICLE 5, shall not be
considered a part of the common fund under the Trust.
13.8 Repayment_of_Loan. The Plan Administrator shall have the sole
responsibility for ensuring that a Participant timely makes all loan
repayments, and for notifying the Trustee in the event of any default by
the Participant on the loan. Each loan repayment shall be paid to the
Trustee and shall be accompanied by written instructions from the Plan
Administrator that identify the Participant on whose behalf the loan
repayment is being made.
13.9 Default_on_Loan.
(a) In the event of a termination of the Participant's
employment with the Affiliated Employers or a default by a Participant on
a loan repayment, all remaining payments on the loan shall be immediately
due and payable. The Employer shall, upon the direction of the Plan
Administrator, to the extent permitted by law, deduct the total amount of
the loan outstanding and any unpaid interest due thereon from the wages
or salaries payable to the Participant by the Employer in accordance with
the Participant's promissory note. In addition, the Plan Administrator
shall take any and all other actions necessary and appropriate to enforce
collection of the unpaid loan. However, attachment of the Participant's
Account pledged as security will not occur until a distributable event
occurs under the Plan.
(b) For purposes of this section, the term "default" shall
mean failure, by a period of at least ten (10) days, to make any loan
payment (whether principal or interest or both) that is due and payable.
Neither the Plan Administrator nor any other fiduciary is required to give
any written or oral notice of default.
13.10 Unpaid_Amounts. Upon the occurrence of a Participant's
retirement or death, or upon a Participant's fifth consecutive Break in
Service or earlier distribution, the unpaid balance of any loan, including
any unpaid interest, shall be deducted from any payment or distribution
from the Trust to which such Participant or his Beneficiary may be
entitled. If after charging the Participant's Account with the unpaid
balance of the loan, including any unpaid interest, there still remains
an unpaid balance of any such loan and interest, then the remaining unpaid
balance of such loan and interest shall be charged against any property
pledged as security with respect to such loan.
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ARTICLE 14
INSURANCE
14.1 Insurance. If the Adoption Agreement so provides and the
Employer elects to allocate or permit Participants to allocate a portion
of their Accounts to purchase life insurance, the ensuing subsections of
this ARTICLE shall apply.
14.2 Policies. The Plan Administrator shall instruct the Trustee
to procure one or more life insurance policies on the Participant's life,
the terms of which shall conform to the requirements of the Plan and the
Code. The policies and the companies which write them shall be subject
to the approval of the Plan Administrator and the Trustee. The Trustee
shall procure and hold such policies in its name or the name of the
nominee. The Trustee shall be the sole owner of all contracts purchased
hereunder, and it shall be so designated in each policy and application
therefor.
14.3 Beneficiary. The Participant shall have the right to name the
Beneficiary and to choose the benefit option under the policy for the
Beneficiary. The Trustee shall designate the Beneficiary of all such
policies in accordance with the written directions of the Plan Adminis-
trator and the policy terms. Such designations may be outlined in the
original application as forwarded to the issuing company. However, the
Plan Administrator shall have available and shall furnish the Participant
with the necessary forms for any Beneficiary designation or change of
Beneficiary and it will keep a copy of all executed designations as part
of its records. Upon a Participant's death, the Plan Administrator will
promptly furnish the Trustee a copy of the last designation and shall
authorize the Trustee to complete such forms as the insurance company may
require in order to effect the benefit option.
14.4 Payment_of_Premiums. Subject to the provisions of sections
7.3 and 14.5, premium payments to the insurer may be made only by the
Trustee with respect to any insurance policy purchased on behalf of a
Participant and shall constitute first an investment of a portion of the
funds of the Participant's Employer Contribution subaccounts up to the
maximum amount of such subaccounts permitted to be applied toward such
premium payments, as provided in section 14.5. If a Participant's
subaccounts lack sufficient assets to pay premiums on a life insurance
policy due on his behalf, the Trustee, at the direction of the Plan
Administrator, acting upon the request of the Participant, shall borrow
under the policy loan provisions, if any, the amount necessary to pay such
premiums, using the cash value of the insurance as security, or the
Trustee may liquidate assets held in the Participant's Account, in the
same order, of sufficient value to pay such premiums. Any loans shall be
repaid by the application of earnings, contributions, or forfeitures to
the Account of the Participant insured by such policy. In the absence of
the Plan Administrator's direction to borrow or to liquidate assets to pay
premiums, the life insurance policy shall be put on a paid-up basis or,
if it has no cash value, cancelled.
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14.5 Limitation_on_Insurance_Premiums. The Trustee shall not pay,
nor shall anyone on behalf of the Trustee pay, any life insurance premium
for any Participant out of the Participant's Employer Contribution
subaccounts unless the amount of such payment, plus all premiums
previously so paid on behalf of the Participant, is less than fifty
percent (50%) of the Employer Contributions and forfeitures allocated to
the Participant's Employer Contribution subaccounts as determined on the
date such premium is paid with respect to reserve life insurance policies
and shall be less than twenty-five percent (25%) thereof with respect to
nonreserve (term) policies, or, if both reserve life and term insurance
are purchased on the life of any Participant, the sum of the term
insurance premium plus one-half (1/2) of the reserve life premiums may not
exceed twenty- five percent (25%) of the Employer Contributions made on
behalf of such Participant. For purposes of these incidental insurance
provisions, reserve life insurance contracts are contracts with both
nondecreasing death benefits and nonincreasing premiums. Dividends
received on life insurance policies shall be considered a reduction of
premiums paid in such computations.
If payment of premiums on a Participant's life insurance
policy is prohibited because of the limitation, the Trustee, as directed
by the Plan Administrator, shall permit the Participant to maintain that
part of the coverage made available by the prohibited premiums, either by
payment of the amount of the prohibited premium by the Participant from
sources other than the Trust or by distributing the policy to the extent
of the Participant's vested interest to the Participant and eliminating
it from the Trust.
Nothing contained in the foregoing provisions of section 14.4
and this section shall be deemed to authorize the payment of any premium
or premiums for any Participant which would result in a failure to
maintain any mandatory investment in Shares required by the Sponsor in the
Account or subaccounts of any such Participant.
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14.6 Insurance_Company. No insurance company which may issue any
policies for the purposes of this Plan shall be required to take or permit
any action contrary to the provisions of said policies, nor shall such
insurance company be deemed to be a party to, or responsible for the
validity of, this Plan for any purpose. No such insurance company shall
be required to look into the terms of this Plan or question any action of
the Trustee hereunder, nor be responsible to see that any action of the
Trustee is authorized by the terms of this Plan. Any such issuing
insurance company shall be fully discharged from any and all liability for
any amount paid to the Trustee or paid in accordance with the direction
of the Trustee, as the case may be, or for any change made or action taken
by such insurance company upon such direction and no such insurance
company shall be obliged to see to the distribution or further application
of any monies paid by it. The certificate of the Trustee signed by one
of its trust officers, assistant secretary, or other authorized
representative thereof, may be received by any insurance company as
conclusive evidence of any of the matters mentioned in this Plan and any
insurance company shall be fully protected in taking or permitting any
action on the faith thereof and shall incur no liability or responsibility
for so doing.
14.7 Distribution_of_Policies. Upon a Participant's death, the
Trustee, upon direction of the Plan Administrator, shall procure the
payment of the proceeds of any policy held by the Participant in
accordance with its terms and this Plan. The Trustee shall be required
to pay over all the proceeds of any policy to the Participant's Designated
Beneficiary in accordance with the distribution provisions of this Plan.
A Participant's Spouse will be the Designated Beneficiary unless a
Qualified Election has been made in accordance with section 9.4(c) of the
Plan. Under no circumstances shall the Trust retain any part of the
proceeds. Subject to the joint and survivor annuity requirements of
ARTICLE 9, the policies shall be converted or distributed upon
commencement of benefits in accordance with the provisions of this
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section. Upon a Participant's retirement at or after his Normal
Retirement Age, unless there is a single sum distribution in which case
any policy shall be distributed, any such policy shall be converted to a
paid-up contract and delivered to the Participant but the Plan
Administrator may, with the Participant's consent, direct that a portion
or all of such cash value of the policy be converted to provide retirement
income as permitted within the terms of the policy and this Plan. Upon
a Participant's retirement due to Total and Permanent Disability, any such
policy shall be held for his account and assigned or delivered to the
Participant in addition to any other benefits provided by this Plan. Upon
a Participant's termination of employment for reasons other than death,
Total and Permanent Disability, or retirement as stated above, to the
extent of life insurance purchased by Employer Contributions, he shall be
entitled to a vested interest in any policy held for his account as his
interest is vested in the remainder of his Employer Contribution
subaccounts (exclusive of any such policy). Whenever the Participant is
entitled to one hundred percent (100%) vesting, then such policy shall be
assigned and delivered to the Participant in accordance with its terms and
the terms of the Plan. Whenever the Participant is entitled to vesting
of less than one hundred percent (100%), then the Participant shall be
entitled to a vested interest of the cash surrender value of any such
policy equal to his percent of vested interest in his Employer
Contribution subaccounts, exclusive of the policy, and one of the
following distribution procedures shall apply:
(a) If the nonvested portion of the cash surrender value of
all policies held for the Participant's Account is less than the amount
of his vested termination benefit exclusive of the policies, then, such
policy shall be assigned to the Participant and the remainder of the
Participant's vested interest in the Participant's Employer Contribution
subaccounts shall be reduced by the cash surrender value of the nonvested
portion of all policies, after which it shall be paid or distributed to
the Participant in accordance with the terms of the Plan; or
(b) If the nonvested portion of the cash surrender value of
all policies held for the Participant's Account exceeds the Participant's
vested interest in the Employer Contribution subaccount exclusive of such
policies, the Participant shall be given the opportunity to purchase such
policies by paying to the Trustee the amount of such excess within thirty
(30) days after notice to him of the amount to be paid. Upon receipt of
such payment said policy shall be assigned and delivered to the Partici-
pant to the full satisfaction of all termination benefits under this Plan.
Any such policy not so purchased shall be surrendered by the Trustee for
its cash value and the proceeds thereof deposited in the Trust for
reallocation pursuant to ARTICLE 5.
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It is the intention hereof that the total termination benefit
of a Participant whose interest is not fully vested shall be equal to the
sum of the vested percentage of his Employer Contribution subaccounts
exclusive of all such policies and the same percentage of the cash value
of all such policies held for his Account. To the extent possible under
the foregoing provisions, such total termination benefits shall be
satisfied by the transfer and delivery to the Participant of one or more
such policies with the balance, if any, to be paid in cash or in kind.
14.8 Policy_Features. The Trustee shall arrange, where possible,
that all policies purchased for the benefit of a Participant shall have
the same dividend option which shall be on the premium reduction plan, and
as nearly as may be possible all policies issued under the Plan shall have
the same anniversary date. To the extent any dividends or credits earned
on insurance policies are not applied toward the next premiums due, they
shall be allocated to the Participant's Employer Contribution subaccount
in the same manner as a Participant's directed investment.
14.9 Changed_Conditions. From time to time because of changed
conditions, the Trustee, acting at the direction of the Plan Administrator
upon the election of the Participant concerned, shall obtain an additional
contract or policy or make such change in the contracts or policies
maintained by the Trustee on the life of the Participant as may be
required by such changed conditions, within the limits permitted by the
insurance company which issued or is requested to issue a contract and the
limits established by this Plan.
14.10 Conflicts. In the event of any conflict between the terms
of the Plan and the provisions of any contract issued hereunder, the terms
of the Plan shall control.
ARTICLE 15
ADMINISTRATION
15.1 Duties_and_Responsibilities_of_Fiduciaries;
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Allocation_of_Fiduciary_Responsibility. A fiduciary of the Plan shall
have only those specific powers, duties, responsibilities, and obligations
as are explicitly given him under the Plan and Trust Agreement. In
general, the Employer shall have the sole responsibility for making
contributions to the Plan required under ARTICLE 4; appointing the Trustee
and the Plan Administrator; and determining the funds available for
investment under the Plan. The Plan Administrator shall have the sole
responsibility for the administration of the Plan, as more fully described
in section 15.2. It is intended that each fiduciary shall be responsible
only for the proper exercise of his own powers, duties, responsibilities,
and obligations under the Plan and Trust Agreement, and shall not be
responsible for any act or failure to act of another fiduciary. A
fiduciary may serve in more than one fiduciary capacity with respect to
the Plan.
15.2 Powers_and_Responsibilities_of_the_Plan_Adminis trator.
(a) Administration_of_the_Plan. The Plan Administrator
shall have all powers necessary to administer the Plan, including the
power to construe and interpret the Plan documents; to decide all
questions relating to an individual's eligibility to participate in the
Plan; to determine the amount, manner, and timing of any distribution of
benefits or withdrawal under the Plan; to approve and ensure the repayment
of any loan to a Participant under the Plan; to resolve any claim for
benefits in accordance with section 15.7; and to appoint or employ
advisors, including legal counsel; to render advice with respect to any
of the Plan Administrator's responsibilities under the Plan. Any
construction, interpretation, or application of the Plan by the Plan
Administrator shall be final, conclusive, and binding. All actions by the
Plan Administrator shall be taken pursuant to uniform standards applied
to all persons similarly situated. The Plan Administrator shall have no
power to add to, subtract from, or modify any of the terms of the Plan,
or to change or add to any benefits provided by the Plan, or to waive or
fail to apply any requirements of eligibility for a benefit under the
Plan.
(b) Records_and_Reports. The Plan Administrator shall be
responsible for maintaining sufficient records to reflect the Eligibility
Computation Periods in which an Employee is credited with one or more
Years of Service for purposes of determining his eligibility to
participate in the Plan, and the Compensation of each Participant for
purposes of determining the amount of contributions that may be made by
or on behalf of the Participant under the Plan. The Plan Administrator
shall be responsible for submitting all required reports and notifications
relating to the Plan to Participants or their Beneficiaries, the Internal
Revenue Service and the Department of Labor.
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(c) Furnishing_Trustee_with_Instructions. The Plan
Administrator shall be responsible for furnishing the Trustee with written
instructions regarding all contributions to the Trust, all distributions
to Participants in accordance with ARTICLE 10, all withdrawals by
Participants in accordance with ARTICLE 12, all loans to Participants in
accordance with ARTICLE 13 and all purchases of life insurance in
accordance with ARTICLE 14. In addition, the Plan Administrator shall be
responsible for furnishing the Trustee with any further information
respecting the Plan which the Trustee may request for the performance of
its duties or for the purpose of making any returns to the Internal
Revenue Service or Department of Labor as may be required of the Trustee.
(d) Rules_and_Decisions. The Plan Administrator may adopt
such rules as it deems necessary, desirable, or appropriate in the
administration of the Plan. All rules and decisions of the Plan
Administrator shall be applied uniformly and consistently to all
Participants in similar circumstances. When making a determination or
calculation, the Plan Administrator shall be entitled to rely upon
information furnished by a Participant or Beneficiary, the Employer, the
legal counsel of the Employer, or the Trustee.
(e) Application_and_Forms_for_Benefits. The Plan
Administrator may require a Participant or Beneficiary to complete and
file with it an application for a benefit, and to furnish all pertinent
information requested by it. The Plan Administrator may rely upon all
such information so furnished to it, including the Participant's or
Beneficiary's current mailing address.
(f) Facility_of_Payment. Whenever, in the Plan
Administrator's opinion, a person entitled to receive a payment of a
benefit or installment thereof is under a legal disability or is
incapacitated in any way so as to be unable to manage his financial
affairs, as determined by a court of competent jurisdiction, it may direct
the Trustee to make payments to such person or to the legal representative
or to a relative or friend of such person for that person's benefit, or
it may direct the Trustee to apply the payment for the benefit of such
person in such manner as it considers advisable.
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15.3 Allocation_of_Duties_and_Responsibilities. The Plan
Administrator may, by written instrument, allocate among its members or
employees any of its duties and responsibilities not already allocated
under the Plan or may designate persons other than members or employees
to carry out any of the Plan Administrator's duties and responsibilities
under the Plan. Any such duties or responsibilities thus allocated must
be described in the written instrument. If a person other than an
Employee of the Employer is so designated, such person must acknowledge
in writing his acceptance of the duties and responsibilities allocated to
him.
15.4 Appointment_of_the_Plan_Administrator. The Employer shall
designate in the Adoption Agreement the Plan Administrator who shall
administer the Employer's Plan. Such Plan Administrator may consist of
an individual, a committee of two or more individuals, whether or not, in
either such case, the individual or any of such individuals are Employees
of the Employer, a consulting firm or other independent agent, the Trustee
(with its consent), or the Employer itself. The Plan Administrator shall
be charged with the full power and the responsibility for administering
the Plan in all its details. If no Plan Administrator has been appointed
by the Employer, or if the person designated as Plan Administrator by the
Employer is not serving as such for any reason, the Employer shall be
deemed to be the Plan Administrator of the Plan. The Plan Administrator
may be removed by the Employer, or may resign by giving notice in writing
to the Employer, and in the event of the removal, resignation, or death,
or other termination of service by the Plan Administrator, the Employer
shall, as soon as practicable, appoint a successor Plan Administrator,
such successor thereafter to have all of the rights, privileges, duties,
and obligations of the predecessor Plan Administrator.
15.5 Expenses. The Employer shall pay all expenses authorized and
incurred by the Plan Administrator in the administration of the Plan
except to the extent such expenses are paid from the Trust.
15.6 Liabilities. The Plan Administrator and each person to whom
duties and responsibilities have been allocated pursuant to section 15.3
may be indemnified and held harmless by the Employer with respect to any
alleged breach of responsibilities performed or to be performed hereunder.
The Employer and each Affiliated Employer shall indemnify and hold
harmless the Sponsor against all claims, liabilities, fines, and
penalties, and all expenses reasonably incurred by or imposed upon him
(including, but not limited to, reasonable attorney's fees) which arise
as a result of actions or failure to act in connection with the operation
and administration of the Plan.
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15.7 Claims_Procedure.
(a) Filing_a_Claim. Any Participant or Beneficiary under
the Plan may file a written claim for a Plan benefit with the Plan
Administrator or with a person named by the Plan Administrator to receive
claims under the Plan.
(b) Notice_of_Denial_of_Claim. In the event of a denial or
limitation of any benefit or payment due to or requested by any
Participant or Beneficiary under the Plan ("claimant"), claimant shall be
given a written notification containing specific reasons for the denial
or limitation of his benefit. The written notification shall contain
specific reference to the pertinent Plan provisions on which the denial
or limitation of his benefit is based. In addition, it shall contain a
description of any other material or information necessary for the
claimant to perfect a claim, and an explanation of why such material or
information is necessary. The notification shall further provide
appropriate information as to the steps to be taken if the claimant wishes
to submit his claim for review. This written notification shall be given
to a claimant within ninety (90) days after receipt of his claim by the
Plan Administrator unless special circumstances require an extension of
time for processing the claim. If such an extension of time for
processing is required, written notice of the extension shall be furnished
to the claimant prior to the termination of said ninety (90) day period,
and such notice shall indicate the special circumstances which make the
postponement appropriate.
(c) Right_of_Review. In the event of a denial or limitation
of his benefit, the claimant or his duly authorized representative shall
be permitted to review pertinent documents and to submit to the Plan
Administrator issues and comments in writing. In addition, the claimant
or his duly authorized representative may make a written request for a
full and fair review of his claim and its denial by the Plan
Administrator; provided, however, that such written request must be
received by the Plan Administrator (or its delegate to receive such
requests) within sixty (60) days after receipt by the claimant of written
notification of the denial or limitation of the claim. The sixty (60) day
requirement may be waived by the Plan Administrator in appropriate cases.
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<PAGE>
(d) Decision_on_Review. A decision shall be rendered by the
Plan Administrator within sixty (60) days after the receipt of the request
for review, provided that where special circumstances require an extension
of time for processing the decision, it may be postponed on written notice
to the claimant (prior to the expiration of the initial sixty (60) day
period) for an additional sixty (60) days, but in no event shall the
decision be rendered more than one hundred twenty (120) days after the
receipt of such request for review. Any decision by the Plan Adminis-
trator shall be furnished to the claimant in writing and shall set forth
the specific reasons for the decision and the specific Plan provisions on
which the decision is based.
(e) Court_Action. No Participant or Beneficiary shall have
the right to seek judicial review of a denial of benefits, or to bring any
action in any court to enforce a claim for benefits prior to filing a
claim for benefits or exhausting his rights to review under this section.
ARTICLE 16
AMENDMENT, TERMINATION AND MERGER
16.1 Sponsor's_Power_to_Amend. The Sponsor may amend any part of
the Plan. For purposes of Sponsor's amendments, the mass submitter shall
be recognized as the agent of the Sponsor. If the Sponsor does not adopt
the amendments made by the mass submitter, it will no longer be identical
to or a minor modifier of the mass submitter plan.
16.2 Amendment_by_Adopting_Employer.
(a) The Employer may:
(i) change the choice of options in the Adoption
Agreement;
(ii) add overriding language in the Adoption Agreement
when such language is necessary to satisfy section 415 or section 416 of
the Code because of the required aggregation of multiple plans; and
(iii) add certain model amendments published by the
Internal Revenue Service which specifically provide that their adoption
will not cause the Plan to be treated as individually designed.
(b) An Employer that amends the Plan for any other reason,
including a waiver of the minimum funding requirement under section 412(d)
of the Code, will no longer participate in this prototype plan and will
be considered to have an individually designed plan.
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<PAGE>
16.3 Vesting_Upon_Plan_Termination. In the event of the
termination or partial termination of the Plan, the Account balance of
each affected Participant will be nonforfeitable.
16.4 Vesting_Upon_Complete_Discontinuance_of_Contribu tions. In
the event of a complete discontinuance of contributions under the Plan,
the Account balance of each affected Participant will be nonforfeitable.
16.5 Maintenance_of_Benefits_Upon_Merger. In the event of a merger
or consolidation with, or transfer of assets to any other plan, each
Participant will receive a benefit immediately after such merger,
consolidation or transfer (if the Plan then terminated) which is at least
equal to the benefit the Participant was entitled to immediately before
such merger, consolidation or transfer (if the Plan had been terminated).
16.6 Special_Amendments. The Employer may from time to time make
any amendment to the Plan that may be necessary to satisfy section 415 or
416 of the Code. Any such amendment will be adopted by the Employer by
completing overriding Plan language in the Adoption Agreement. In the
event of such an amendment, the Employer must obtain a separate
determination letter from the Internal Revenue Service to continue
reliance on the Plan's qualified status.
ARTICLE 17
MISCELLANEOUS
17.1 Exclusive_Benefit_of_Participants_and_Beneficia ries.
(a) All assets of the Trust shall be retained for the
exclusive benefit of Participants and their Beneficiaries, and shall be
used only to pay benefits to such persons or to pay the fees and expenses
of the Trust. The assets of the Trust shall not revert to the benefit of
the Employer, except as otherwise specifically provided in section
17.1(b).
(b) To the extent permitted or required by ERISA and the
Code, contributions to the Trust under this Plan are subject to the
following conditions:
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<PAGE>
(i) If a contribution or any part thereof is made to
the Trust by the Employer under a mistake of fact, such contribution or
part thereof shall be returned to the Employer within one (1) year after
the date the contribution is made.
(ii) In the event the Plan is determined not to meet
the initial qualification requirements of section 401 of the Code,
contributions made in respect of any period for which such requirements
are not met shall be returned to the Employer within one (1) year after
the Plan is determined not to meet such requirements, but only if the
application for the qualification is made by the time prescribed by law
for filing the Employer's return for the taxable year in which the Plan
is adopted, or such later date as the Secretary of the Treasury may
prescribe.
(iii) Contributions to the Trust are specifically
conditioned on their deductibility under the Code and, to the extent a
deduction is disallowed for any such contribution, such amount shall be
returned to the Employer within one (1) year after the date of the
disallowance of the deduction.
17.2 Nonguarantee_of_Employment. Nothing contained in this Plan
shall be construed as a contract of employment between the Employer and
any Employee, or as a right of any Employee to be continued in the
employment of the Employer, or as a limitation of the right of the
Employer to discharge any of its Employees, with or without cause.
17.3 Rights_to_Trust_Assets. No Employee, Participant, or
Beneficiary shall have any right to, or interest in, any assets of the
Trust upon termination of employment or otherwise, except as provided
under the Plan. All payments of benefits under the Plan shall be made
solely out of the assets of the Trust.
17.4 Nonalienation_of_Benefits. No benefit or interest available
hereunder will be subject to assignment or alienation, either voluntarily
or involuntarily. The preceding sentence shall also apply to the
creation, assignment, or recognition of a right to any benefit payable
with respect to a Participant pursuant to a domestic relations order,
unless such order is determined to be a qualified domestic relations
order, as defined in section 414(p) of the Code, or any domestic relations
order entered before January 1, 1985.
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<PAGE>
17.5 Aggregation_Rules.
(a) Except as provided in ARTICLE 6, all Employees of the
Employer or any Affiliated Employer will be treated as employed by a
single employer.
(b) If this Plan provides contributions or benefits for one
or more Owner-Employees who control both the business for which this Plan
is established and one or more other trades or businesses, this Plan and
the plan established for other trades or businesses must, when looked at
as a single plan, satisfy sections 401(a) and (d) of the Code for the
Employees of this and all other trades or businesses.
(c) If the Plan provides contributions or benefits for one
or more Owner-Employees who control one or more other trades or
businesses, the employees of the other trades or businesses must be
included in a plan which satisfies sections 401(a) and (d) of the Code and
which provides contributions and benefits not less favorable than provided
for Owner-Employees under this Plan.
(d) If an individual is covered as an Owner- Employee under
the plans of two or more trades or businesses which are not controlled and
the individual controls a trade or business, then the contributions or
benefits of the employees under the plan of the trades or businesses which
are controlled must be as favorable as those provided for him under the
most favorable plan of the trade or business which is not controlled.
(e) For purposes of paragraphs (b), (c) and (d), an Owner-
Employee, or two or more Owner-Employees, will be considered to control
a trade or business if the Owner- Employee, or two or more Owner-Employees
together:
(i) own the entire interest in an unincorporated
trade or business; or
(ii) in the case of a partnership, own more than fifty
percent (50%) of either the capital interest or the profits interest in
the partnership.
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<PAGE>
For purposes of the preceding sentence, an Owner- Employee,
or two or more Owner-Employees shall be treated as owning an interest in
a partnership which is owned, directly or indirectly, by a partnership
which such Owner- Employee, or such two or more Owner-Employees, are
considered to control within the meaning of the preceding sentence.
17.6 Failure_of_Qualification. If the Employer's plan fails to
attain or retain qualification, such plan will no longer participate in
this master/prototype plan and will be considered an individually designed
plan.
17.7 Applicable_Law. Except to the extent otherwise required by
ERISA, as amended, this Plan shall be construed and enforced in accordance
with the laws of the state in which the Employer's principal place of
business is located, as specified in the Adoption Agreement.
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<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
The Schedule contains summary financial information extracted from year-end
audited financial statements dated December 31, 1995 and is qualified in its
entirety by reference to such financial statements.
</LEGEND>
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> DEC-31-1995
<INVESTMENTS-AT-COST> 129,069,919
<INVESTMENTS-AT-VALUE> 140,197,063
<RECEIVABLES> 353,127
<ASSETS-OTHER> 72,319
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 140,622,509
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 1,721,969
<TOTAL-LIABILITIES> 1,721,969
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 127,075,402
<SHARES-COMMON-STOCK> 8,844,228
<SHARES-COMMON-PRIOR> 8,653,955
<ACCUMULATED-NII-CURRENT> 695,588
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 2,406
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 11,127,144
<NET-ASSETS> 138,900,540
<DIVIDEND-INCOME> 2,699,630
<INTEREST-INCOME> 543,200
<OTHER-INCOME> (13,227)
<EXPENSES-NET> 1,424,870
<NET-INVESTMENT-INCOME> 1,804,733
<REALIZED-GAINS-CURRENT> 15,931,202
<APPREC-INCREASE-CURRENT> 9,051,101
<NET-CHANGE-FROM-OPS> 26,787,036
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 1,809,688
<DISTRIBUTIONS-OF-GAINS> 13,290,821
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 423,165
<NUMBER-OF-SHARES-REDEEMED> 1,087,805
<SHARES-REINVESTED> 854,913
<NET-CHANGE-IN-ASSETS> 2,925,345
<ACCUMULATED-NII-PRIOR> 62,496
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 1,937,432
<GROSS-ADVISORY-FEES> 935,397
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 1,424,870
<AVERAGE-NET-ASSETS> 131,000,220
<PER-SHARE-NAV-BEGIN> 14.36
<PER-SHARE-NII> .22
<PER-SHARE-GAIN-APPREC> 3.00
<PER-SHARE-DIVIDEND> (.22)
<PER-SHARE-DISTRIBUTIONS> (1.65)
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 15.71
<EXPENSE-RATIO> 1.09
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>